ECON 043 Final Review

credit rating

An individual's _________ ________ is based on the ability to pay, assets, and credit history. / This is a number anywhere from 350-850 - A high credit rating reflects a high probability of repayment.

lower

In order to encourage economic growth, the Fed can ________ the required reserve ratio for banks allowing banks to lend out more money to businesses and consumers.

reduce

In order to encourage economic growth, the government can ____________ taxes.

secure

In order to ensure a successful economy, all of the government defense organizations must work together to develop a ___________ nation.

Federal Reserve

In order to have enough money to lend to all the consumers and businesses demanding loans, banks borrow money from the ________ _________, who charge an interest rate (discount rate).

substitute

a _____________ is a good that can be used in place of another good or service

product market

a business exchanging finished products for consumers' money/ the final destination of the good is the consumer

partnership

a business owned and operated by two or more individuals

sole proprietorship

a business owned by a single person/ the owner is responsible for all aspects of operation, including accounting, financing, production, and distribution

peak (business cycles)

a positive uptrend in business activity/ the highest point in the business cycle, indicating the end of expansion and the beginning of a contraction

below (if set above the equilibrium price, it would still allow equilibrium to be reached)

a price ceiling has to be set _______ the equilibrium price in order to impact the economy

business

John Maynard Keynes believed that all economic problems are caused by decreases in ___________ sector spending.

Keynes

John Maynard ___________ first introduced fiscal policy in 1936 during the midst of the Great Depression. -he felt that if the government could increase demand they could improve the economy

production inefficient

a disadvantage of monopolies/ they do not ever produce goods at their lowest possible operating cost because they aren't scared of losing business to competitors/ caused by a lack of competition

BOP (balance of payments)

a record of all transactions made between one particular country and all other countries during a specified period of time made up of imports and exports, and investments given to and received by foreign nations

absolute advantage

a philosophy of foreign trade developed by Adam Smith in the 18 century which states that nations should specialize in only the goods they can produce cheaper than the nations they trade with and if a country can produce more of a good than any other country, then it should export that good

comparative advantage

a philosophy of foreign trade which states that nations can still gain from foreign trade even if other countries can produce goods or services more cheaply if their opportunity cost of producing a good is less than the opportunity costs of other nations

promote economic efficiency

Many economists argue that global free trade will... - promote economic efficiency - cause economic problems - result in the United States becoming poor - create protectionism

(federal) government

Many felt the national bank gave the ___________ too much power, and Congress refused to renew the 20 year charter of the First National Bank in 1811.

(extensive) training

Parent companies provide __________ to franchise owners to ensure their success.

law (www.business.gov outlines the steps to starting a business in each state)

Potential business owners are obligated by _______ to follow many guidelines, such as obtaining required licenses and registering with the state.

Reaganomics

President Ronald Reagan's new economic strategy, _______________, included cutting taxes and decreasing government spending.

inflation

a rise in the overall price of goods and services/ price indexes are used to adjust data as a result of this ex. in 1982 the average hourly income was $7.68 an hour while today the average hourly income is about $15.85 an hour

decrease

a rise in the price of a game of bowling will _____________ the demand for bowling balls

economics

a social science that attempts to explain human behavior in the economy

equilibrium

a state of balance between opposing forces or powers

true (many women had a difficult time with this because they had enjoyed their jobs and wanted to continue working)

T/F - After the war, most women were forced to quit to allow returning veterans to take their place.

true (banks give loans to people who are going to spend that money right away)

T/F - Borrowing can increase the amount of money in the economy and stimulate economic growth.

true

T/F - Corporations sell stock to the public, and as a result all stockholders hold part ownership in and have partial control of the corporation.

false (they refuse to import goods while flooding foreign markets with cheap goods)

T/F - Countries that practice dumping import goods from foreign nations.

true (in the past 10 years, the world has shifted towards more liberal trading policies)

T/F - Currently, U.S. tariffs are at their lowest in history and international trade is at the highest it has ever been.

true (if a business does not follow these guidelines, the US government will step in)

T/F - Each business has a responsibility to provide safe working conditions, equal pay, and equal treatment for all employees.

false (uneven growth patterns occur in the US due to unequal distribution of wealth, declining regional population, and demographics)

T/F - Economic growth always occurs at the same rate in all regions of the United States.

true

T/F - Economic knowledge is important in every job.

false (laissez faire means "hands off")

T/F - Economic regulations help fulfill Adam Smith's idea of a laissez faire economy.

false (they are employed by the government and by private businesses)

T/F - Economists are only employed by government agencies.

true (a country has a comparative advantage when that country can produce a good at a lower opportunity cost than another)

T/F - England can produce glue at a lower opportunity cost than France; therefore, England has the comparative advantage.

true (many claimed that the Constitution did not allow for all of these socialist programs)

T/F - FDR's New Deal came crashing down when the Supreme Court declared most of the programs unconstitutional.

true (parent companies often provide financing options for an individual considered a "good risk")

T/F - Franchise owners borrow money from lending institutions or family members, or use personal resources to pay the initial setup costs for the business.

false (it is the term used for the emergence of a global society)

T/F - Globalization is the term used to describe the emergence of a fragmented and divisive isolationist world view.

true

T/F - Improved telecommunications technology contributes to economic growth.

false (the branch locations would also fail)

T/F - In a franchise, if the parent company fails then the branches can continue with their business.

true

T/F - In a recession, fiscal policy calls for the government to decrease taxes and increase spending.

false (govt spending during the 1950s created new economic opportunities, contributing to the affluent society)

T/F - Increased government defense spending heavily contributed to the decline of the economy in the 1960s.

false (discount rate is a type of monetary policy)

T/F - Increasing the discount rate in order to decrease the money supply is an example of fiscal policy.

false (trade deficits have not devastated the U.S. economy so far and probably won't)

T/F - Increasing trade deficits will devastate the U.S. economy in the future.

true (they encourage and develop production)

T/F - Investment, the creation of new businesses, and entrepreneurs are some of the "driving forces" of our economy.

true (telephones/the Internet make it possible for a person in a foreign country to fill a job once filled in the US)

T/F - Large companies might find it cheaper to function outside of the United States.

true (since its creation it has met opposition from those concerned about free trade)

T/F - Many feel like the WTO neglects poor, developing countries and favors rich nations, such as the United States.

false (a combination of monetary and fiscal policy works best)

T/F - Monetary policy alone is the most effective economic policy.

true (the US econ. is large, strong, and dependent on imports/ the dollar's value can affect the world econ.)

T/F - Most countries agree that the United States is the driving force of the world economy.

true

T/F - One of the main reasons for increasing economic regulations in the United States is the increasing population.

true

T/F - Public utilities are examples natural monopolies.

false (it prescribed decreasing domestic government spending and cutting taxes)

T/F - Reaganomics included increasing taxes while decreasing government spending.

false (specialization allows for goods to be produced at the most efficient rate)

T/F - Specialization does not promote economic efficiency because it increases the need for foreign trade.

true (employees are less likely to get their demands met during a time of high unemployment and low production)

T/F - Strikes are more effective when the economy is in a good condition.

false (it is a private institution within the government with both public and private aspects)

T/F - The Federal Reserve is owned by the government.

false (it only measures the output of the economy)

T/F - The GDP is a measure of the well-being of the economy.

true (a modern example of natural monopoly)

T/F - The U.S. Postal Service is the only firm with a government license to deliver first class mail.

Adam Smith

a well-known Scottish philosopher during the Enlightenment/ his ideas laid the foundation for free-enterprise economies/ he argued that the interaction of self-interest and competition provided the best economic world

private property ownership

What economic concept do the Fourth and Fifth Amendments to the Constitution identify? - private property ownership - competition among businesses - regulation of monopolies - organization of the Fed

recession (business cycles)

exists when there is an overall downturn of many economic indicators - ex. employment/ the average ___________ lasts about one year

economic growth

expansion of the economy to produce more goods, jobs, and wealth

limited liability

financial responsibility of business owners only for what they invested in a business

Federal Trade Commission

in the United States, the _________ _________ ______________ is an organization run by the government to protect consumers/ it enforces federal laws that prevent fraud, deception, and unfair business practices

technology

it can be argued that changes in ____________ have the most important influence on supply

impossible

it is difficult to achieve all of the economic goals because the pursuit of one often makes another _____________

foreign markets

many businesses in an economy produce goods strictly for __________ __________

regressive tax

opposite of a progressive tax/ takes a larger percentage of income from low-income groups than high-income groups ex. sales tax

open market operations

purchases and sales of U.S. government securities

investment

putting money into businesses, stocks, bonds, retirement plans, etc., in order to gain a profit/ can also mean saving money for the future

value

scarcity and utility determine _________

related

supply can also be influenced by the prices of other ___________ goods

decrease

supply will ___________ when the number of suppliers decreases

increase

supply will ___________ when the number of suppliers increases

baby boom

the ______ _______ was a period of huge increase in the number of births in the U.S and increased economic prosperity by increasing consumer demand

supply curve

the ________ ________ shows the relationship between the quantity of a good supplied and its price/ as the price (y-axis) rises, the quantity supplied (x-axis) increases

value

the ________ of a good or service in a market economy is determined by utility and scarcity

incorporation

the act of becoming a corporation/ this allows firms to accumulate sufficient capital to make large-scale investments and achieve economies of scale/ reduces the risk to investors by limiting their liability to their share of ownership

voluntary exchange

the act of buyers and sellers freely and willingly engaging in market transactions/ countries are not forced to import or export any particular goods

quantity supplied

the amount of a good or service that producers plan to sell during a given amount of time at a particular price/ the maximum amount of a good producers are willing to sell at a certain price

quantity demanded

the amount of a good that consumers plan to buy at a given price during a specific time

price

the amount of goods or money that must be given up in exchange for something/ convey information about the cost of production and the wants of consumers/ If either the cost of production or the wants of consumers change, so does the ________

discretionary income

the amount of income beyond what is needed to pay the bills/ during times of economic growth, consumers and businesses have more ____________ __________/ this is either spend on non-essential objects or saved

budget deficit

the amount of money by which federal expenditures exceed federal revenue in one year

money price

the amount of money it will take to purchase something

New Deal

the domestic programs passed by Congress between 1933 and 1938 which attempted to reduce unemployment and restore economic prosperity

moving

the economy is always _________

trade-offs

the exchange of one thing for another/ whenever we make an economic decision, we are always giving something up

economic growth

the expansion period of the business cycle/occurs when the total output of the economy increases over time/ typically refers to the rising GDP

decrease (the factory will stop making cars and begin making airplanes)

the same factory that produces cars can also produce airplanes - if the factory is producing cars and the price of airplanes goes up, the supply of cars will _________

Great Depression

the severe economic slump that followed the collapse of the US stock market in 1929

net exports (NX)

the smallest factor in determining GDP/ the total amount of exports minus the total amount of imports/ exports - imports

fixed exchange rate

the value of a country's currency as set by its government/ central bank, which works to hold the exchange rate in place, mainly through the purchase and sale of national currency

wealth

the value of all of the goods, services, and resources a society or individual owns

appreciate

to increase in value

protectionism

trade with restrictions

free trade

trade without restrictions

concentrated

Since different regions focus on different types of production, economic growth is typically ________________ in a few areas. ex. New York/ LA/ large cities

mass media

Since the radio networks were heard throughout the United States, radio advertising was the first example of _______ _________.

decrease

Some argue that labor unions __________ economic productivity. ex. since unions protect jobs, it is difficult for businesses to fire union workers

welfare

Some argue that social security helped establish an overdependence on the government for _____________ in the United States.

(protection and) security

The Department of Defense is an important part of the economy because it provides consumers and businesses with a sense of ____________ when making economic decisions.

Defense

The Department of ___________ protects and defends our nation, allowing us to feel safe and secure.

Commerce

The Department of ____________ compiles the statistics on the nation's output and income.

expand

The Fed can lower the discount rate and buy government securities in order to _________ the money supply.

12

The Fed is composed of ____ regional banks and their branches.

financial panics

The Federal Reserve was created in order to prevent _________ __________. It achieves this by regulating bank reserves and influencing the nation's money supply.

interdependence

dependence on others to fulfill needs

saving

___________ accounts are used to store money for the long term.

scarcity

not being able to afford everything one wants is an example of the fundamental economic problem of _____________

double taxation

occurs when the income of the corporation is taxed and its profits are taxed again when they are paid out to stockholders

laissez faire policies

policies allowing businesses to operate under minimal government regulation/ though there were many warning signs of the Great Depression, the government watched while production skyrocketed, demand plummeted, and the stock market imploded

basic economic

"What," "How," and "For whom" are the _______ ____________ questions.

38

$1,000 in an account with a yearly interest rate of 3.8% will earn $___.

comparing prices (with inflation rates)

1950 price = current price x 1950 CPI/current CPI ex. $10.00 x 24.1/187.3 = $1.28

low

A ______ unemployment rate usually indicates that the economy is doing well.

weak

A _________ dollar can purchase less foreign currency relative to a strong dollar - US consumers pay more for foreign imports, and foreign consumers pay less for US exports.

strong

A _________ dollar can purchase more foreign currency relative to a weak dollar - US consumers pay less for foreign imports and foreign consumers pay more for US exports.

multinational

A ____________ company exists in more than one country. These exist in virtually every industry. ex. McDonalds, 7-11, Costco, etc.

floating (flexible) exchange rate

A _____________ ______________ _______ is determined by supply and demand - if demand for a currency increases, the value of that currency relative to other currencies will increase/ If demand decreases, the value of that currency will decrease.

factor

A baker purchases flour so he can make goods and sell them in his bakery - the baker purchased the flour in a ________ market

economic decision

Because there was a choice (studying or partying) with limited resources (time), an ____________ _________ had to be made.

product

A businessman purchases flowers for his wife on the way home from work - he man purchased the flowers in a ________ market

deficit

A country experiences a trade _________ when the value of imports exceeds the value of exports.

absolute

A country has a(n) _____________ advantage when it can produce more of a product than another country.

comparative

A country has a(n) ______________ advantage when it can produce a good at a lower opportunity cost than another country.

all of the above

A labor union is an organization... - of workers who seek better treatment - that takes part in collective bargaining - that may go on strike if its demands are not met - all of the above

growing

A low inflation rate usually indicates that the economy is ___________.

decrease (it also makes the United States a less affordable travel destination)

A strong dollar also results in a ______________ in US exports because the goods are more expensive in relation to foreign goods.

more (because they are more affordable)

A weak dollar allows foreign consumers buy ________ US goods. This helps US production and employment, and encourages foreigners to travel to the States.

comparative advantage

According to modern theory, it is beneficial for a country to trade a good with another country if one country has a(n) ______________ _____________ in the production of that good.

service

According to the U.S. Bureau of Labor and Statistics, _________ jobs such as doctors, lawyers, counselors, educators, managers, computer programmers and engineers, nurses, and detectives are the jobs of the future. Although the manufacturing and agriculture industries make up a large portion of U.S. production, an increasing number of jobs are available in the __________ sector.

self-interest

Adam Smith believed that, if given a choice, all people would choose that which is in their own ______-____________

honest

All businesses have the obligation to be ________ to customers.

property

All businesses must use ____________ only for legal activities and abide by the law.

president

All of the EPA regulations must first be bills passed by the congress and then signed into law by the ________________.

reputation

Businesses need a good _______________ in order to beat out the competition.

cause

Amendment IV of the Constitution states that "The right of the people to be secure in their persons, houses, papers and effects, against unreasonable searches and seizures shall not be violated." - this furthers the right to own property, because the government cannot search property without reasonable _______________.

income

Amendment XVI, passed in 1913, grants Congress the power to collect __________ taxes.

ration

Americans were forced to _________ goods, such as gas, rubber, flour, and sugar, in order to ensure there would be enough for the troops.

oligopoly

An _____________ is an industry dominated by a small number of firms.

(honest and) ethical

An economic responsibility of all businesses in the United States is to conduct all business in an ________ manner.

protectionism

An example of ______________ is the Hawley-Smoot Tariff Act of 1930, which raised tariffs in the United States on numerous foreign goods.

women (however, when the war ended, women were expected to quit their jobs)

As a result of WWII, _____________ entered the workforce, working in industries considered off-limits before the war.

9/11

As a result of the _______ terrorist attacks, the US economy suffered a devastating blow - the American travel industry declined, unemployment increased, and jobs were destroyed.

Internet

As a result of the ___________, large quantities of information are now just a click away and people and goods are more accessible.

decrease (gives consumers and businesses the incentive to spend and to take out loans)

As a way to increase economic growth, the government will _____________ interest rates.

increase

As transportation costs ___________, the price of goods will increase.

interest

Banks offer __________ on savings accounts and some checking accounts. ex. if a bank pays 4% interest per year, the bank will pay you $40 per year on a $1,000 balance

store of value

Because money can be saved or stored for later use without losing value, it is considered a ________ _____ __________.

standard of value

Because money can be used to measure the relative value of all goods and services and is a standard system of measurement for business profits and losses, it is considered a __________ ____ _____________.

labor

Before the _______ movement, workers had almost no voice in determining their wages, hours, or working conditions.

absolute

Beta can produce either ten apples or three oranges. Cama can produce either twelve apples or three oranges. - Cama has a(n) ____________ advantage in the production of apples.

interest

Between January of 2005 and December of 2006, The Federal Reserve raised ________ rates by almost 3 percent because it shrinks the money supply and attempts to curb inflation.

entrepreneur

Bill Gates is an example of an _____________ because he developed a company and started a business

spending

Business ____________ causes a chain reaction - as businesses invest money, they pay employees and hire workers, who then spend the money they receive.

decreases

By borrowing money to finance a deficit, the government ______________ the amount of money available in the economy for lending.

inflation

By printing more money to finance a deficit, the government runs the risk of increasing _____________.

Interstate Highway

By the 1960s much of the United States was connected through the __________ __________ System.

20

By the 19____s, automobiles were not just for the wealthy and people could venture much farther from their homes than before. They also allowed businesses more freedom in supplying.

30

By the 19____s, most Americans owned a radio and were able to listen to radio programs and advertisements. Businesses were then able to market their products to a larger audience.

telephone

By the early 1900s, Americans were able to communicate using the ___________, which allowed instantaneous long-distance communication. Businesses could now expand to multiple cities because they could keep in close communication.

25

By the early 1930's, as a result of Black Tuesday and the Great Depression, over _____% of Americans were unemployed.

trade deficit (also contributed to inflation)

By the early 1970s Japan and Europe had rebuilt from WWII, and were producing goods cheaper and more efficiently than the United States. Foreign merchandise was flooding into the United States, causing a _______ _________ of ten billion dollars.

consumer demand (when consumers demand products developed in your area, it thrives)

Changing ___________ ____________ also contributes to uneven economic growth.

change quickly/ equal

Command Economies are strong in that they can ________ __________ and working class citizens are economically ___________

First Bank

Congress established the ______ _______ of the United States in 1791/ This functioned as the central bank, making loans, safeguarding deposits, and issuing currency, regulated all banks chartered by the United States, and developed a national coinage system.

Federal Reserve (the central bank of the United States)

Congress passed the ____________ ____________ Act of 1913, which gave the Fed the power to regulate bank reserves and influence the nation's money supply.

credit (based on their credit rating)

Consumers cannot use ________ unless they apply for it and are approved.

corporate charter

Corporations are very costly and time consuming to organize because of the many government regulations involved in gaining a _____________ ___________ (a licence to operate given by the state government).

raising money (they are able to invest and expand)

Corporations are very effective in _________ _______.

stockholders

Corporations can be sued, but ________________ cannot.

cost-benefit

Economists and government officials have to weigh the options in order to determine if economic policy is helping the country - this analysis is called a ______-__________ analysis.

analyze economic data

Economists are hired by private businesses to... - do general labor - program computers - analyze economic data - manage companies

efficiently

Economists argue that free trade would eliminate jobs in industries that are not producing _____________, then increase the number of jobs in the industries that are.

overproduction

Demand for US products abroad decreased and ____________ was one of the main causes of the Great Depression. / The _____________ of the 1920's led to an unequal distribution of wealth.

stronger

During his administration, President George W. Bush believed that participating in the world economy makes the U.S. economy ____________.

financial

During the 1990s, banks began to transform into a new industry - __________ services - that offer a large variety of services such as insurance and investments.

all of the above

During the Cold War, the United States government spent large amounts of money... - on defense, including atomic warfare - on the space program - in order to outspend the Soviet Union - all of the above

overproduction

During the Great Depression, the major reason for farmers receiving low prices for their crops was _____________.

Hundred Days

During the ____________ _______, Congress passed many major bills to help relieve the Great Depression.

license

Each business is required to have a current business ____________ - depending on the type of business, many other permits and licenses might be required.

agriculture (farmers produced more, hoping they could sell more and continue to make money, but demand did not exist, and soon many were defaulting on their loans)

Early warning signs of the Great Depression came from the ___________ industry.

uneven (one reason for this is population distribution in large cities vs rural areas)

Economic growth is __________ in the US, contributing to a diverse economy.

increased

Economic growth occurs because of the ____________ consumer spending when new technology lowers prices. ex. plasma TVs

longterm

Economists recommend fiscal policy for ____________ economic help.

safety

Employers are responsible for the __________ of their workers.

property/ ideas

Entrepreneurs are able to open new businesses because the government guarantees individuals are able to own ___________ and _______.

bachelor's degree

Entry level economists typically must have a... - GED - high school diploma - bachelor's degree - Ph.D.

bachelor's

Entry-level economists must have a ___________ degree, and a master's degree is required for most economists working in the private sector.

required reserve

Every bank in the United States is required to keep a specific amount of money in reserve. This is a percentage called the _____________ _________ ratio.

encourage (increasing spending without increasing revenue will increase the federal deficit)

Fiscal policy can ____________ an expanding budget deficit.

tailored

Fiscal policy can be ___________ to specific groups. ex. tax cuts for low income families

decreasing (reduce the money supply, helping to curb inflation)

Fiscal policy can be used to control rising inflation rates by ______________ government spending.

specialization

Foreign trade allows ______________ by letting countries concentrate on making goods that they are able to produce cheaply and efficiently.

regulations

Franchise owners must follow the _______________ of the parent company.

nominal GDP

GDP evaluated at current market prices/ this will include all of the changes in market prices that have occurred during the current year due to inflation or deflation

all of the above

GDP is not a proper measure of the total production of the United States economy because... - it only includes final goods - it does not account for household labor/ volunteer labor - it does not take illegal production into consideration - all of the above

increased

Government economic regulations have consistently _____________ in the United States economy since our country was founded.

inflation

Governments seek to reach economic stability by increasing production and decreasing unemployment without increasing _____________.

less (consumers are not able to buy as much as they used to)

High inflation rates typically mean that consumers have ________ purchasing power. - an indicator of a slow economy

market

I am an owner of a very successful mortgage company. My company provides loans to individuals so they can purchase homes. I work hard so I can make a lot of money and retire early. The government does not interfere, so I am able to make decisions as I see fit. I belong to a _____________ economy.

mixed-market

I work for the Federal Trade Commission. I help the government regulate consumer protection laws that make sure the economy runs smoothly. I own a townhouse, and I'm thinking about quitting my job and going on a road trip. I belong to a _________-_____________ economy.

command

I work for the government in a factory. I work every day in order to fulfill government quotas. My family lives in a modest apartment provided by the government. I belong to a ______________ economy.

progressive

If Congress just passed a new income tax outlining that those making over $100,000 pay 35 percent of their income in taxes, and those making under $25,000 would pay 10 percent of their Income, what type of tax did Congress pass?

credit

If a country receives money, it is considered a ______.

debit

If a country spends money, it is considered a _______.

dissolve (or reorganize)

If a member of a partnership leaves the business, the partnership must ___________ completely.

spending (makes up for the decrease in business sector spending)

If the economy is declining, a slight increase in government ____________ can help the economy.

increases

If the price __________, the demand will decrease. This is because as a price rises, people are willing and able to buy less of that good.

decreases

If the price __________, the demand will increase. This is because as the price of a good is reduced, people are willing and able to buy more of that good.

low (if the money supply is limited, the exchange rate will be higher)

If there is a large supply of currency, the exchange rate will be ______.

demand

If you ____________ something, then you plan to buy it/ these are different from wants/ the amount of a good that consumers are willing and able to buy at a given price/ they must have the money to buy it, the ability to buy it, and the willingness to buy it

authorized

If you download a music file, make sure it is from an _______________ Web site.

international

Improvements in communication and transportation have made the ______________ sector increasingly important to having a stable economy.

raise (by taking extra money, the government hopes the money supply will decrease)

In order to control inflation, the government can _________ taxes.

income (the government came to the realization that high tariffs were not an adequate way to gain funds )

In 1913, the United States passed an amendment to the Constitution allowing the federal government to tax the __________ of the American people.

39

In 19___, World War II began, and public and government attention moved toward foreign policy and national defense.

Hurricane Katrina

In 2005, storms like __________ _________ caused deaths, destruction of homes, and caused over 500,000 people to be separated from their place of work. They also caused major destruction to oil facilities, increasing gas prices.

Bretton Woods

In July of 1944, many nations met to discuss economic recovery from WWII. The resulting ____________ ____________ Agreement established the World Bank, to provide long-term loans for Europe's recovery, and the International Monetary Fund, to manage the international monetary system of fixed exchange rates.

29 (by 1933, the banks in many major cities, including New York and Detroit, had failed.)

In October of 19___, the Great Depression hit the United States and many businesses failed, which led to many workers losing their jobs.

buys

In order to encourage economic growth, the Fed ___________ government securities because it increases the supply of money.

less (countries would rely on each other/it does not make sense to go to war with your own market/ supplier)

In a world of completely free trade, war would be ________ likely because of the devastating economic effects it would have on the world economy.

ownership/ control

In corporations there is a separation of __________ from __________ - The stockholders own the corporation, but executives working for the corporation usually control it.

financial

In order for people to use the savings of others, the economy must have a(n) ____________ system—a network of savers, investors, and financial institutions.

all of the above

In order to control inflation, governments might... - sell government securities - increase taxes - decrease government spending - all of the above

raise (requiring banks to keep more money in reserve)

In order to control inflation, the Fed can ________ the required reserve ratio for banks because it decreases the money out in the economy.

price

In perfect competition, the only competition is _________ competition.

National Bank

In the 1860s Congress passed the __________ ________ Acts, which accomplished... - made it possible for private banks to be chartered by the federal gov. - issued money backed by the government - placed a tax on the use of all state bank notes, thus driving them out of circulation - brought about a dual system with state and nationally chartered banks

potential

In the 1920s the paper value of the stock market had exceeded the real value of production. The problem was that the market was not based on real earnings; it was based on __________ earnings.

Korean War

In the 1950s, the United States was also involved in the __________ _______, fighting to protect the people of South Korea from communism.

Vietnam

In the 1960s and early 1970s the United States policy was focused in _____________, where soldiers were fighting to protect South Vietnam from communism.

Silicon Valley (computer chips made from silicon were the foundation of the tech community)

In the 1980s, a small area in California between San Francisco and San Jose became known as ________ ___________. This gave birth to new technologies, such as pocket calculators, video games, personal computers, etc. and by the 1990s, virtually every American home had a computer.

progressive/ regressive

In the United States, income tax is an example of a __________ tax, and sales tax is an example of a __________ tax.

increase/ decrease

Inflation is an overall _____________ in price, and deflation is an overall ____________ in price.

trough

In the business cycle, a __________ is measured when economic growth changes and begins to increase.

recession

In the business cycle, a _____________ exists when there is an overall downturn of the economy

transcontinental railroad

In the late 1860s, the first ______________ ____________ in the United States was completed. This made it possible for goods to be transported further and for cities away from coasts and waterways to flourish .

Enlightenment

In the mid-eighteenth century, a new era of philosophy known as the _____________ developed in Europe.

stock

In the stock market, individuals buy partial ownership in a corporation by investing in that company's _________.

efficient

International competition motivates countries to develop more __________ means of production.

increase

International trade leads to an ___________ in world production.

yes

Is economic growth likely to occur if the economy is experiencing a decreasing unemployment rate and an increasing GDP?

no

Is economic growth likely to occur if the economy is experiencing a recession?

yes

Is economic growth likely to occur if the economy is experiencing an increase in overall GDP?

no

Is economic growth likely to occur if the economy is experiencing an increasing unemployment rate and a high inflation rate?

yes

Is economic growth likely to occur if the economy is experiencing expansion?

combination (the policies working together will have the best effect on overall economic growth)

It is believed that the best economic policy uses a _______________ of fiscal policy and monetary policy.

Bolshevik

Karl Marx's socialism theory was the basis of the _______________ Revolution in 1917

interest rate

Like all real data, the real ___________ ________ is the nominal or current market rate minus the expected rate of inflation./ The bank pays an ___________ ________ set by the Federal Reserve to the consumer or business depositing the money.

does not (ex. odd jobs like babysitting and lawn mowing are not measured)

Limitations of the GDP - It ________ ______ measure all transactions.

legal (the government cannot measure black market transactions)

Limitations of the GDP - It only measures ________ transactions.

final (does not measure any product that is used in the production of another good)

Limitations of the GDP - It only measures ___________ products.

employment

Many argue that trade restrictions increase ________________ because of the increasing demand for domestic goods. This ensures jobs are not lost to foreign competition.

monopolistic competition (generally has no real drawbacks)

Many economists agree that ______________ ______________ is the most efficient market structure.

communism

Marx believed that ______________ was the purest form of socialism

save

More money becomes available for economic growth when people _________ money.

overall economy

Monetary policy affects the ___________ ____________.

medium of exchange

Money serves as a ________ ___ _________ because it can be exchanged for goods and services.

barriers to entry

Monopolies are typically created because the industry has high __________ ____ _________ that prevent many businesses from entering the industry.

inefficiency

Monopolies face disadvantages that focus around _______________.

traditional

My parents are farmers. For as long as I can remember, I have been helping them plow and harvest the fields. We use the secrets of our ancestors to get as much from the land as we can. We then trade what we get from the land with others around us. Our society has worked this way for centuries. I belong to a ____________ economy.

Canada, Mexico, US

NAFTA instituted a free trade policy between... - All world nations - Europe and Asia - Canada, Mexico, US - Europe and Africa

technology

New ______________ creates the need for new laws. ex. automobiles required new traffic laws

intellectual

New and innovative ideas are considered ______________ property and are protected in the United States by patent laws.

it increases (a rise in overall income produces an increase in demand for normal goods)

New cars are a normal good - if the economy enters a period of strong economic expansion so that consumer incomes increase, what will happen to the demand for new cars?

the economic prosperity of the 1920s

New technology and consumer spending created... - the economic prosperity of the 1920s - the Great Depression - the New Deal - the labor movement

black tuesday

October 29, 1929 - the day the US stock market crashed, leading to the Great Depression

competition

Oligopolies are able to restrict ___________ almost as easily as monopolies.

businesses

Oligopolies have many advantages for _____________ - since they are comprised of so few industries, the industries often work together to control the market/ firms are easily able to withstand economic downturns because they are able to cooperate and fix prices

41

On December 7, 19____, Japan bombed Pearl Harbor, and the United States entered World War II.

1969

On July 20, _________, the United States was the first to land on the moon, and that was considered a huge defeat of the Soviets.

lifespan (that is not linked to a specific owner)

One advantage of a corporation is... - unlimited liability for its owners - lifespan - the ease of obtaining a charter - it cannot enter into any legal contracts

differentiation

One distinct difference between monopolistic competition and perfect competition is product _____________.

storing money

One of the four main functions of banks in today's economy/ Banks hold our money is checking and savings accounts until we are ready to use it.

financial services

One of the four main functions of banks in today's economy/ Banks offer many services such as credit cards, debit cards, smart cards, and insurance, which make it easier for consumers and businesses to make purchases and transfer money.

transferring money

One of the four main functions of banks in today's economy/ Banks transfer money between individuals, businesses, and other banks.

lending money

One of the four main functions of banks in today's economy/ The money put into banks is given out as loans to other customers. The bank charges interest for these loans and usually needs some form of collateral.

debtor/ creditor

One of the most important economic results of World War I for the United States was the United States moving from being a __________ nation to being a __________ nation.

dumping

One of the most recent arguments for protectionism is ___________. This occurs when a nation sells its goods at a lower price in a foreign market than they do in their domestic market for the purpose of driving foreign industries out of the market. Under current laws and trade agreements, this is illegal.

savings and loans

One of the three main types of financial institutions in the United States/ _________ _____ ____________ were established to accept funds and lend money in order to offer home mortgage loans. In the past, they encouraged people to same money by paying high interest rates on saving accounts and charging low rates on loans, but as a result of many of these failing in the 1980s, today most function as commercial banks.

commercial banks

One of the three main types of financial institutions in the United States/ _________ ________ offer services such as checking and savings accounts, loans, and financial advice. They operate to make a profit, and do so through interest.

credit unions

One of the three main types of financial institutions in the United States/ _________ _________ operate much like commercial banks, however, they are owned and controlled by their members and so may be considered nonprofit organizations. This allows them to enjoy certain tax exemptions, and they typically offer lower interest rates on loans.

unlimited

One weakness of a sole proprietorship is that the faces ___________ liability.

specialize

Partners can __________ - they can contribute specific but different talents and skills to the successful operation of the business.

income taxes (these are paid when the individual partners file their personal income taxes)

Partnerships are not required to file and pay _________ ________.

Commerce

Patent laws are regulated by the Department of __________________, and they help to protect intellectual property from being stolen or misused/ This department also works to regulate monopolies when necessary.

more

People who can fill jobs that are in high demand will be paid _________ than those who can fill jobs that are in low demand.

decreasing

Reagan believed in cutting taxes for consumers and for businesses while _______________ domestic government spending because tax cuts would stimulate investment, create new businesses, and create new jobs.

contradiction

Reaganomics seemed to be a _____________ in economic theory - While cutting taxes to encourage economic growth and spending, the president supported the Federal Reserve's policies, which raised interest rates in order to lower inflation and discourage consumer spending.

positive

Real interest rates normally are ____________ because people must be compensated for deferring the use of resources from the present into the future.

Reaganomics

Ronald Reagan, who was elected president in 1980, believed in a new economic policy called supply-side economics. This eventually became better known as _____________.

lend

Saving makes economic growth possible because it allows financial institutions to _________ the savings of others to those who will invest them.

regressive

Sales tax is an example of a ____________ tax, because lower income families spend a higher percentage of their income on the tax.

easy (they involve little government interference)

Sole proprietorships are typically ________ to establish.

chairperson

Some say the ________________ of the Federal Reserve Board is the second most powerful person in the United States, second only to the president.

4/ 6

Some sort of unemployment will always exist, so a good unemployment rate is about ___% and a high unemployment rate is over ___ %.

disincentive (extreme progressive taxes would not motivate people to increase their income)

Some view the progressive tax as a _____________ for hard work.

efficiency

Specialization promotes the __________ of the world economy because nations are able to produce only what they produce especially well.

true (the balance of payments should technically always balance)

T/F - A country can experience a trade deficit or surplus, or an investment deficit or surplus, but everything all totaled for all nations should equal "0."

true (an increase in oil prices increases the cost of the transportation and can therefore increase the cost of eggs, milk, bread, etc.)

T/F - The United States is so dependent on oil imports that oil prices are one of the tools economists use to determine the state of the economy.

true (this is mostly due to a misunderstanding of the law of comparative advantage)

T/F - The benefits of free trade are obvious to most economists, but politicians and the public frequently call for trade restrictions.

true (apply for cards with low interest rates and low fees)

T/F - The consumer will pay a finance charge or interest rate on all purchases made with credit.

true (the Federal Reserve raised interest rates to record-high levels, intentionally creating small recessions)

T/F - The government actually planned the rest of the small recessions that occurred during the 1950s and 1960s in order to control inflation.

false (the government does not regulate oligopolies as heavily as monopolies)

T/F - The government regulates oligopolies heavily.

false (it was extremely successful - ex. child labor was outlawed and an 8 hour work day was established)

T/F - The labor movement in the 1800's and early 1900's in America was not very successful.

true (buying and selling government securities is the tool most often used by the Fed)

T/F - The primary and most used tool of the Federal Reserve is open market operations.

true (deficits incurred by fighting the Vietnam War, consumer spending, and European and Japanese trade all contributed to the recession)

T/F - The recession of the early 1980s was caused by large government deficits, increased consumer spending, and the emergence of foreign trade by other nations.

true (if the Dow Jones and NASDAQ are low, there is a good chance the economy is doing poorly, and vice versa)

T/F - The stock market reflects all aspects of the economy, and watching the stock market is a pretty good indicator of where the economy currently is.

true (this instilled fear in consumers, contributing to a decline in spending)

T/F - The terrorist attacks of September 11, 2001, caused a decline in consumer spending.

true (factories were transformed into war-producing industries, making everything from bullets to airplanes. and automobile factories started making tanks and planes, and soon the United States was producing more weapons than any nation in the world.)

T/F - The wartime economy of WWII ended the Great Depression, and the United States economy came to life.

true (2000 proved to be deadly for the dot-coms because there was not enough consumer demand)

T/F - The year 2000 brought an end to the technology boom of the 1990s.

true (monetary policy faces the same lags as fiscal policy; recognition, implementation, and impact lags, but is more immediate because it has a shorter implementation lag)

T/F - There is no congressional discussion or debate with monetary policy like there is when implementing fiscal policy.

true (since most high-paying jobs require an education, those who cannot afford college are left behind)

T/F - Uneven economic growth is also due to the lack of educational opportunities available to lower-income Americans.

true (when the price of a loan goes up, the demand for the loan goes down)

T/F - When banks have to pay a higher discount rate, they will pass that increase in the discount rate on to the customers by increasing the interest rate charged on the loans they take out.

true (a nation can produce a good at the lowest opportunity cost but not make a profit because of trade restrictions)

T/F - When restrictions are placed on trade, comparative advantage may be nullified.

true

T/F - When the Federal Reserve sells government securities, it results in a decrease in the money supply.

false

T/F - a factory selling tires that a delivery company uses on its trucks is an example of a product market transaction

false (any change in the price of a good will produce movement along the demand curve)

T/F - a rise in the price of a good will shift its supply curve to the right

false

T/F - an example of a monetary incentive is accomplishing a goal

true

T/F - an example of capital is a computer that a business uses for everyday transactions

true

T/F - an increase in supply means movement up and rightward along the supply curve

false

T/F - by limiting wants, people can eliminate scarcity

false

T/F - entrepreneurship is considered an economic and social goal of society

false

T/F - goods and services have the save value for everyone

false

T/F - if both the demand and supply curves shift equal distances rightward, the equilibrium price rises

false

T/F - scarcity is a problem only for economies that use money

false

T/F - the fundamental economic problem is the number of businesses that fail all over the world

true

T/F - the law of demand states that as the price of a good rises, the quantity demanded of the good falls

false (as price of a good increases, the quantity supplied of the good rises)

T/F - the law of supply states that as the price of a good rises the quantity supplied decreases

true

T/F - the opportunity cost of taking an unpaid vacation from work is the amount of money you would have made at work

true (instead of owing debts as it had done in the past, the US was owed money by other nations)

T/F- As a result of WWI, the United States moved from being a debtor nation to a creditor nation.

indirect

Taxation is considered an ______________ approach to influencing the economy because changes in taxation can cause consumers and businesses to react in different ways.

cultural differences

Television began to transform our nation and erase many _________ __________. As a result, businesses could market their products to the entire country, not just to local markets.

mercantilism

The American economy was established under the system of _____________ - The philosophy behind this was that the purpose of economic activity was to better the state and government.

stagflation

The 1970s produced a period of __________, where inflation and unemployment were increasing simultaneously. This made it difficult for Americans to purchase homes and goods since discretionary income was decreasing.

Federal Reserve Board

The 7 members of the _________ _________ _________ are appointed by the president and confirmed by the senate, and serve for 14 years.

FDIC (Federal Deposit Insurance Commission)

The Banking Act of 1933 created the ________, which insures all money deposited in a savings or checking account.

payments

The CPI is also used to adjust government ___________ from programs such as social security and welfare to consumers.

dollar

The CPI is used to determine the purchasing power of the __________.

91

The Cold War began after WWI and didn't end until the fall of communism in the USSR in 19____.

uniform (Article 1, Section 8)

The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be ____________ throughout the United States.

taxes (or duties/ Article 1, Section 9)

The Constitution blocks states from placing _________ on their exports.

property (Amendment V -"No person shall be ... deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.")

The Constitution created a market economy, free enterprise, and economic choice by establishing private ownership of ___________.

trade ( Article 1, Section 8 - Congress shall have the power to "regulate Commerce with foreign nations and among the several states and with the Indian Tribes.")

The Constitution gives the United States Congress the power to regulate ________.

Congress (Article 1, Section 8 - Congress shall have the power "To coin Money, regulate the Value thereof, and...To provide for the Punishment of counterfeiting the Securities and current Coin of the United States.")

The Constitution grants ______________ the power to coin money.

living

The Constitution is considered a ________ document since it is open to interpretation.

copyright (Article 1, Section 8 - Congress shall have the power "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writing and Discoveries.")

The Constitution paves the way for entrepreneurs by including the __________ clause.

Securities and Exchange

The Glass-Steagall Act provided strict government regulations of the stock market by establishing the _____________ _____ ____________ Commission, an organization that enforces regulations of the stock market.

e-commute

The Internet has made it possible for a growing number of workers to ___-____________, or work at home.

global

The Internet has transformed our economy into a ____________ economy.

Industrial Recovery

The National _____________ ____________ Act provided for government regulation of industries in order to ensure fair competition and eliminate fraud in the United States economy.

capital

The United States has to finance the trade deficit by investing _________ in foreign nations—that is, by paying foreign nations for the goods they receive.

all of the above

The Social Security Act sought to help... - the unemployed - the unemployable - the elderly - all of the above

space race

The U.S. and the USSR were engaged in a ________ _________ through the 1980s where John F. Kennedy increased United States commitment to the National Aeronautics and Space Administration (NASA).

the EPA (The Environmental Protection Agency )

The United States is facing an air pollution problem. Many companies and private citizens freely pollute the air without thinking of the future repercussions. What government agency would deal with this problem?

terrorism

The United States send troops to Afghanistan after declaring war on ____________.

recession

The US saw a small ____________, or a decline in economic activity, after the Korean War in 1953 which reflected the government's transition from wartime to peacetime spending.

GDP

The United States _________, which is the market value of all final goods and services produced in the nation in a year, is calculated by adding the expenditures of the four sectors of the economy.

WWI

The War Industries Board converted businesses to the war effort during _________.

War Industries

The ______ ________ Board was created by the government after the US entered WWI in 1917. This gave the government power to run all industrial plants, taking over many factories and converting them into war material manufacturers.

EU (European Union)

The ______ was organized in 1993, creating the world's largest free trading market. Its aimed to expand cooperation between the member nations in Europe and stabilize the currency of all member nations.

Cold War

The _______ _______ is the name of the period when hostility, short of war, existed between the United States and the Soviet Union. Many conflicts arose out of the hostilities, including the Korean War, the Vietnam War, and the Cuban missile crisis.

CPI

The _______ is used by many businesses to compare data from year to year.

stock market

The ________ _________ is where stocks in corporations are bought and sold.

Social Security (1935)

The ________ __________ Act established three main social insurance programs: unemployment insurance, retirement funds, and welfare payments, which are still in existence today.

(private) property

The ability to own ____________ is the basis of the market system.

WTO (World Trade Organization)

The ________ originated in 1948 with the General Agreement on Tariffs and Trade, but became what it is today in 1995. This helps producers, importers, and exporters conduct business by developing trading agreements between nations and enforcing international trade laws. It is based in Geneva, Switzerland.

Hawley-Smoot Tariff

The ________-_________ ________ was the largest tariff in United States history. This backfired causing a further drop in foreign trade when foreign nations passed tariffs of their own.

Glass-Steagall (1933)

The ________-__________ Act set firm laws and regulations for the banking industry and established the FDIC. Money deposited in banks was now protected, and people again began to deposit their money in banks.

assembly line

The _________ _______ was developed by Henry Ford, and allowed specialization in factories. It increased productivity and decreased production time, which lowered prices for factories and consumers.

Federal Reserve (Fed)

The _________ __________ is the governmental body that mandates monetary policy in the United States./ This is given the duties of conducting monetary policy, providing banking services to financial institutions, and ensuring that banking customers receive fair treatment and accurate info.

central (monetary policy conducted by the Federal Reserve directly affects the foreign exchange rate)

The _________ bank of the United States is the Federal Reserve Bank.

EPA (Environmental Protection Agency)

The _________ impacts the economy by developing and enforcing regulations that protect human health and the environment

FDIC (Federal Deposit Insurance Corporation)

The _________ insures bank depositors' savings.

labor (stiff competition in cities caused workers to work under almost any conditions)

The _________ movement in the United States was a result of the Industrial Revolution - Jobs moved from family-run farms and businesses to the large factories of the cities.

Marshall Plan (1950s)

The __________ _______ consisted of the US giving billions of dollars to European nations because they saw themselves as "protectors of free peoples" all over the world.

AAA (Agriculture Adjustment Act)

The __________ brought much criticism because it offered farmers money to destroy crops and leave land uncultivated.

railroad

The __________ industry was the first industry to be regulated by the Federal Government as a result of the Interstate Commerce Act in 1887.

CCC (Civilian Conservation Corps)

The __________ provided work to single young men, requiring them to send most of the money home to their families.

Agricultural Adjustment

The ___________ _________ Act aimed to raise agricultural prices and save the agricultural industry by paying farmers to destroy crops or not grow them. This was widely criticised and deemed unconstitutional by the Supreme Court three years later.

Tennessee Valley

The ___________ ___________ Authority, which is still in existence today, is an organization that provided work to Americans in order to generate electrical power and control floods around the Tennessee River.

infant industry

The ___________ ___________ argument is one of the main arguments for protectionism - new industries are fragile and need to be protected with temporary trade restrictions. Once the industry is developed, protection is no longer needed and the tariff is removed.

resources (usually do not have enough resources to invest in future growth and expansion)

The ___________ of sole proprietorships are very limited.

Wagner (AKA The National Labor Relations Act - 1935)

The ____________ Act established fair employment standards for all workers and gave federal protection to unions engaging in collective bargaining. It guaranteed workers the right to join unions without fear of getting punished or fired by an employer.

Patriot (some believe this is a violation of the rights given to all citizens)

The ____________ Act was passed in 2001 in an attempt to protect United States citizens from terrorist attacks. - The most controversial portion of the Patriot Act is Title II: Enhanced Surveillance Procedures

Montgomery GI

The ____________ ______ Bill's main purpose was to help returning veterans achieve a college education. The federal government spent millions of dollars on the college education of returning veterans.

International Monetary Fund (IMF)

The ____________ ___________ ________ was created by the Bretton Woods Agreement to manage the international monetary system of fixed exchange rates. In 1972, this system of fixed exchange rates broke down, giving way to today's floating exchange rates.

Civilian Conservation

The ____________ _____________ Corps was an organization that provided work for young men (18-25 years old). The men were required to send most of their income home to their parents, and worked mostly on road construction, forest preservation, telephone-line stringing, tree planting, and dam building.

consumer price index

The _____________ ________ ________ is used as an economic indicator because it determines the rate of inflation/ is used to adjust dollar values for inflation

national security

The _____________ ____________ argument is often used as an argument for trade restrictions - some industries are so important to national security that they need to be protected. ex. the steel/ computer encryption industry

Emergency Banking (1933)

The _____________ _____________ Act allowed federal bank inspections - federal officials were now allowed to inspect banks and their policies in order to make sure the banks were following federal law.

Occupational Outlook

The ______________ ___________ Handbook, published by the United States Bureau of Labor and Statistics, outlines the current and future status of specific jobs in the United States.

FTC (Federal Trade Commission)

The agency responsible for investigating fraud, as in fake vacation solicitors on the phone, is the ______.

100

The base year's CPI (consumer price index) is always _________. ex. a price index of 110 means there has been a 10% increase in price since the base year/ a price index of 90 means there has been a 10% decrease since the base year.

merging (together and becoming one company)

The cost of running a firm is very high and companies can make more money by __________.

high

The costs of unemployment are ________ because of the loss of output and decrease in upward mobility.

decrease

The creation of new jobs will ____________ the unemployment rate and increase production in the economy.

Cold War

The state of hostility that existed between the two world powers from World War II through the 1980s was called the ________ ________.

debts (conquered nations like Germany could not pay back the debt and entered their own depression)

The destruction of foreign markets was caused by the insistence of the United States and other WWI victors in collecting war _________.

inflation

The difference between real and nominal GDP is that Real GDP is adjusted for ____________, while nominal GDP is not.

1990

The economic prosperity of the _______s was primarily due to the new economy created by the internet, development of the computer industry, and dot-com businesses.

Internet

The emerging digital age contributed to soaring stocks and declining inflation. The ___________ helped to make it possible for millions of people to open dot-com businesses.

consumer

The extra money spent by a company is passed along to the ______________.

invest (when money is put in savings accounts, banks can lend it out to other consumers/ businesses)

The financial system works to take the savings of others and loan them to those who _________ them.

three Rs

The first of the New Deal programs was organized in order to accomplish the ________ ____ - "reform" for the banking industry and the stock market, "relief" for workers and industries, and "recovery" from the depression

defense

The government is obligated to provide protection to its people and defend them from any foreign or domestic threats/ the obligation to __________ is the reason for the Department of Defense, military, FBI, CIA, Secret Service, and Office of Homeland Security.

76

The home computer was not developed until 19____ and was not capable of communication until the 1990s.

price index

The inflation rate is calculated by finding the percentage change in the ________ ________. ex. if the price index in year one is 120, and the price index in year two is 135, then this would be the inflation rate: inflation rate = (135-120)/120 = 15/120 = .125 or 12.5%

50

The introduction of the television in the 19___s just expanded the idea of mass media and brought advertising into a new era.

inflation

The large amount of government spending on the space race and the arms race continued to expand the US economy, but also added to the money supply and raised ___________ rates.

International Monetary

The laws and procedures for exchanging national currencies are established and enforced by the ________________ ______________ System.

EPA

The laws developed by the _______ force businesses to be more conscious of the environment- sometimes spending extra money in order to comply with these regulations.

specialize

The main advantage that partnerships have over sole proprietorships is the ability to _____________.

wealth (the rich have a higher percentage of the wealth, and the poor have less)

The main cause of uneven economic growth is the uneven distribution of ________.

tax lags

The main drawbacks of fiscal policies are time lags, or _______ _______. - Many months can pass before the recognition of problems (recognition lag) and before the policy is implemented.

banking

The main duties of the Fed are to conduct monetary policy, provide banking services to financial institutions, and regulate the ___________ industry.

sole proprietorships (because they are fairly easy to open and easy to run)

The majority of businesses in the United States are _______ ____________.

perfect competition

The more buyers and sellers that exist in a market, the closer the market will be to ___________ _____________.

expansion (the New Deal expanded the role of government in America)

The most important legacy of the New Deal is the ________________ of government.

New Deal

The most significant legacy of the ______ _______ is an increase in the size of the federal government and expansion of government programs.

lower

The nation with the ________ opportunity cost has the comparative advantage in production of that product.

all of the above

The overall prosperity of the 1920s became the root of the causes of the Great Depression. The main roots of the economic failure were... - overproduction - decline in foreign trade - over speculation in the stock market - laissez faire policies - all of the above

tax ID

The owner of a business must file for _______ _____ numbers.

Montgomery GI

The purpose of the ____________ _____ Bill was to provide economic assistance, including education and housing assistance, to all veterans.

price index

The price of the same market basket for each year is calculated in order to determine the ______ _________.

economic regulations

The purpose of ____________ _____________ in the United States is to promote economic growth, stability, and equity.

subsidies

The purpose of government ____________ is to increase production in order to ensure competition in the industry./ This is money to industries by the government that are in need of support and stabilization.

Fed (Federal Reserve)

The purpose of the _______ is to regulate the money supply in order to create a stable economy.

restrictions

The purpose of trade ___________ is to protect a nation from foreign influences.

(written) contract

The results of collective bargaining go into a __________ between workers and management.

voluntary exchange

The right to ____________ ___________ requires businesses to disclose accurate information about the exchange to all parties involved.

monopolistic competition

The shoe industry in the current American economy, where many different types and brands are offered, is an example of ____________ _____________.

Brain Trust

The team of advisers that assisted Franklin D. Roosevelt in creating New Deal policies were nicknamed the ________ ________ due to their intelligence.

reform, relief, and recovery

The three Rs of the Great Depression were... - relief, recession, and reform - reform, relief, and recovery - research, read, and reform - reform, recession, and research

lag

The time period between when an economic policy is decided and when it actually takes effect is called a _______.

tripled

The value of the stock market ________ from 1925 to 1929. ($27 billion to $87 billion)

Arab Oil Embargo

This occurred when, in order to regain their losses from the devaluing of the dollar and to punish the US for its support of Israel, OPEC (Organization of Petroleum Exporting Countries) refused to sell oil to the US -oil prices quadrupled.

increase (by increasing the discount rate that banks must pay to the Federal Reserve, the Fed discourages banks from borrowing money)

To control inflation, the Fed can __________ the discount rate.

lowers (when banks borrow more money from the Fed, there is more money available for banks to loan to consumers and businesses)

To encourage economic growth, the Fed _________ the discount rate.

manufactured

Today, ___________________ goods make up the largest percent of U.S. exports.

oil

Today, our economy is highly dependent on ______, which is made into gasoline.

IMF (International Monetary Fund)

Today, the _______ exists in order to promote world trade, stabilize exchange rates, and correct balance-of-payment problems. It maintains funds that are available for loans to developing nations.

gold standard

Under the ________ __________, a country backs up the value of its currency with actual gold reserves - the amount of their currency in the world can be exchanged for gold.

automatic stabilizer

Unemployment insurance is an example of an ___________ ____________.

credit

Using ________ to purchase stocks inflated the worth of the stock market, and allowed common people to purchase stocks through easy ________ and margin accounts.

17

WWI began in Europe in 1914, but the United States did not get involved until 19___. When they were neutral, the US was able to supply both sides with goods, and exports exceeded imports.

expensive

We buy the more ___________ items for many reasons, including better quality, brand name, or because they fit well.

World War II

What actually brought the United States completely out of the Great Depression? - the New Deal - the Second New Deal - World War II - World War I

increase

What will happen to supply if the cost of production goes down? The supply will ___________.

decrease

What will happen to the supply if the cost of production goes up? The supply will ___________.

unemployment (they are paid up to 1/3 of their original salary for a period of time)

When a person loses their job through no fault of their own, they are entitled to ____________ insurance.

interest

When banks are paying less in interest, they pass their savings on to their customers - When __________ rates are lowered, more people will demand loans.

states

When our country began in 1789, most taxation power was given to the _________.

government securities (decreasing the money supply to control inflation)

When the FOMC determines the money supply is increasing too fast, the Fed sells ____________ ___________on the open market.

decrease reserve requirements

When the Federal Reserve decides it is necessary to expand the money supply, it might... - increase the discount rate - decrease reserve requirements - sell government securities - lower taxes

increase

When transaction costs _____________, trade decreases.

decrease

When transaction costs _____________, trade increases.

lending money

Which of the following is a function of our current banking system? - lending money - acting as a medium of exchange - regulating money supply - determining the value of money

voluntary exchange

Which of the following is an economic right of all businesses in the United States? - voluntary exchange - involuntary exchange - government ownership of property - the ability to function as a monopoly

large government deficits and increased consumer spending

Which of the following was a cause of the recession of the 1980s? - insufficient production in the United States - overproduction - large government deficits and increased consumer spending - increasing employment

allocation inefficient

a disadvantage of monopolies/ they can restrict their output and thus charge higher prices/ caused by a lack of competition

labor movement

___________ ____________ refers to the efforts of workers to improve their economic position. This resulted in the outlawing of child labor, eight-hour work days, and safer working conditions.

jobs (typically the cities)

Workers move to where the _______ are - this leaves many small rural areas with declining populations and local production

unions

Workers organize ________ in order to express their needs to their employer as a group./ "The voice of the workers."

45

World War II ended in August of 19____, and by then over 400,000 Americans had lost their lives in combat.

The (United States) Constitution

Written in 1787, this is still the driving force of the US government

credit cards

________ _________ were introduced in the 1950s, allowing more people to afford the goods they wanted.

free

________ trade increases overall output by increasing efficiency, improving the standard of living around the world, and creating healthy competition.

OPEC (Organization of Petroleum-Exporting Countries)

_________ is an international organization of oil-producing countries who work together to determine the oil trading policies of each member state. This is made up of Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela. Member countries produce about 40 percent of the world's oil, and their goal is to achieve stable oil prices that are fair to all.

High

_________ unemployment rates usually indicate a decreasing economy.

Real

__________ GDP is adjusted for inflation and is measured in constant dollars.

production

__________ depends on many factors besides price including, price of the factors of production, price of other goods produced, expected future prices, number of suppliers, and technology

consumers (C)

__________ spend money on goods and services/ their spending is calculated into the GDP

economies of scale

___________ ___ _________ is attained when an increase in the number of units produced results in a lower average per unit cost

economic growth

___________ _________ is progress and development that results in increases of production

checking

___________ accounts are used for storing money for a short period of time so it is available to pay bills or go shopping.

prices

___________ are determined through the interaction of buyers and sellers - sellers want to produce goods and services at the lowest cost and sell them for as much as possible - buyers want to buy the highest quality good at the lowest price

loans (generally increases the amount of money available to the business owners)

___________ can be acquired for partnerships by using the combined income and assets of all the partners and their spouses.

Hoover

___________ helped establish the Farm Board and the Reconstruction Finance Corporation after realizing the economy couldn't take care of itself.

equity

___________ may be difficult for command economies to achieve/ it is up to the discretion of a few to decide what is equal for all.

Nominal

____________ GDP is the current raw data not adjusted for inflation.

buying plans

____________ ______ depend on many other factors besides price: - Price of related goods - Income of consumers - Expected future prices - Overall population - Preferences

television (introduced in the 1950s)

____________ advertising played a pivotal role in the increase of consumer spending because consumers could now see what items were for sale.

socialists

____________ believe that a small percentage of the wealthy should not possess the majority of the wealth

NAFTA (North American Free Trade Agreement)

____________, passed in 1992, called for a gradual removal of all tariffs between the United States, Canada, and Mexico. It created the second largest free trading market in the world and enabled the countries of North America to trade freely with one another.

managed exchange rates

_____________ _____________ ______ are influenced by the central bank of a nation, but do not concentrate around one fixed rate. This system practiced today is a combination of fixed and floating exchange rates.

economics

_____________ can be defined as the study of how people satisfy seemingly unlimited wants with scarce resources

businesses

_____________ produce goods and services for consumers and offer goods and services for sale

electronic commerce

______________ _________________, or e-commerce for short, has made it possible for businesses to reach customers anywhere in the world. Consumers can now shop at home from anywhere in the world.

flexible

______________ exchange rates are determined by the forces of supply and demand.

competition

_______________ among businesses is the driving force of market economies

unexpected inflation

________________ ____________ affects savings and investment decisions, because people are not able to prepare for it/ it hurts savers and people on fixed incomes, but helps people who borrow money at a fixed rate ex. if an interest rate on a loan is 10% and inflation unexpectedly rises 2%, the individual still only has to pay the 10% despite the rising costs

technology

________________ contributes to the rise of the global economy because it allows us to instantaneously communicate with people all over the world.

fixed

________________ exchange rates are set by a governing body or tied to the gold standard.

governments

________________ play a large part in the economy of a nation and in the economy of the world/ in capitalistic societies, ____________ seek to help the economy run smoothly

specialization

________________ promotes efficiency of the world economy by allowing nations to only produce the goods they produce efficiently.

competition

_________________ creates the lowest prices and the most efficient economy.

managed

_________________ exchange rates are administered by a governing body like a central bank but are also influenced by the forces of supply and demand.

socialism

a "classless" system where everything is distributed equally to all/ encompasses the idea of common ownership/ It is a command economy / benefits of this system are that all people are taken care of because everyone is given the exact same goods and services and everyone is treated equally

Karl Marx

a German social philosopher who published Das Kapital (pointing out the weaknesses of the capitalistic system)/ he thought the main weakness of the capitalist system is that it neglects the "have-nots," who will eventually rebel against the "haves."

deflation (although this occurred in the 1930s, it does not occur very often in our modern economy)

a continuing decrease in the average price of goods and services/ the opposite of inflation/a negative number when calculating the inflation rate

PPF (production possibilities frontier)

a curve depicting all maximum output possibilities for two goods, given a set of inputs consisting of resources and other factors/ this assumes that all inputs are used efficiently

tradition

a custom or belief that is passed down from generation to generation

left

a decrease in consumer income will shift the graph to the _______

expansion (business cycles)

a fast upward growth spike - ex. lots of money flowing, jobs created, and positive activity

EPA (Environmental Protection Agency)

a federal government organization that was established in 1970 to protect our health and the environment/ this develops and enforces regulations like the Clean Air Act, Clean Water Act, Food Quality and Protection Act, and Toxic Substances Control Act/ funds research and provides grants for environmental education

complement

a good that is bought along with another good ex. when you buy a DVD, you also need to buy a DVD player

price ceiling

a government regulation that sets the maximum legal price that can be charged for a product ex. cost of housing in large cities

Dow Jones (Industrial Average)

a group of stocks and bonds selected from the overall stock market as a sample of how all stocks are performing/ measures stocks on the New York Stock Exchange, the American Stock Exchange, and the NASDAQ/ influences how and when investors purchase stocks

numerous markets

a market economy consists of ___________ ____________ that all direct the way the economy will function

laissez-faire

a market economy is an example of a _________-______, or "hands off," economy

monopoly

a market structure composed of one company selling a product for which there is no good substitute/ there are also high barriers to entry that prevent others from entering the industry

real GDP

a measure of the value of economic output adjusted for price changes/ GDP adjusted for inflation

depression (business cycles)

a period of severe decline in business activity and employment/ in order for this to occur, the economy must be declining for at least 12 months straight

inefficient

a mixed economy is sometimes _________ - the government regulations protecting the environment or fair labor practices might prevent a company from choosing the most efficient means of production

opposition

a mixed-market economy is a system which strives to maintain the balance between freedom and control—two goals which are often in ____________

Second New Deal

a new set of programs and reforms that aimed to continue the work of the first New Deal

isolationism

a period after WWI where the US focused only on themselves and cared nothing about what was happening throughout the world

contraction (business cycles)

a period of economic slowdown - ex.money doesn't come in as fast and indicators like unemployment rise/ could be a short downturn/ could become a recession or depression

market basket

a sample of goods and services consumers purchase for everyday living

Department of Commerce

a section of the U.S. gov. that is dedicated to promoting economic growth/ works to create jobs through sustainable development, economic growth, favorable international trade terms and the accessibility of high technology

change in supply

a shift of the supply curve to the left or right ex. the price of blank DVDs goes up drastically - now it will cost more to produce DVDs, so the supply of DVDs will decrease

up

a shortage will force prices _______

technology (the development of CDs and mp3 files have virtually made the demand for cassette tapes disappear)

a significant reason for a change in consumer preference is the development of new ____________

economic growth

a significant strength of market economies is their ability to foster ____________ ________

shortage

a situation where the quantity demanded is greater than the quantity supplied

surplus

a situation where the quantity supplied is greater than the quantity demanded

disinflation

a slowing of the rate at which prices increase

down

a surplus will force prices _______

proportional tax (flat tax)

a tax that takes the same percentage from all income groups

labor movement

a term that refers to the efforts of workers to improve their economic position

franchise

a type of business where a company is authorized to sell another company's goods or services in a specific area in exchange for a franchise fee/ an established business authorizing another owner to open that same business

licensing requirement

a type of non-tariff trade barrier which requires foreign industries to go through a procedure of licensing their business and paying a fee

decrease (as the price of a good is reduced, suppliers are less willing and able to supply that good)

according to the supply curve, if the price decreases, the supply will ____________

increase (as the price rises, suppliers are willing and able to offer more goods for sale)

according to the supply curve, if the price increases, the supply will ____________

stability

an absence of excessive fluctuations in the macroeconomy ex. an economy with fairly constant output growth and low and stable inflation

economics of scale

an advantage of monopolies/ this allows large companies to produce goods at lower prices because they can invest in better technology and sustain ups and downs in the business cycle

installment buying

an agreement in which the consumer makes a down payment and pays the rest in payments plus interest/ this made it easy for people to buy goods

product market

an individual buys a finished product for the purpose of consumption in a _________ _________

market

an economic term for an exchange/ this consists of a buyer and a seller and can be local, regional, national, or international

efficiency

an economy should be efficient so it can produce as much as possible/ it must allocate resources efficiently/ strive to keep production costs down/ the more efficient an economy is, the better it will function

mixed-market economy

an economy that combines elements of command, market, and traditional economies/ The United States is an example of this/ the three economic questions are answered by individuals just as in a market economy, but government and communal organizations weigh in on economic decisions as well

market economy

an economy where the means of production are privately owned and individuals make economic decisions

economic analysis

an illustration of trade-offs and choices

tariff (decreases demand for foreign goods and increases sales of domestically produced goods)

an import tax on a good which provides extra income for the government and raises the price of foreign goods in the economy

labor union

an organization that strives to provide better working conditions, shorter working days, and better overall worker benefits/ the two main tools utilized by these are collective bargaining and strikes

incentives

anticipated positive outcomes from a decision or set of decisions

needs

anything required in order to function in society (food, clothing, shelter, and water)

money

anything that is accepted as a medium of exchange

inferior goods

as income goes up, demand for __________ _________ actually goes down/ some examples of these are used cars, Wal-Mart clothes, and dollar store products

increase (improved technology allows suppliers to produce goods at a faster and cheaper rate)

as new technologies are developed, the supply of goods will ____________

more/ less

as the price of a good goes up, suppliers produce _______ of that good and buyers want ______ of that good

equilibrium price

at this point, the price of goods is at equilibrium with the quantity

equilibrium quantity

at this point, the quantity of goods is at equilibrium with the price

government securities

bonds that are sold by the Federal Reserve to banks, businesses, or individuals/ the purchase and sale of these is the main tool of the Federal Reserve

voluntary exchange

both sellers and buyers exchange products only when they desire to do so/ trade between both parties is voluntary, not mandated by government decree

corporation

businesses that are considered legal entities (separate from the people who own them)/ these can own property, incur debt, and produce and distribute products

investment (I)

businesses, the heart of our economy, invest a lot of money in themselves and the economy/ all the investments that businesses make in a year are added to the GDP.

market

buyers and sellers compete with one another to determine a price, and in a stable __________ economy that price is always the equilibrium price

normal good

certain things that consumers will buy if they make enough money or will not buy if they don't make enough money/ if demand for an item goes up when the income of consumers go up, then it is considered a ________ ________

gradual

changes in a market economy tend to be __________

barriers to entry

conditions that make it hard for new suppliers to enter a business ex. patent laws

opportunity cost

cost in terms of foregone alternatives

transaction costs

costs other than price that are associated with the purchase of a good or service

preferences

demand depends on _____________, but since they are individuals' ideas and attitudes towards goods and services, they are hard to measure

government agencies

economic decisions in a command economy are made by __________ ________

full employment

economic growth leads to a reduction of jobs, and market economies have a difficult time fulfilling the goal of ________ ________________

organization

economic systems developed in response to the need for ____________ in societies, which deals effectively with the problem of scarcity

goods/ services (what to produce)

economic systems must have a way of determining what _________ and __________ to produce

best (how to produce)

economic systems must have a way to determine the __________ way to produce goods and services

economic growth

economic systems must push for progress and development - achieved by increasing the ability to produce goods and services/ strive to produce more this year than last year/ increases the standard of living

equity (fairness)

economic systems should strive to be fair/ this typically means that there is fair distribution of income and wealth (definitions can differ from society to society)

technology

economies are able to become more efficient through _____________/ one way to achieve economic growth is by developing _______________

stability

economies must be stable, established, and enduring/ an economy achieves stability over time by eliminating large fluctuations of the inflation rate, employment rate, and business cycles

full employment

economies strive for full employment/ every available resource in an economy must be used to produce goods and services/ all available factors of production must be employed in production

need/ want

economists assume people will buy what they ________ first and what they ________ second

relative price

economists often define the price of goods by the ___________ ________ / measured in terms of other goods

scarcity/ utility

education is valuable because of its _________ and ___________

factors of production

elements required to produce any good (land, labor, capital, and entrepreneurship)

profit/ wealthy

entrepreneurs are motivated by the incentive of making a _________ and becoming _____________

common ownership

everyone has an ownership in all aspects of society

automatic stabilizers (AKA non-discretionary fiscal policies)

fiscal policies that do not require congressional action ex. income taxes/ unemployment insurance

discretionary (fiscal policies)

fiscal policies that require congressional action/ one way this is implemented is through government spending

collusion

from an economic perspective, cooperation among firms to manipulate prices and increase their profits/ this reduces the levels of competition in a market

imports

goods and services brought into a nation from another nation

purpose (whom to produce for)

goods and services must be produced for a _________

exports

goods and services taken to another nation from the nation it was produced in

imports

goods or services that are brought from a foreign country

exports

goods or services that are sent to a foreign country

free goods

goods that are naturally available to all

free goods

goods that are not bought or sold/ these are plentiful in nature and there is enough for everyone to have as much as they want (ex. air)

economic goods

goods that can be bought or sold/ these are scarce and therefore are not equally available to all

Hoovervilles

group of shacks in which homeless lived during the Great Depression/ they were named after President Hoover, whom many blamed for the depression

demand

gruel is an inferior good - an increase in consumer income decreases the ___________ for gruel

cost-benefit analysis

how economists analyze opportunity cost choices/ people often decide on the option whose benefits outweigh the cost

scarcity

how much of a good is available

efficiency

if an economy is able to keep production costs down and allocate resources effectively, the economy has achieved the goal of ________________

higher

if consumers are able afford goods, the producers are able to make ________ profits

down

if the good is likely to be less expensive in the future, the current demand will go ________

down

if the overall population of an area goes _____, the demand for goods goes down

up

if the overall population of an area goes _____, the demand for goods goes up

down (if the DVD player gets higher, less people will buy DVDs)

if the price of a complement goes up, the demand for the good will go _______

up (suppliers want to sell as much as we can at the current price, because when the price decreases we will not make as much money)

if the price of a good is expected to fall in the future, supply will go _______

up

if the price of a good is expected to go up in the future, the current demand for the good now will likely go _______

down (suppliers will decrease the amount they offer for sale - they will wait and offer more for sale when the price increases.)

if the price of a good is expected to rise in the future, supply will go _________

up

if the price of a substitute goes up, the demand for the good will go _______

lower

if the production costs decreases, goods can be offered at a _______ price

complement

if you increase the supply of a good, you will increase the supply of its ______________ in production

efficiency

in a command economy, the authority plans based on what they believe will be for the greater good of the state - goods are produced that people do not want, making the goal of economic ___________ impossible to achieve.

consumers/ business

in a market economy, the decisions of "what," "how," and "for whom" are often determined by ____________ and ____________ owners

scarcest

in a market economy, the resources that are the ____________ will have the highest price

publicly (individuals cannot own property)

in command economies, property is __________ owned

government

in command economies, the ____________ also owns the means of production: raw materials, factories, farms, and other resources used to produce goods and services

competition

in command economies, there is typically no _________, so the government establishes the prices of goods and services

above (if set below the equilibrium price, it would still allow equilibrium to be reached)

in order for a price floor to have any impact on the economy, it must be set ______ the equilibrium price

full employment

in order to achieve _____ __________, every available resource in the economy must be used in production

willing/ able

in order to demand a good, a consumer must be both ________ and _________ to buy the good

equity

in traditional economies, _______ is hard to achieve due to the lack of economic mobility and traditional attitudes

non-monetary incentives

incentives that do not have anything to do with money ex. fame, personal fulfilment/ achieving goals

environment

individuals in market economies are motivated by self-interest - not by what is good for all, or what is good for the _______________/ air, rivers, forests, lakes, and streams belong to the society as a whole, and they tend to be abused without concern in a market economy

businesses

individuals, in order to pay bills and satisfy wants, sells labor to ______________

factors of production

land, labor, capital, and entrepreneurs are all ________ ___ _____________

scarcity

limited quantities of resources to meet unlimited wants/ the choices and trade-offs people make are the results of __________

stable

market economies have proved to be __________ - individuals have faith in the economy because of the economic freedom they are provided

economic efficiency (economy is efficient when it produces the most products possible at the lowest cost)

market economies usually accomplish the goal of ____________ ______________ - capitalism encourages businesses to increase production and lower costs

NASDAQ (National Association of Securities Dealers Automated Quotation)

measures smaller stocks that are generally technology and computer-related businesses/ only measures stocks that are bought and sold "over-the-counter" (not exchanged at an actual location - most are traded over the internet)/a good indicator of how the tech industry is doing

laissez faire (economy)

minimal government interference in the economy

ethics

moral codes or sets of moral principles that a person requires himself or herself to abide by

natural monopolies

most monopolies that exist in our society today/ these occur because one business is able to produce a good cheaper and more efficiently than other businesses, forcing its competition out of business ex. railroads of the 1800s/ Polaroid cameras/ US Postal Service

cheaper

new technology for manufacturing computer chips is developed - this will contribute to ____________ production of computer chips

left

on the supply curve, if the supply of a good decreases, the line is shifted to the _________

right

on the supply curve, if the supply of a good increases, the line is shifted to the ________

price/ quantity

once a market is at its equilibrium price, unless something changes, the ________ and _________will not change

quickly

one key strength of a command economy is its ability to adapt ___________ to differing economic needs in society

entrepreneurs

one of the four factors of production persons who take risks by combines the other three factors of production and creating a business/ are considered the driving force of the economy/ they come up with innovative ideas to make a profit

land

one of the four factors of production all natural resources (ex. timber, water,minerals)

labor

one of the four factors of production all people and the work they do in order to produce goods and services

capital

one of the four factors of production man-made goods that are required for the production process (ex. machines, buildings, tools) the money used to buy machines, buildings, tools, and so forth is referred to as _________

quota

one type of non-tariff barrier to trade which restricts the quantity of goods that can be imported/ this decreases the supply of foreign goods, forcing consumers to buy more domestic goods

equilibrium price

price compromise between buyer and seller is known as an _____________ _______

equilibrium (a price floor makes it so buyers have to pay more than equilibrium/ a price ceiling makes it so buyers pay less than equilibrium)

price controls do not affect supply and demand; they just affect ____________ price

government (G)

provides many goods and services to the nation, such as police protection, education, and roads/ the money spent on these types of goods and services is added to the GDP

Dust Bowl

region of the Great Plains affected by extreme drought and dust storms in the 1930s

monetary incentives

rewarding decisions or a set of decisions with an increase in money

demand curve

shows the relationship between the quantity of a good demanded and its price - as the price (y-axis) rises, the demand (x-axis) decreases

oligopoly

similar to monopolies, except instead of one firm there are at least two/ there are only a few firm which are selling similar products/ consumers are offered a few choices/ they have high barriers to entry ex. the airline industry/ TV in the 1950s/ local gas stations/ cell phone companies

neutral

since prices don't favor producers or consumers, they are described as ___________ - fixed - neutral - flexible - biased

economists

social scientists who study human behavior in the economy and attempt to determine the outcomes of our decisions based on patterns and trends

equity

some argue that market economies achieve the goal of ________ because there is opportunity and motivation for all/ others argue that _______ is not achieved because the poor have less economic opportunity than the rich

law of demand

states that, all other things remaining the same, the higher the price, the smaller the quantity demanded/ demanded varies inversely with price

marginal benefit

the benefit a person receives from consuming one more unit of a good or service/ this affects the individual utility of a good/ ex. the benefits from the first unit are typically much larger than the benefits from the third or fourth unit

efficient

the best way to keep costs down is to produce goods in the most __________ way possible

trough (business cycles)

the bottom of the downward trend/ the point where a contraction turns the corner and begins to again expand

interdependence

the businesses in oligopoly depend on each other/ there are so few firms that the actions of one firm will affect the others

consumers

the buyers of goods and services/ in charge of the economy

equity

the concept or idea of fairness in economics

full employment

the condition in which virtually all who are able and willing to work are employed

externalities

the consequences, good or bad, of resource decisions that are not directly accounted for in the price of the resource

arms race

the contest between the Soviets and U.S. during the Cold War to have the best and most weapons/ this was a driving force in the world economy

marginal cost

the cost of producing one more unit of output ex. we continue to produce cell phones until our marginal cost is equal to the price of a cell phone - then we are no longer making money

circular flow of economic activity

the cycle of individuals and businesses interacting is called the ________ _______ ___ __________ _________

utility

the usefulness of a good/ measures the satisfaction a person gets from consuming an economic good

business cycles

the fluctuations in GDP growth/ this typically includes expansion, peak, contraction, and trough/ it takes many years to complete and is always unique

economic growth

the goal of ______________ _________ can never be achieved in a traditional economy

eminent domain

the government confiscation of public land/ property can be taken for public use, as long as just compensation is given

shortage

the government sets a price ceiling on pizza that is below the equilibrium price, causing a __________ of pizza

affluent society

the historical idea that the American society in the 1950's was very wealthy

factor markets (input market)

the inputs into the production process are bought and sold in _________ ________/ items that are going to be used to produce a good are sold here ex. land, labor, capital, and entrepreneurship

discount rate

the interest charged to individual banks for loans from the Federal Reserve

decreases

the law of demand states that as the price of a good increases, the quantity demanded ___________

price floor

the lowest legal price that can be paid for a good or service ex. minimum wage

minimum wage

the lowest payment an employer can offer its employees for their labor/ creates a higher unemployment rate but insures that workers will be paid an adequate amount for their work

price

the main factor that causes a change in quantity demanded is ________

FOMC (Federal Open Market Committee)

the main policy-making body of the Fed/ consists of 12 members including the Federal Reserve Board, the president of the New York Federal Reserve bank, and 4 reserve bank presidents appointed on a rotating basis

economic growth (workers do not have an incentive to work hard)

the main weakness in a command economy is its lack of _____________ __________

producers

the makers of goods and services

price index

the measure of the average change in price over time

output expenditure model

the model economists use to calculate GDP/ = G + I + C + NX = GDP

perfect competition (so rare that it might not even exist)

the most competitive market you can imagine/ In order for a market to have this, it must meet the following criteria: 1. many buyers and sellers in the marketplace and none can be large enough to influence price 2. freedom of entry and exit/ low barriers 3. firms earn only a normal profit, the bare minimum profit necessary to keep them in business 4. buyers and sellers are fully informed 5. products are homogeneous- there is no distinction between goods as they are perfect substitutes

GDP (Gross Domestic Product)

the most important measure of economic activity/ the best measure of production and economic growth we have/ the market value of all final goods and services produced in the nation in a year/ GDP = G + I + C + NX

stock market indicators

the most prominent economic indicators in our society

price

the only factor that can create movement along the demand curve is ________ - economists call this a change in quantity demanded

price

the only factor that can create movement along the supply curve is __________/ economists call this "a change in quantity supplied"

burrito

the opportunity cost of purchasing a $2 slice of pizza over a $2 burrito is the ___________

unlimited liability

the owner is liable for everything that might go wrong with the business/ this is a downfall of sole proprietorships and partnerships

consumer sovereignty

the power of the consumer in the economy/ the idea that wants originate within the individual, and businesses simply produce what the consumers want

consumer sovereignty

the power of the consumer in the market

foreign exchange rate (this is important to importers and exporters, businesses, and consumers because it affects the relative value of their goods in other countries)

the price of a nation's currency in relation to another nation's currency

equal

the profit-maximizing level of output for firms is where marginal benefit ___________ the marginal cost (where the benefit received from producing one more unit ________ the cost of producing one more unit)

unemployment rate

the ratio of job seekers to the total labor force - job seekers / (workers + job seekers) - in order to be counted in this, unemployed workers must actively be pursuing a job.

global warming

the steady warming of the earth's atmosphere and is believed to be caused by the burning of fossil fuels such as coal, oil, and natural gas/ can cause changes in the weather and a decline in human health

macroeconomics

the study of economics on a large scale/ includes studying the entire economy, including government economic policies and international trade

microeconomics

the study of economics on a small scale/ includes studying the behavior of firms, households, and industries

globalization

the term used for the emergence of a global society/ this is due to improvements in technology, communication, and transportation

supply and demand

the theory of _________ _____ _________- actions based on costs and benefits to construct a theory of how markets work

national debt

the total amount of money owed by a government ex. currently, the US owes almost $9 trillion to organizations such as the Federal Reserve, pension funds, mutual funds, bonds, and foreign countries.

human capital

the training and development of employees/ training and knowledge makes employees more productive

invisible hand theory

the unobservable market force that helps the demand and supply of goods in a free market to reach equilibrium automatically/ if all people were free to pursue self-interest, the economy would naturally be guided to achieve the best for all

monetary policy

the use of economic principles and programs by the Federal Reserve in order to control the money supply, availability of credit, and interest rates/ the goals of this are full employment, stable prices, and economic growth

efficiency

the use of resources in such a way as to maximize the output of goods and services

fiscal policy (tax and spend policy)

the use of taxes and government spending in order to affect the overall level of the economy

opportunity cost

the value of the best item we gave up in order to do something else ex. take a week of unpaid vacation from work - the ______________ ________ of this vacation is a week's pay -by going on vacation, you give up the money you would have made if you were at work

wage

the value of work determined by the law of supply and demand and the skill level a job requires

wants

the way that we satisfy our needs (ex. we need food, but we want pizza)

free lunch

there is no such thing as a ________ ________

market (capitalist) economies

these answer the three economic questions by giving economic freedom to individuals + businesses and letting them make decisions/ an economic system in which the means of production are privately owned and individuals make the economic choices

bonds

these are bought by individuals from a corporation and are considered a loan - the company must pay the money back to the individual with interest

patents

these assure that businesses and individuals "own" ideas and products and that new ideas will not be stolen and copied/ they act as barriers to entry and can lead to monopolies

traditional economies

these attempt to answer the three basic economic questions through tradition/ these work well in small, close-knit societies/ usually found in rural, undeveloped areas and are governed by customs (Middle East, Africa, and South America)/ most activities are centered on the family/ there is little change from generation to generation.

command economies

these attempt to answer the three economic questions by relying on a central or command authority/ the central authority dictates the economic behavior of individuals

depreciate

to decrease in value

FDA (Food and Drug Administration)

this consumer protection agency protects human health/ safety by assuring the safety and security of all food, drugs, cosmetics, and medical devices in the United States

CPSC (Consumer Product Safety Commission)

this consumer protection agency protects the public from unreasonable injury or death from consumer products/ recalls any good that it feels is unsafe

FDIC (Federal Deposit Insurance Corporation)

this consumer protection agency was organized after the Great Depression as part of the New Deal and insures deposits up to $250,000 placed in all banks in the US ex. when a bank fails, the federal government will make sure the bank can pay all of its depositors

FTC (Federal Trade Commission)

this consumer protection agency works to ensure that U.S. markets are efficient and free from factors that might harm competition/ enforces laws against unfair business practices, deception, and fraud

monopolistic competition

this is between perfect competition and a monopoly- not pure competition yet not quite a monopoly/ tends to be the type of market that actually occurs, but requires that... 1. many buyers and sellers in the marketplace and none can be large enough to influence price 2. freedom of entry and exit/ low barriers 3. buyers and sellers are fully informed 4. differentiated products offered for sale/ multiple brands of the same product ex. the jeans market

Greatest Generation

this is the name given to those who survived the Great Depression and went on to fight in WWII

strike

this is used by labor unions as an extreme measure, therefore a majority of members must vote for a _______ for it to occur/ the most common example of this is when employees refuse to work until their demands are met

law of supply

this states that, all other things remaining the same, the higher the price, the larger the quantity supplied/ quantity supplied correlates directly with price

progressive

this type of tax takes a larger percentage of income from high-income groups than low-income groups/ the income tax system in the US today

seasonal

this type of unemployment exists because of the changing seasons ex. snowplow drivers are unemployed in the summer/ lifeguards are unemployed in the winter

structural

this type of unemployment exists when someone is not qualified for any job because the most he/she can contribute is less than the minimum wage for the job/ the reason that full employment in a market economy does not mean "zero unemployment"/ mostly exists due to minimum wage laws, however, not exclusively ex. sociopaths/ criminals do not contribute to the economy

cyclical

this type of unemployment occurs because of the fluctuation of business cycles in the economy/ exists when there is not enough demand to employ all who are willing and able to work ex. jobs are created during the ups of the economy and eliminated during the downs

technological

this type of unemployment occurs when new technology replaces existing jobs ex. the US manufacturing industry

frictional

this type of unemployment results from the day-to-day changes in the economy/ this will always exist because it always takes time and effort to find a new job

stability/ full employment

traditional economies are successful at the economic goals of ___________ and ______ ______________

income

unequal distribution of __________ is a weakness of the market system

wants

unlimited wishes that people have for goods and services/ scarcity guarantees that many of our _________ will not be satisfied

collective bargaining

used by labor unions, this is a way for management and workers to communicate/ a process of negotiation that allows both sides to establish acceptable conditions

it increases

what is the effect on the quantity of DVDs demanded if the overall consumer income increases?

it decreases

what is the effect on the quantity of DVDs demanded if the price of DVD players increases?

it increases

what is the effect on the quantity of DVDs demanded if the price of videos increases?

up

when demand for a good increases, the price will go ______

down

when the demand for a good decreases, the price will go ______

left

when the demand for an object decreases without altering the price, the graph is shifted to the ______

right

when the demand for an object increases without altering the price, the graph is shifted to the ______

up

when the supply of a good decreases, the price will go ______

down

when the supply of a good or service increases, the price will go ______

equilibrium point

where the quantity supplied equals the quantity demanded/ this makes both buyers and sellers happy

Karl Marx

who said it - "A small percentage of the population should not possess the majority of the wealth."

Adam Smith

who said it - "An individual's self-interest is what directs the economy."

Adam Smith

who said it - "If given the opportunity, an economy will be run as if by an invisible hand. The government should use a laissez faire approach when dealing with the economy."

Karl Marx

who said it - "The "have-nots" will eventually overthrow the "haves."