Download economics – final exam study guide

ECONOMICS – FINAL EXAM STUDY GUIDE
Definition of scarcity (vs. shortage)
What are resources? Why are they limited?
Difference between want and need
Four types of economic resources (factors of production), what might be the fifth?
Consumer good vs. capital good
Definition of opportunity cost & trade-off
Three types of economic systems – which one is this course primarily about?
What does it mean a “mixed” economic system?
Circular flow of business activity (diagram)
Four basic questions all economic systems must answer
What’s important about the rule of law and private property in economic growth?
Adam Smith – Wealth of Nations (1776) – laissez-faire and invisible hand
Five economic goals of a nation
Disposable vs. discretionary income
Purpose of credit
What is “rational choice?”
Differences between competitive, informative, and bait & switch advertising
What do these agencies do: SEC, CPSC, FTC?
Principal, interest, and installment debt
What is credit necessary in a modern economy?
Mortgage lending – fixed vs. ARM, what’s the difference?
Types of lending institutions – commercial banks, dangers of finance companies
Credit card debt – secured vs. unsecured loans, collateral
APR – define its meaning
Credit reports and credit scores – components / weights
Usury laws
Three lending rules – define “prime” and “sub-prime”
Advantages of owning vs. renting
Know how sub-prime lending caused the Great Recession of 08-09
Define “depreciation”
Insurance Agent, Stock Broker, Financial Advisor – what’s the difference?
Two types of capital gains (long / short) define
What is a stock?
What are bonds? (3 types: Federal, Local, Corporate)
Define mutual fund
What are IRAs and 401Ks – advantages/disadvantages
Why is a 401K the best investment for the middle class?
What are dividends?
DJIA, NYSE, NASDAQ, S&P – what are these?
What is “diversification?”
What is a money market fund?
What does it mean “Insured by FDIC” – what’s protected and what’s not?
U.S. debt – differences between Treasury bills, notes, bonds
Law of Supply
Law of Demand
Law of diminishing marginal utility
Supply, demand curves & “equilibrium”
Price determinants of demand (3)
Non-price determinants of demand (5)
Determinants of supply (6)
Define price elasticity and inelasticity
Shifting of demand / supply curves – interpreting results
Four elements to every business
Advantages / disadvantages
Sole Proprietor
Partnership (& limited partnership)
Corporation
Public corporation (define)
Incorporating (purpose)
Liability (Define)
Four market structures: Monopoly, Oligopoly, Monopolistic Competition, Perfect Competiton
Five conditions of perfect competition
Types of monopolies
Characteristics of oligopolies
Characteristics of monopolistic competition (most common in free market capitalism)
Sherman Anti-Trust Act
Federal Trade Commission
Securities & Exchange Commission
National Income Accounting
Gross Domestic Product [GDP] =C+I+G+E(n)
Gross National Product [GNP]
NDP [Net Domestic Product]
National Income
Personal Income
Disposable Income
Consumer Price Index [CPI] – Market Basket of Goods
Business Cycles
Economic Indicators – Lagging, Coincident, Leading
Fractional Reserve Banking – how does it expand the money supply?
How does money eliminate the need for a “double coincidence of wants?”
Federal Reserve Bank
Monetary Policy – the three “tools” – reserve percentage, discount rate, open market operations
Inflation – how does “tight” monetary policy address?
Unemployment – how does “loose” monetary policy address?
Fiscal policy (definition) – “tax and spend”
Entitlements – social insurance and public assistance
Merit & Demerit Goods
Types of unemployment: cyclical, structural, seasonal, frictional
Cost-push inflation
Demand-pull inflation
Circular Flow of Income (Business Activity)
Why do monetarists criticize fiscal policy? ( Too slow in acting to influence dynamic free market).
Absolute v. Comparative Advantages of Trade
Exchange Rates & Foreign Exchange Market (what is this?)
IMF, WTO, NAFTA
Characteristics of developing nations
Types of foreign aid
Obstacles to growth in developing countries / Cycle of poverty