Unit 1
What is Scarcity?
The principle that limited amounts of goods and services are available to meet unlimited wants
What is demand
the willingness and ability to consume good/service at various prices.
Define GDP
GDP is the dollar value of all final goods and services produced within a country’s borders in a given year.
What are externalities?
Externalities are unintended side effects of an economic activity that impact a third party not directly involved in the transaction
Where did the New York Stock Exchange (NYSE) begin, and what was the simple agreement that started it all in 1792?
Under a buttonwood tree on Wall Street, where 24 stockbrokers agreed to trade with each other and set commission rates, forming the foundation of modern stock trading
What is Underutilization?
The use of fewer resources than an economy is capable of using
What is supply?
The amount of a good or service that is available to consumers.
List the 3 types of tax structure
Progressive Taxes, Proportional Taxes,Regressive Taxes
What are the four types of goods
Private Goods, Public Goods, Common Resources, and Club Goods
Who introduced the concept of the "invisible hand" to describe how individual self-interest can benefit society, and what famous book is it in?
Adam Smith
Define and provide examples of positive incentives
Rewards that encourage behavior that make people better off.
What shifts the demand Curve?
non price factors, Income, Tastes and preferences, Prices of related goods (substitutes and complements), Number of buyers, Expectations about future prices or income
What is interest rate?
The cost of owing money over time,the percentage charged for borrowing money
When would the government want to get involved in exchanges that result in externalities?
They step in to correct negative externalities like pollution with taxes or regulations to make polluters pay, and to encourage positive externalities like education or public health through subsidies or direct provision, ensuring more of socially beneficial goods are produced/consumed.
What is the Latin phrase economists use to mean "all other things being equal" when analyzing economic models
Ceteris Paribus
What does a mixed economy look like
Social Welfare Programs
Price Controls
Business Regulations
What's the substitution effect?
When a consumer reacts to a rise in the price of one good by consuming less of that good and more of a good that fills a similar purpose
What is the Dual Mandate? Why is it important for the United States’ economic health?
The Dual Mandate is the Federal Reserve's (Fed) goal given by Congress to promote maximum employment and stable prices (low inflation)
How and why do countries restrict trade? What are the drawbacks to restricting trade?
This reduces consumer choice, raises prices, stifles innovation, invites retaliation (trade wars), and hinders overall economic growth by misallocating resources, making economies less efficient and competitive globally.
What unusual economic phenomenon occurs when high inflation happens at the same time as high unemployment and slow economic growth?
Stagflation (a portmanteau of stagnation and inflation).
Constant vs increasing opportunity cost
Constant opportunity cost means that giving up one unit of a good always requires sacrificing the same amount of another good. Increasing opportunity cost means that each additional unit of a good requires giving up more and more of another good.
Define Economies of Scale
Characteristics that cause a producer’s average cost per unit to drop as production rises
What is the fractional reserve system? How does it affect how banks operate?
The fractional reserve system lets banks hold only a fraction of customer deposits, lending the rest to create new money, fueling economic growth, but risking bank runs
How do you calculate nations’ opportunity cost when producing goods and identify comparative advantages.
(Opportunity Cost = Units of Good B forgone / Units of Good A gained)
What two key economic variables does the Laffer Curve illustrate the relationship between, showing how tax rates affect government revenue?
Government revenue and tax rates.