Economics Fall Exam Review

what is a reserve requirement

A central bank regulation that sets the minimum amount of reserves that must be held by a commercial bank BASED ON ITS TOTAL DEPOSITS

What is easy money policy?

A monetary policy that increases the money supply usually by lowering interest rates. It occurs when a country's central bank decides to allow new cash flows into the banking system.

when are we at full employment

All the currently available factors of production are being used as efficiently as possible. WHEN THE UNEMPLYMENT RATE IS BEWEEN 4-4.5 %

what are the main differences between perfect competition and Oligopolistic Competition.

In an oligopoly, there are many buyers for a product or service. Monopolistic competition describes a market that has a lot of buyers and sellers, but whose firms sell vastly different products. Therefore, the condition of perfect competition that products must be identical from firm to firm is not met.

What point on a Production Possibility Model would indicate the existence of unemployment?

Indicates unemployment when production is inside the production possibilities curve. Unemployment means resources that could be used for production are not being used.

what are the characteristics of Monopolistic Competition

Large numbers of buyers and sellers, Free entry and exit of firms

What is the Discount Rate

The rate of interest which a central bank charges on its loans and advances to a commercial banK

What metal standards has the United States used for backing currency

The silver standard is a monetary system in which the value of a country's national currency is backed by silver. It is similar in nature to its famous counterpart, the gold standard.

Economics

The study of how society deals with the problems of scarcity

What is Fiscal Policy

The use of government revenue collection and expenditure to influence a country's economy

What does consistent economic growth lead to

A HIGHER STANDARD OF LIVING WHICH OVER TIME SHOULD RESULT IN A BETTER QUALITY OF LIFE

What is the difference between a budget surplus and a budget deficit

A budget surplus is when extra money is left over in a budget after expenses are paid. A budget deficit occurs when the federal government spends more money that it collects in revenue.

What are complementary goods?

A complementary good is a good whose appeal increases with the popularity of its complement. Technically, it displays a negative cross elasticity of demand and that demand for it increases when the price of another good decreases. GOODS THAT GO TOGETHER

What is a regressive tax

A tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases.

The effect of inflation(a general increase in prices and fall in the purchasing value of money) on the dollar

Demand pull inflation - the upward pressure on prices that follows a shortage in supply. "too many dollars chasing too few good."WHEN AGGREGATE DEMAND IS GREATER THAN AGGREGATE SUPPLY. Cost push Inflation - occurs when overall prices increase(inflation) due to increase in the cost of wages and raw materials. Since the demand for goods hasn't changed, the price increases from production are passed onto consumers creating cost-push inflation.

Trade off

Every decision we make has a trade off or alternative choice that is given up in favor of the choice we make(Unlimited wants vs. limited resources).

What policy is the Congress and the President practicing when they go through the budget process

FISCAL POLICY

What point on the Production Possibility frontier would you move from in order to reach optimality

FROM A POINT INSIDE THE CURVE TO A POINT ON THE CURVE!!!

what are the characteristics of an Oligopoly

Few sellers - There are just several sellers who control all or most of the sales in the industry. Barriers to entry - It is difficult to enter an oligopoly industry and compete as a small start-up company. Oligopoly firms are large and benefit from economies of scale. It takes considerable know-how and capital to compete in this industry. Interdependence - Oligopoly firms are large relative to the market in which they operate. If one oligopoly firm changes its price or its marketing strategy, it will significantly impact the rival firm(s). THERE IS ALWAYS ONE COMPANY THAT IS A PRICE LEADER WHENEVER THAT COMPANY CHANGES ITS PRICE THE OTHERS SOON FOLLOW Prevalent advertising - Prevalent advertising. - Oligopoly firms frequently advertise on a national scale. Many Super Bowl, World Series, Wimbledon finals, World Cup finals, NBA finals, and NCAA March Madness advertisements are done by oligopoly firms.

what kind of goods are counted when calculating GDP

Final goods

How is GNP defined

Gross National Product is Gross Domestic Product plus net factor income from abroad. THE DOLLAR VALUE OF FINAL GOODS PRODUCED BY AMERICAN CITIZENS/AMERICAN COMPANIES REGARDLESS OF WHERE.

How is GDP defined

Gross domestic product is a monetary measure of the market value of all the final goods and services produced in a specific time period. WITHIN A NATION'S BORDERS

What does the business cycle measure

IT MEASURES REAL GDP

What does an increase in the cost of production cause the supply curve to do

IT WILL SHIFT THE CURVE INWARD OR TO THE LEFT!!!

When was the Federal Reserve created

It was created on December 23, 1913

What causes the demand curve to shift

NON PRICE DETERMINANTS OF DEMAND

What causes the supply curve to shift

NON PRICE DETERMINANTS OF SUPPLY

How are the Board of governors of the FED chosen

Nominated by the President and confirmed by the Senate

What causes market failures

Positive and negative externalities, environmental concerns, lack of public goods, underprovision of merit goods, overprovision of demerit goods, and abuse of monopoly power.

What is the difference between a free trader and a protectionist?

Protectionism is the restriction of trade with other nations in order to protect domestic firms. Free trade is the elimination of barriers to trade to create large open markets for goods and services.

What is the definition of Scarcity

Society's seemingly unlimited WANTS versus limited resources to meet those wants

What are Open Market Operations?

THE FED'S POLICY ON THE BUYING AND SELLING OF GOVERNMENT BONDS AND SECURITIES

What is the 3 part structure of the FED

The Board of Governors, the Federal Reserve Banks (Reserve Banks), and MEMBER BANKS

What is Demand

The amount of product consumers are willing and able to buy at various prices

Factor of Production

The basic resources used to produce goods and services

what is Ceteris Paribus as it relates to production possibility

This commonly-used phrase stands for 'all other things being unchanged or constant'. It is used in economics to rule out the possibility of 'other' factors changing, i.e. the specific causal relation between two variables is focused.

cyclical unemployment

This type of unemployment arises from the business cycle. Keynes was mainly concerned with this type of unemployment. Such unemployment occurs due to deficiency of demand or purchasing power and is

seasonal unemployment

This type of unemployment occurs due to seasonal pattern of demand and the consequent seasonal nature of activities in some industries. In some industries like entertainment, tourism and soft drink, the demand for goods and services fluctuates seasonally. As a result these industries are fully staffed in the peak season but many workers are laid off in the off-season.

What are substitute goods?

Two goods are substitutes if the products could be used for the same purpose by the consumers.

how are partnerships and sole proprietorships similar in their ability to hire workers

are both easy and inexspensive to set up. These types of businesses are not separate legal entities

Opportunity cost

are related to trade offs. When you make a trade off the value of the alternative good(what you gave up) is the opportunity cost.

how are goods produced by American companies in a foreign country counted

as part of U.S. GNP

How are part time workers counted as a part of the labor force and employment

by being employed.

What are the functions of money

commodity money - The simplest and, most likely, the oldest type of money. It builds on scarce natural resources that act as a medium of exchange, store of value, and unit of account. Fiat money - Gets its value from a government order Fiduciary money - Depends for its value on the confidence that it will be generally accepted as a medium of exchange. Commercial bank money - Can be described as claims against financial institutions that can be used to purchase goods or services.

The five types of unemployment

frictional, structural, cyclical, seasonal, technological

The four factors of production

land - anything the earth makes(all natural resources) Labor - Workers or laborers Capital - Goods used to produce other goods and services Entrepreneurship - A businessman/businesswoman that takes a risk in organizing the factors of production to produce a marketable product in search of profit(They are always looking to maximize their profits or minimize their losses

Most common form of business

sole proprietorship, a business owned and run by someone for their own benefit

structural unemployment

structural unemployment is long-term unemployment caused by the decline of certain industries and changes in production process.

what are the weaknesses of the sole proprietorship

the potential exposure to liability

technological unemployment

unemployment caused by technological developments or automation that make some workers' skills obsolete.

Frictional unemployment

when changing demand patterns in an economy dislocate existing production patterns to the extent that labour becomes redundant.