Economic Principles
What is the primary focus of economics?
The study of scarcity and choice.
What happens when price is above equilibrium in a perfectly competitive market?
Surplus occurs.
Which banking service typically earns the highest interest rate?
Time/Certificate of deposit (CD).
What is an entrepreneur?
An individual who creates and runs a new business, taking on financial risks in the hope of profit.
The Federal Reserve primarily controls:
Monetary policy
What is opportunity cost?
The next best alternative given up when a choice is made.
In a command economy, who makes the majority of economic decisions?
The government.
What is the difference between a checking account and a savings account?
Checking accounts are for frequent transactions, while savings accounts are for saving money.
Which type of business structure offers the most protection from personal liability?
Corporation.
During inflation, which group typically benefits?
Debtors.
The law of demand states that:
Price and quantity demanded are inversely related; when price decreases, quantity demanded increases.
When supply decreases and demand remains constant, what occurs?
Shortage occurs.
What does liquidity refer to?
the efficiency or ease with which an asset or security can be converted into ready cash without affecting its market price
What is the primary goal of a market economy?
Efficient allocation of resources & growth.
What is the effect of government spending on the economy?
It can stimulate the economy.
How is productivity measured in economics?
Output divided by input.
In a free market economy, who makes the majority of economic decisions?
All economic decisions are made by individuals and businesses, without government regulation
What is compound interest?
Interest calculated on the initial principal and also on the accumulated interest of previous periods.
What is Adam Smith's "invisible hand" concept associated with?
The self-regulating nature of the marketplace.
What is the impact of government price controls on a market?
They can lead to shortages or surpluses.
Name the four types of economic systems:
Command, Free Market, Mixed, Traditional
What is a basic disadvantage of a traditional economy?
It can be inflexible and resistant to change
What is the primary function of money?
Medium of exchange, Store of Value, Standard of Value
What is the main advantage of forming a Limited Liability Company (LLC)?
Combined benefits of corporation and partnership- limit liability!
Structural unemployment results from:
Changes in the fundamental wellbeing of an economy