Download EOCT General Review

EOCT General Review
Fundamental Concepts
1. Identify an example of land, labor, capital, entrepreneurship at a
restaurant.
2. Define scarcity. Give two ways to allocate scarce resources.
3. Draw a PPC for a country that can produce 9million lbs of oranges
or 10million lbs of lemons. - Show what happens on the graph if an
insect destroys ½ their lemon crop.
4. Complete this sentence: rational decisions occur when ____________
are greater than ___________.
5. What is the relationship between specialization and voluntary
exchange? Give an example of a worker that specializes.
6. Both parties in a trade gain as long as the exchange is _______ and non________.
7. What are the three basic questions all economies must answer?
8. What is de-regulation and why is it sometimes beneficial for a market?
9. For each term below, identify whether it is more associated with
command or market economies.
Private ownership
profit motive
consumer sovereignty
competition
government regulation
freedom
security
stability
equity
growth
10. Why does the government provide public goods and services in the
economy?
11. Why is it important for the government to protect property rights?
(Which factor of production does this protection encourage?)
12. Fill in the blanks: Productivity is the relationship of _____ to ______.
To improve productivity and encourage growth, countries and businesses
should invest more in _____ and _____.
13. What is GDP per capita and how does it relate to standard of
living?
Microeconomic Concepts
14. On a correctly labeled circular flow diagram, what flows from
households to the factor market? What flows from businesses to the factor
market? What flows from households to the product market?
15. What is the role of buyers and sellers in the marketplace?
16. What is the role of money in the marketplace?
17. Define or explain the Law of Supply and Law of Demand.
18. If a market is operating at the market clearing price, what TWO things
are equal to each other? (The answer is NOT supply and demand!!!)
19. Graph what happens in a market when consumer preference for a
good increases. What happens to equilibrium price and quantity?
20. What happens to equilibrium price when there is an improvement in
technology? Why?
21. What happens to equilibrium price and quantity when incomes
increase at the same time the government places a tax on the
producers? (may help to show on a graph)
22. What does price elasticity mean? What is a good that has inelastic
demand? What is a good that has inelastic supply?
23. Explain and show the difference between price ceilings and floors.
24. What is the largest reason a company would choose to incorporate?
Why might they stay a sole proprietorship?
25. What is the relationship between these three words: profit,
incentive, entrepreneurship?
26. What is the primary difference between a monopoly and monopolistic
competition? What is the primary difference between monopolistic
competition and pure (or perfect) competition? What is the difference
between an oligopoly and monopolistic competition?
27. Give an example of an industry that operates as: pure competition,
monopolistic competition, oligopoly, and monopoly.
Macroeconomic Concepts
28. Identify one example of an item that is counted under EACH of
the components of GDP (C+I+G+NX).
29. How is the Unemployment Rate calculated?
30. What is the CPI and how is it measured?
31. How is stagflation different than inflation?
32. Explain what happens to unemployment, inflation, and real GDP
as the economy moves from a trough to a peak.
33. Give an example of cyclical, structural, and frictional
unemployment.
34. What is the difference between national debt and deficit? What is
the opposite of a budget deficit?
35. What is the relationship between the Board of Governors,
Federal District Banks, and the FOMC?
36. What are the three basic tools of Monetary Policy (the FED)?
Which one applies to the phrase “buy bigger, sell smaller”?
37. When the economy is in a recession, what should the Fed do
with the discount rate, reserve requirement, and open market
operations to help?
38. What are the ONLY two tools of fiscal policy?
39. If the government uses an expansionary fiscal policy, how will
the deficit be affected?
International Trade
40. What is comparative advantage and how does comparative
advantage relate to trade?
41. When a person writes a check to a charity in Africa, how are
our balance of trade and balance of payments affected? What is
different if we sell a shipment of American-made wheat to Africa?
42. Why would a domestic consumer argue AGAINST a quota or
tariff? Why would a domestic producer argue FOR them?
43. If a country wanted a trade barrier that would be beneficial to
their domestic consumers and producers, what trade barrier
would be the most effective?
44. What is one of the primary goals of the EU, NAFTA, & ASEAN?
45. Based on the following exchange rates, if Jim has 4US dollars,
how many Euros can he get? If he as 4 Euros, how many US
Dollars can he get?
USD
Euro
1USD
1
.72
1 Euro
1.38
1
46. What groups of people benefit when the US Dollar appreciates
against most other world currencies?
Personal Finance
47. How do people respond to incentives generally?
48. What is the primary difference between a bank and a credit union?
49. Which interest rate is typically higher: the one the bank pays
you for your money, or the one they charge for a loan? Why?
50. What is the relationship between risk and return when investing?
Rank these three from riskiest to least risky: savings account, bond,
stock, mutual fund
51. Why are people who LEND money hurt by inflation?
52. What is the difference between progressive and regressive taxes?
53. Identify 3 SPECIFIC things (not just the 4 Cs) that can affect
your credit worthiness.
54. What is the primary difference between health insurance and
disability insurance?
55. What is the difference between a premium and a deductible
when dealing with insurance? If my policy has very high
deductibles, what should I expect to happen to my premiums?
56. Why is compound interest better than simple interest when saving?
57. What is an annual percentage rate and how is it different than
an annual fee?
58. What is the basic relationship between education and income(and
standard of living)?
EOCT General Review
Fundamental Concepts
1. Land – Anything “natural”, lettuce, meat, water, fruit, fish in a
fish tank, etc.
Labor – Any human working, waitress, cook, chef, manager, maitre
D, etc
Capital – Machines/tools, tables, silverware, oven, cash register, etc
Entrepreneur – the person in charge of gathering and organizing
the other factors, usually involves taking a risk with money so it is
most likely the owner of the restaurant
2. Unlimited wants and needs, limited resources. Pricing, lottery, first
come, first served, specific trait or characteristic, voting, etc
Microeconomic Concepts
14.
Taxes
Taxes
GOVERNMENT
Goods and Services
LEMONS
10
5
After
insect
ORANGES
9
3.
4. Marginal BENEFITS are greater than marginal COSTS
5. Specialization CAUSES a need for voluntary exchange.
Example: because I am a teacher all day, I do not spend time
learning how to fix my car. When my car breaks, I voluntarily call
a mechanic and exchange money for his service.
6. Voluntary and non-fraudulent.
7. What to produce, How to produce and For Whom to produce
8. Deregulation is the process or reducing or removing government
involvement in a market. It is usually beneficial because it leads to
increased competition, lower production costs and lower prices in a
market (although there are exceptions to this).
9. COMMAND-----------------------------------------------MARKET
Private ownership
profit motive
consumer sovereignty
competition
government regulation
freedom
security
stability
equity
growth
efficiency
10. To avoid people getting benefits they are not paying for. This is
known as the “Free rider” problem. Things like Military, police
protection, 911, public education, etc are all things everyone gets a
benefit from, but no one individual would be likely to pay for at a rate
that would maintain a market for that service.
11. To encourage entrepreneurs to take risks and develop new
products that they can profit from.
12. inputs to outputs, education and technology
13. The total dollar amount of goods produced in a country’s
borders divided by the population. Although it is not a perfect
measure of standard of living, typically a higher GDP per capita is
associated with higher income levels across the country, thus a
higher standard of living.
Households to factor market: Services (labor mainly)
Businesses to factor market: Money (to pay for labor)
Households to Product Market: Money
15. To work together to determine market clearing price
(equilibrium price). Buyers look for low prices and sellers want
high prices.
16. To facilitate exchange between buyers and sellers
17. Law of Supply – there is a DIRECT relationship between
price and quantity supplied.
Law of demand – there is an INVERSE relationship between
price and quantity demanded.
18. Quantity supplied and quantity demanded
19. Demand increases (shifts right). Equilibrium price and
quantity are higher.
20. Supply increases (shifts right) thus lowering the equilibrium
price.
21. Demand increases, supply decreases. Prices DEFINITELY
increase, quantity is unknown.
22. The measure of how much a change in price affects quantity.
Medicine has an inelastic demand because even a large increase in
price may not drastically change the amount purchased. Gasoline
works in a similar fashion. A concert venue has inelastic supply
because the number of seats available doesn’t depend on price.
23. Price ceiling:
This causes a SHORTAGE because people want Q4, but
sellers will only sell at Q1.
PRICE FLOOR
This causes a SURPLUS because producers produce at qs, but
buyers only want Qd.
24. Incorporating means the individuals in the company are no longer
liable, therefore, they can take more risks. As a sole-proprietorship,
however, they owners get to keep all profits.
25. Profit is an incentive for entrepreneurs to take risks.
26. A monopoly has only one seller. Monopolistic competition has
many sellers. In monopolistic competition, the sellers are selling
similar, but differentiated products that they try to advertise their
differences. In pure competition everyone is selling the exact same
thing so there is no need for advertising. Monopolistic competition and
oligopolies are very similar. The only major difference is that in
Oligopolies, there are only a few dominant industries
27. Pure Comp – doesn’t FULLY exist, agriculture is close, stocks,
textiles. Mon. Comp – fast food, clothing. Oligopoly – gas
companies, car manufacturers, Home Depot/Lowes, Monopoly –
water authority, MARTA
Macroeconomic Concepts
28. C – purchases of most food, haircuts, legal services, doctor visits
I – purchases of machinery, new homes, factories, etc
G – roads, teachers, military, national parks
NX – purchases of American cars by Japan, imports of French cheese
29. Number unemployed/labor force x 100
30. CPI – Consumer price index, a measure of inflation of prices. It is
measured by comparing the change in price of a market basket of goods
over time.
31. Inflation is only a rise in prices. Stagflation is a rise in prices
and a drop in GDP or a rise in prices with a rise in unemployment
32. Unemployment decreases, inflation increases, real GDP increases
33. Cyclical – laid off because economy is bad, Frictional – moves
from one city to another with spouse, quits one job to look for
another, graduates from school and starts looking for a job.
Structural – laid off because skills are no longer needed by the
economy or the natural resources that supported the job are gone
34. National deficit is when the government spends more than they
make in one year. National debt is ALL the money owed by the federal
government. The opposite of national debt is national surplus.
35. Board of governors is at top. They are appointed by the
president. The 12 Reserve banks are next. They carry out the day
to day jobs of the Fed. When the 12 reserve bank presidents meet
with the Board of Governors, they form the FOMC to make
monetary policy.
36. Open market operations (buy/sell treasury bonds), discount rate,
reserve requirement
37. BUY bonds (make money supply bigger), Lower the discount
rate and lower the reserve requirement
38. Government spending and taxing decisions
39. Expansionary fiscal policy means Lowering taxes,
increasing government spending or both, therefore, the deficit
for that year will increase. This is sometimes called deficit
spending.
International Trade
40. Comparative advantage means being able to produce a good at
a lower opportunity cost compared to another country producing
the same good. The theory of CA says countries/companies should
specialize in the goods in which they have comparative advantage
and trade for other goods they need.
41. The charity check does NOT affect the balance of trade
because there is no good or service exchanged. The balance of
payments is decreased because American currency has left the
US. When we sell wheat to Africa, however, we have
EXPORTED a good and the balance of trade AND balance of
payments experience a positive increase.
42. Domestic consumers would argue that tariffs make imports
more expensive and that drives the equilibrium price higher.
Domestic producers might argue that their workers cannot compete
with lower wages in other countries and these barriers even the
playing field.
43. Subsidies because a subsidy encouraged producers to
produce more and will likely drive market prices lower.
44. Promote free trade
45. 4 USD = 2.88 Euros, 4 Euros = 5.52 US Dollars
46. Anyone holding dollars: US travelers in other countries, US
businesses that are buying things in other countries, etc
Personal Finance
47. Predictably
48. Banks offer more services, are generally bigger, and are owned
by shareholders or people who buy stock in the bank. Credit
unions are owned by the people who have accounts there.
49. The one they CHARGE for a loan because that is the
amount people must pay them. It has to be larger so they can
make a profit on loans.
50. As risk increases, potential for higher return increases. Stock,
mutual fund, bond. Savings accounts are technically even safer
than bonds.
51. Inflation reduces the value of the dollar. Therefore, when
they are repaid, they money they get is worth less than when
they made the loan.
52. Progressive taxation taxes income earners at a higher rate the
higher their income goes. Regressive does the exact opposite, as
your income increases, the percentage you pay decreases..
53. Amount of total credit, payment history, income level,
other debts, length of time you’ve had credit
54. Health insurance pays for medical expenses and Doctors bills
when an accident happens or when needed. Disability insurance
pays YOU a portion of your salary while out of work.
55. A premium is required every month (or some other
frequency) and is what is required to maintain your insurance.
A deductible is ONLY required when you wish to USE your
insurance. Generally, the higher the deductible, the lower the
premium.
56. Because compound interest pays interest on the TOTAL
amount in the account and simple interest only pays interest on the
original amount invested.
57. Annual percentage rate is the yearly interest charged when a
balance is carried monthly. The annual fee is different because it is
a one-time amount charged whether the card is used or not.
58. The higher a person’s education level, generally the higher
their lifetime income will be, therefore, their standard of living
(general well-being) will be increased as well.