Download ECONOMICS FINAL EXAM REVIEW SHEET

ECONOMICS FINAL EXAM REVIEW SHEET
(revised 1/05)
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What does the science of economics study?
What is scarcity?
What is opportunity cost? Opportunity benefit?
Define utility.
What is microeconomics? Macroeconomics?
What are the three basic economic questions?
How do we solve the problem of scarcity? Define that term.
What is Adam Smith’s concept of the invisible hand?
Who benefits from competition in the private sector?
What is the difference between the public sector and private sector? How are public goods
paid for?
How far should you go in making an economic choice?
Define demand. What is the law of demand?
Define supply. What is the law of supply?
List the determinants of demand.
Explain product differentiation.
What are complementary products? What are homogeneous products?
Be able to identify a supply and demand graph and its component parts.
Explain the concept of elasticity.
Why is a demand curve downward sloping? And a supply curve upward sloping?
What is the difference between demand and quantity demanded?
What is the difference between supply and quantity supplied?
What causes demand to shift? What causes supply to shift?
Contrast shortage and surplus. Be sure to include what happens to price.
List the four factors of production.
Identify and explain two types of capital.
What happens in the short run? Long run?
When do we reach diminishing marginal utility? Diminishing marginal productivity?
Define marginal product.
Where do consumers and producers meet?
What function does price have in a market system? What would create pressure on price?
What is equilibrium?
What is a price ceiling? A price floor? Can you graph them?
What are the advantages of proprietorship? Disadvantages?
What is the difference between limited and unlimited liability?
What is a horizontal merger? A vertical merger? A conglomerate?
What is stock and what does buying stock mean? What is a dividend?
Explain the “test of the market.”
Define business organization. Define market organization.
List the five characteristics of each market organization: perfect competition,
monopolistic competition, pure oligopoly, differentiated oligopoly, monopoly.
What is a patent?
What types of market organizations do a lot of advertising?
What is a cartel?
What is marginal private cost? Marginal private benefit?
How does government influence the American economy?
Know the production possibilities curve. Be able to draw and explain it.
What is the exclusion principle?
What causes a negative externality? A positive externality?
What is a derived demand ? Apply the concept to labor.
What factors could change the demand for/supply of labor?
What would cause high interest rates? Low interest rates?
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What is Gross Domestic Product and how is calculated?
What are leakages and injections in the GDP? What does macroeconomic equilibrium mean?
What is disposable income?
Distinguish between personal and functional distribution of income.
What is poverty? What contributes to poverty? What is the “poverty line?”
How do we calculate the unemployment rate?
Define civilian labor force.
What is cyclical unemployment? Structural? Seasonal? Frictional?
Define wage rate and explain equilibrium wage.
What is minimum wage and how does it affect the labor market?
What is job discrimination?
What is inflation?
How do we calculate the Consumer Price Index? What are the problems with the CPI?
Who suffers from inflation? Who might gain from inflation?
What are the two types of inflation?
What are the three macroeconomic goals of the US government?
Why do we need money? What are the functions of money?
What determines the demand for money?
What is the asset demand for money? The transaction demand?
What is the purpose of the Federal Reserve System? The FOMC? The FDIC?
What is interest and how does it affect the supply of and demand for money?
What are the three tools used by the Fed to control the money supply?
When do banks create money?
What is a check? What is currency?
When does the Fed use tight monetary policy? When does it use loose monetary policy?
What are the three tools of monetary policy?
What is the discount rate? Federal funds rate? Open market operations?
Name a tax that is progressive, based on ability to pay, and direct? Why is it necessary?
Contrast progressive and regressive taxes.
What is a proportional tax?
What is the benefit principle of taxation? Why is it difficult to apply?
When is a tax direct? When is a tax indirect?
What is a sales tax? an excise tax?
What is a recession? Name conditions that cause a recession.
When does the government use expansionary fiscal policy? Restrictive fiscal policy?
What are the two tools of fiscal policy?
Why don’t wage and price controls work?
Who has an “inflationary bias” and why?
What is the national debt? Why does it create problems for businesses?
Name and explain four factors necessary for economic growth.
How do research and development activities and production of capital goods contribute to
economic growth?
92. Why is there a trade-off between inflation and unemployment?
93. When does a country promote protectionism?
94. How do tariffs and quotas affect trade?
95. What is a favorable balance of trade?
96. Contrast trade deficit and trade surplus.
97. What is NAFTA? What was GATT? What is the WTO?
98. When does a country have comparative advantage? Absolute advantage?
99. Explain the term “barriers to development.”
100. What is meant by flexible exchange rate?