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Text of the Economics Unit I Review What is the name for the type of economics that focuses on decisions made by individual economic actors? microeconomics What is the name for the study of entire economies? macroeconomics What are the two main types of things that consumers purchase? goods and services What are the four main types of resources? (or factors of production) human resources, natural resources, capital resources, and entrepreneurship What are capital resources or goods? buildings & machinery used to create products & the money that’s invested in them What two things must an entrepreneur have to start a business? an idea and some capital What is the most basic problem in economics? How does it drive decision making? scarcity, resources are limited so choices must be made What are the 3 basic economic questions? what to produce, how to produce, for whom to produce What is the name for the value of the next best alternative given up to obtain a certain item? opportunity cost What is the best visual method for quantifying trade offs and opportunity costs? production possibilities curve How would new technologies or resources impact the production possibilities curve? shift it to the right (expand production) What do utility and scarcity help define about a particular product? its value Who makes all the important decisions in a command economy? the government Who makes all the decisions in a free market economy? Who is the father of this type of economics? individuals, Adam Smith What is the driving motivating factor in a market economy? self interest, actors respond to incentives capitalism and authoritarian socialism are examples of what type of economy? mixed Give three examples of nations with capitalist economies. United States, Canada, Great Britain, Japan, Mexico Give two examples of countries with Democratic Socialist economies. Sweden, France, Poland Identify three of the key rights that individuals have in the United States economy. private property, enter contracts, economic competition, act on self interest, limited government involvement What are the 4 of the main economic goals of the United States? freedom, effici ency, equity, security, stability, and growth What are the two main measures of economic stability? price stability & full employment What is the primary measure of economic growth? standard of living What is used to measure the total productivity of an economy? Gross Domestic Product (GDP) What is Real GDP? GDP adjusted for inflation Does GDP measure all economic activity? Why/Why not? no, lots of other stuff happening (black market, non-market, etc.) What are the four components of the business cycle? expansion, peak, contraction, trough What are three key influences on the business cycle? Business investment, money & credit, consumer expectations, & external shocks (big shifts in global politics/economics) What does a leading indicator tell economists. The direction the economy is headed in the future What are two key leading indicators? housing starts, orders for durable goods, investment in capital What are the key factors involved in boosting productivity? advancing technology, capital deepening, increasing education/skill of labor force What is the basic definition of an unemployed person? someone who wishes to work but cannot find a job Identify three types of unemployment. frictional (moving from job to job), structural (change in technology), seasonal, cyclical (tied to business cycle) What does it mean to be underemployed? Does underemployment increase efficiency? in a job that does not use all of your skills, or gives you part-time when you want full time What are the 3 key types of inflation? demand-pull (ag demand pulling prices up), cost-push and quantity theory What is the most commonly used measure of inflation? Consumer Price Index (CPI) What are three of the main effects of inflation? decreased purchasing power, decreased value of wages, increased interest rates, decreased saving, increased production costs What does the poverty rate measure? the percentage of people in a nation living under the poverty line What does a Lorenz curve demonstrate? The income gap, or disparity in wealth holdings by percentages of the population