Economics

What term describes when quantity supplied exceeds quantity demanded at a certain price?

Surplus

What term describes tax on foreign goods brought into the United States?

Tariff

What term describes income, property, goods, or services that are subject to tax?

Tax Base

What term describes the form that a taxpayer files with the government?

Tax Return

What term describes a person's gross income minus personal exceptions and deductions?

Taxable income

Advances in what can transform a good from an expensive luxury to a mid-priced good?

Technology

Why does the government sometimes use an expansionary fiscal policy?

To encourage growth and try to stop or prevent a recession

What is the purpose of free enterprise?

To give consumers freedom of choice

What is one reason European governments protect the growing of food with subsidies even though imported food would be cheaper?

To have food in case imports are ever cut off

Why does a government place price ceilings on some "essential" goods?

To keep the goods from becoming too expensive

What is the function of a bank examiner?

To make sure banks are obeying laws and regulations

What is the role of the Office of Management and Budget (OMB)?

To manage the federal government's budget

Why does the United States regulate automobile manufacturing in so many ways?

To offset the air pollution caused by automobiles

Why does an economist create a market demand curve?

To predict how people will change their buying habits when prices change

Why do Americans want the government to intervene in their free enterprise economy?

To protect the public interest

What is one way to measure technological progress?

Total growth minus increases in capital and labor

What term describes the total amount of money a company receives by selling its goods?

Total revenue

What term describes a nonprofit organization that promotes the interests of a particular industry?

Trade association

What term describes any alternative that is given up when a decision is made?

Trade-off

What type of economy relies on habit, custom, or ritual to answer the three economic questions?

Traditional economy

What term describes a period of change in which an economy moves away from a centrally planned economy toward a market-based system?

Transition

What term describes the lowest point in an economic contraction?

Trough

What term describes an illegal grouping of companies that discourages competition like a cartel?

Trust

How does a person's perception of whether a good is a necessity or a luxury affect his or her purchase of it?

A good that is perceived as a necessity will be purchased even if the price rises

What is the Securities and Exchange Commission (SEC)?

A government agency that regulates financial markets and investment companies

Why is it difficult for the federal government to increase or decrease spending?

A large portion of government spending is on entitlements, which the government cannot easily alter

What is a certificate of incorporation?

A license to form a corporation issued by the state government

How long can a family collect aid from the Temporary Assistance for Needy Families (TANF) program?

A maximum of 5 years

What term describes a settlement technique in which a third party reviews a case and imposes a legally binding decision?

Arbitration

What does the New York Stock Exchange do?

Arranges stock and bond trading of the largest and most established companies in the United States

What term describes a legal agreement that sets out each partner's rights and responsibilities in a particular partnership?

Articles of partnership

Investors earn interest on the bonds they buy, but what other way can investors make money from bond purchases?

Buying bonds at a discount

What term describes money lawmakers are required to spend on certain programs?

Mandatory spending

The best level of output occurs when marginal revenue is equal to what?

Marginal cost

What term describes the additional cost of producing one more unit?

Marginal cost

What term describes the change in output that results from having one more worker?

Marginal product of labor

What term describes the additional income from selling one more unit of a good?

Marginal revenue

What term describes a table that lists the quantities demanded at each price by all the consumers in the market?

Market demand schedule

What type of economy makes economic decisions based on exchange or trade?

Market economy

What term describes a situation in which the market does not distribute resources efficiently?

Market failure

What happens when any market is in disequilibrium and prices are flexible?

Market forces push toward equilibrium

How can changes in technology or consumer demand make it difficult for people to get jobs?

By changing the number or kinds of jobs available

How does an economist compare the standard of living in two different countries?

By comparing real GDP per capita

How does a bank make most of its profit on its business?

By earning interest on loans

How can a trade deficit actually increase the productivity of an economy?

By importing goods for long-term investment or capital deepening

How does the Fed encourage banks to loan more money?

By reducing the discount rate

What term describes spending for major investments such as roads?

Capital budget

What term describes an increase in efficiency gained by producing more output without using more inputs?

Capital deepening

What term describes the process of increasing the amount of capital per worker?

Capital deepening

What term describes a formal organization of producers that agree to coordinate prices and production?

Cartel

What term describes direct payments of money to eligible poor people?

Cash transfers

Why do various federal, state, and local government programs help to raise people's standard of living?

Certain groups of people have fewer opportunities to be productive

What term describes the phrase "all other things held constant"?

Ceteris paribus

What is the policy used most by the Fed to change the money supply?

Changes in the discount rate

What term describes the process by which banks record whose account gives up money and whose account receives money when a customer writes a check?

Checking clearing

What age group in the United States has the largest percentage of its members living in poverty?

Children

What type of corporation issues stock to only a few people, often family members?

Closely held corporation

What term describes a large farm leased by the Soviet government to groups of peasant farmers?

Collective

What term describes the process by which union and company representatives meet to negotiate and form a new labor contract?

Collective bargaining

What term describes an agreement among members of an oligopoly to set prices and production levels?

Collusion

Which type of economy is characterized by a government making the economic decisions alone?

Command economy or centrally planned economy

What type of economy operates in direct contrast to free market systems by opposing private property, free market pricing, competition and consumer choice?

Command or centrally planned economy

What term describes a product that is considered the same regardless of who makes or sells it?

Commodity

What term describes an object that has value in itself as well as its value as a means of exchange?

Commodity money

What term describes a political system characterized by a centrally planned economy with all economic and political power resting in the hands of the central government?

Communism

Which political system believes in violent revolution and requires strict obedience to an authority, such as a dictator?

Communism

What term describes a payment to employees other than wages or salaries?

Compensation

The result of free enterprise's economic rights is extensive what which is the rivalry among sellers to attract customers while lowering costs?

Competition

What "invisible hand" regulates the free market economy?

Competition and self-interests

What term describes two goods that are used together?

Complements

The demand for what job is expected to double in the next few years?

Computer engineer

What term describes the combination of more than three businesses that make unrelated products?

Conglomerate

What term describes a price index determined by measuring the price of goods meant to represent the "market basket" of a typical urban consumer?

Consumer Price Index (CPI)

What term describes a retail outlet owned and operated by its members?

Consumer cooperative

How does the substitution effect work when the price of an item drops?

Consumers buy the item as a substitute for other similar items

How does information provided by the government influence consumer decisions?

Consumers prevent companies from selling products revealed to be dangerous

What term describes temporary and/or part-time jobs?

Contingent employment

What term describes a range with no clear divisions that has a pure centrally planned economy to the left and a pure free market economy to the right?

Continuum of mixed economies

What term describes fiscal procedures that try to decrease economic output?

Contractionary policies

Respectively, what term describes the rate of inflation excluding the effects of food and energy prices and what term describes the percentage rate of change in price levels over time?

Core inflation rate, inflation rate

Respectively, what term describes an arrangement that allows for exchange among buyers and sellers and what term is the concentration of the productive efforts of individuals and firms on a limited number of activities?

Market, specialization

What term describes the method used by a society to produce and distribute goods and services?

Economic system

What term describes the study of how people make decisions to satisfy their needs and wants?

Economics

What term describes factors that cause a producer's average cost per unit to fall as output rises?

Economies of scale

What term describes an economy that is using all its resources to produce the maximum output of goods and services?

Efficiency

What term describes an economy that is producing the maximum amount of goods and services?

Efficient

What term describes demand that is responsive to price changes?

Elastic

What term describes a measure of how suppliers react to a change in price?

Elasticity of supply

Why are patents a form of monopoly that society allows?

Encourages firms to research and develop new products that benefit society as a whole

What term describes a social welfare program from which people benefit if they meet certain eligibility requirements?

Entitlements

What term describes a person who opens a Phở ca dao restaurant and employs others?

Entrepreneur

What term describes the point at which supply and demand come together?

Equilibrium

What term describes the point at which the quantity supplied and quantity demanded are the same?

Equilibrium

What term describes a wage that produces neither a surplus of labor nor a shortage of labor?

Equilibrium wage

In monopolistic competition, why are profits well in excess of costs unlikely?

Established rivals and new firms would lure customers away with slightly different and/or cheaper products

What is the only way that a cartel is able to survive?

Every member keeps to the agreed output levels

How is a general partnership organized?

Every partner shares equally in both responsibility and liability

Why are free market economies able to attain economic growth?

Everyone is acting in their own self-interest, which motivates market growth

Why does every decision involve trade-offs?

Everyone's resources are limited

A decision-making grid is a visual way of doing what?

Examining trade-offs and opportunity costs

What term describes when quantity demanded exceeds quantity supplied at a certain price?

Excess demand

What term describes when quantity demanded is more than quantity supplied?

Excess demand

What term describes a payment to the government on the production or sale of a good that raises the price and discourages consumers?

Excise tax

What term describes fiscal procedures that try to increase economic output?

Expansionary policies

What term describes an economic side effect of a good or service that generates unintended benefits or costs to someone other than the person deciding how much to produce or consume?

Externality

What term describes a government institution that insures customer deposits against bank failure?

FDIC

Respectively, what term describes the income people receive for supplying factors of production and what term describes a system to protect people experiencing unfavorable economic conditions?

Factor payments, safety net

What term describes a product that reflects the impact of advertising and consumer taste on consumer behavior?

Fad

In 2001, what initiative focused on supporting people in need via charities, community groups, and religious organizations?

Faith-based initiatives

At the founding of the U.S., what type of work did most people perform?

Farm work

What term describes negotiating a contract that keeps workers whose work is unnecessary on a payroll?

Featherbedding

What term describes the research arm of the Federal Reserve?

Federal Advisory Council (FAC)

What term describes the Federal Reserve committee that makes key decisions about interest rates and the U.S money supply?

Federal Open Market Committee (FOMC)

Who is considered the banker for the United States government?

Federal Reserve

What term describes the twelve banking regions created by the Federal Reserve Act?

Federal Reserve Districts

What term describes the current United States central banking system that is comprised of 12 member banks?

Federal Reserve System

What term describes a nonbinding settlement technique in which a neutral negotiator meets with each side to try to find a solution that both sides will accept?

Mediation

Which of the following programs does not provide direct cash transfers?

Medicaid

What term describes the national health insurance program for people over age 65?

Medicare

What is the difference between Medicare and Medicaid?

Medicare is for people over age 65, Medicaid is for low-income families

Respectively, what governmental health insurance covers people over 65 and what governmental health insurance covers the poor or unemployed?

Medicare, Medicaid

What term describes anything that is used to determine value?

Medium of exchange

What term describes a company that joins another company to form a single firm?

Merger

What term describes the study of the economic behavior and decision making of small units, such as individuals and businesses?

Microeconomics

What term describes when the government sets a price floor on earnings?

Minimum wage

What was the state of the federal budget at the start of the twenty-first century?

Minor deficit spending for the first time in 30 years

Most modern economies have what type of economy which is characterized by limited governmental involvement?

Mixed economy

Since there are no current economic systems that rely exclusively on central planning or the individual initiative of the free market, how are most economies comprised?

Mixed economy

What does it mean when an economist says a consumer has demand for a good or service?

He is willing and able to buy the good or service at the specified price

What term describes a large capital investment to produce items used in other industries?

Heavy industry

The savings and loan crisis in the late twentieth century was caused at least partially by what?

High interest rates, bad loans, and fraud

What term describes the joining of two or more firms competing in the same market with the same good or service?

Horizontal Merger

In the late 2000s, what "bubble" deflated leading to a high rates of personal bankruptcy?

Housing bubble

What does elasticity of demand measure?

How consumers react to a change in price

What problem did the Great Depression in the 1930s highlight that classical economics did not address?

How long the market would take the return to equilibrium

To what part of an industry does a worker's education contribute?

Human capital

What problem may result when the government attempts to cover large deficits by creating more money?

Hyperinflation

How do future expectations about the price of a good affect the present supply?

If the price is expected to increase, many producers will hold onto their supply

When would it make sense for a factory that is losing money to remain in operation?

If the revenue from the goods being manufactured exceeds the operating cost

How can expectations about the future change consumer behavior?

Immediate demand for a good will drop if its price is expected to drop

What term describes a market structure that does not meet the conditions of perfect competition?

Imperfect competition

What is the main difference between a limited partnership and a limited liability partnership?

In a limited liability partnership, all partners are limited from liability in certain situations

Why might a socialist society have a less rigid command economy than a communist society?

In a socialist society, various political systems may be combined with public control of the economy

What is the main difference between perfect competition and monopolistic competition?

In monopolistic competition sellers can profit from the differences between their products and other products

What term describes goods and services provided for free or at greatly reduced prices, like food stamps and subsidized housing?

In-kind benefits

Respectively, what term describes an expectation that encourages people to behave in a certain way and what term describes the power of consumers to decide what gets produced?

Incentive, consumer sovereignty

What term describes the change in consumption resulting from a change in real income?

Income effect

What is the main source of revenue for local government?

Income tax

What would increasing the number of laborers in an economy do?

Increase the production possibilities curve

If the government uses tax money to pay for long-term investments such as roads or other infrastructure, what happens to the economy?

Increased capital deepening

How will the federal budget be affected when members of the baby boom generation begin to retire in large numbers?

Increased deficits

What are the Dow and the S&P 500?

Indexes that show the performance of limited but representative stocks

In 2010, the federal government collected approximately $2.16 trillion in tax revenue and 42% came from what source?

Individual income taxes

Labor unions arose largely in response to the changes brought about by what?

Industrial Revolution

If there were no substitutes for the medicine that kept you healthy and the price increased, what type of demand would you have?

Inelastic

What is the elasticity of supply for an orchard owner in the short run if the price he can get for his crop goes up?

Inelastic

What is the term for the supply of a product that cannot easily or quickly expand or reduce its production?

Inelastic

What term describes demand that is relativity unresponsive to price changes?

Inelastic

What term describes elasticity of supply that is less than 1 and is not very responsive to changes in price?

Inelastic

What term describes goods for which demand falls as income increases?

Inferior goods

What term describes a condition of rising prices?

Inflation

What term describes a delay in implementing monetary or fiscal policy?

Inside lag

What term describes the role of consumers to persuade public officials to vote according to the beliefs of private organizations?

Interest group

What term describes redirecting resources from being consumed today to create future benefits?

Investment

What does monetary policy do?

It alters the supply of money

Why does the Fed rarely change the reserve requirements?

It can be disruptive to the whole banking system

What can happen to the economy when the level of unemployment is very low?

It can cause wages and prices to rise

What is one of the major problems caused by a large national debt?

It decreases the amount of money available to be borrowed by business

Why is the 2008 American median household income of $51,000 misleading?

It does not take into account income distribution

Why did the former Soviet Union use a command economic system instead of one based on price?

It hoped to create a society based on equal distribution of goods and services

How does reducing the required reserves by the Fed affect the money supply?

It increases the money supply

Why do not government planners try to end seasonal unemployment?

It is a natural part of a healthy economy

How does each society determine who will consume what is produced?

It is dependant of a society's needs and wants

Why is a certificate of deposit considered a safe investment?

It is guaranteed by the federal government

Why does the federal government collect income taxes in installments rather than waiting until April 15th?

It is more convenient for the government and taxpayers to collect in installments

What does new technology generally do to production?

It lowers cost and increases supply

How does a firm generally respond to a higher demand for its goods?

It raises prices

What typically happens to the inflation rate when unemployment falls to very low levels?

It rises

What is a major argument against a constitutional amendment requiring a balanced budget?

It would be too inflexible

Why would an investor buy a junk bond?

Junk bonds pay a potentially higher level of interest than other bonds

The United States government has a free enterprise economy, but it still intervenes in what instances?

Keep order, provide vital services, and promote the general welfare

What is the government's purpose in giving an antitrust exemption to sports leagues?

Keep team play orderly and stable

What term describes the idea that the government can, and should, regulate the economy?

Keynesian economics

What term describes the effort that a person devotes to a task, for which the person is paid?

Labor

Why are U.S. firms moving manufacturing jobs overseas?

Labor costs less overseas

What term describes an organization of workers that tries to improve working conditions, wages, and benefits for its members?

Labor union

What early free market term describes a doctrine that permits the conduct of business with minimal government intervention?

Laissez faire

What are the three factors of production?

Land, labor, capital

What term describes consumers buying more of a good when its price is lowered?

Law of demand

What term describes that shifting the factors of production to produce a different item requires increasingly more resources to produce more of the new items?

Law of increasing costs

What term describes the tendency of suppliers to offer more of a good at a higher price?

Law of supply

Respectively, what term describes the theory that education increases productivity and results in higher wages and what term describes all nonmilitary people who are employed or unemployed?

Learning effect, labor force

Factors that reduce supply can shift the supply curve in what direction?

Left

What is the subject of Federal Open Market Committee decisions?

Level of interest rates and growth of the money supply

What term describes the legal obligation to pay debts?

Liability

What term describes a business in which all partners are limited from personal liability in certain situations?

Limited liability partnership

What term describes a business in which only one person has unlimited personal liability for the business's actions?

Limited partnership

What is considered a negative impact caused by a strike?

Loss of profits

What is the relationship between start-up costs and a competitive market?

Low start-up costs are likely to make a market more imperfect

Before the government approves a merger, companies must prove that the merger will do what?

Lower costs and consumer prices or lead to a better product

Until 1996, the United States used price supports in agriculture by doing what to create demand?

Lowering prices

What term describes the study of an entire economy and examines the major trends for the economy as a whole?

Macroeconomics

What term describes the belief that the money supply is the most important factor in macroeconomic performance?

Monetarism

What is created as banks go about their normal day-to-day operations?

Money

What are assets?

Money and other valuables

What term describes a formula that tells how much money will be created by an initial cash deposit?

Money multiplier

What term describes many companies in an open market selling similar products?

Monopolistic competition

What term describes a single seller in a market?

Monopoly

What term describes the division of customers into groups based on how much they will pay for a good?

Monopoly

According to the law of increasing costs, what happens as production shifts from one item to another?

More and more resources are necessary to increase production of the second item

Approximately how much total income does a family of four need to earn to be considered above the poverty line?

More than $22,000

Respectively, what term describes a specific type of loan that is used to buy real estate and what term describes the failure to pay back a loan?

Mortgage, default

What term describes the idea that every dollar of change in government use of money is reflected in a greater change in the economy?

Multiplier effect

What term describes a bond issued by a state or local government authority?

Municipal bond

What term describes the total amount of money owed by the federal government?

National Debt

What term describes a system that collects macroeconomic statistics on production, income, investment, and savings?

National income accounting

What term describes a market that runs most efficiently when one large firm supplies all of the output?

Natural monopoly

The more inelastic the demand, the more easily the seller can shift the incidence of a tax on what types of goods to the consumer?

Necessity

What term describes total assets minus total liabilities?

Net worth

What types of laws are designed to help minorities gain education and access to job experience and close the wage gap?

Non-discrimination laws

What term describes a way to attract customers through style, service, or location, but not a lower price?

Non-price competition

What term describes organizations such as museums, the Red Cross, and churches that promote a benefit to society?

Nonprofit organization

What term describes goods that consumers demand more of when incomes increase?

Normal goods

What term describes the electronic marketplace for stocks that are not listed or traded on an organized exchange?

OTC market

What is the function of retail or purchasing cooperative businesses or co-ops?

Obtain lower prices for members

What term describes a market structure dominated by a few large, profitable firms that produce 70-80% of the market output?

Oligopoly

Describe a "means-tested" program?

One for which those with higher incomes receive lower benefits or no benefits at all

What does a "fractional reserve banking system" mean?

One that keeps only a small part of customers' deposits on hand

How does the concept of a balanced budget apply to state government?

Only the operating budget must be balanced

What term describes the buying and selling government securities to change the supply of money?

Open market operations

Respectively, what term describes the concept that everyone can compete in the marketplace and what term describes the concept that people may decide what and when to buy and sell?

Open opportunity, voluntary exchange

What term describes spending for day-to-day expenses?

Operating budget

If a person has just enough money to buy one DVD and chooses DVD #1 instead of DVD #2, what economic term describes DVD #2?

Opportunity cost

What term describes the alternative that is given up because of a decision?

Opportunity cost

What term describes the most attractive alternative that is given up when a decision is made?

Opportunity cost

What term describes the time it takes for monetary or fiscal policy to have an effect?

Outside lag

In most mixed economics, the government does not?

Own all the property and confiscate all economic output

What term describes a tax for which the percentage of income paid in taxes remains the same for all income levels?

Proportional (flat) tax

How does improved technology help create a higher standard of living for future generations?

Providing additional goods and services

What term describes restrictive laws that require companies to provide full information about their products in order to protect the public's well-being?

Public disclosure laws

What term describes a shared good or service for which it would be impractical to make consumers pay individually and to exclude non-payers?

Public good

What do local governments spend the bulk of their revenue on?

Public school systems

Respectively, what term describes the part of the economy that involves the transactions of the government and what term describes the part of the economy that involves the transactions of individuals and businesses?

Public sector, private sector

What term describes the ability to purchase goods and services?

Purchasing power

Respectively, what term describes the option to sell shares of stock at a specified time in the future and what term describes the option to buy shares of stock at a specified time in the future?

Put option, call option

What term describes how much of a good is offered for sale at a specific price?

Quantity supplied

What term describes dividing up goods and services without regard to price?

Rationing

What is the difference between real GDP and nominal GDP?

Real GDP is based on constant prices; nominal GDP is based on the current year's prices

What term describes GDP expressed in unchanging prices, divided by the total population?

Real GDP per capita

What term describes assets such as land and buildings?

Real property

What term describes a prolonged economic contraction?

Recession

What term describes government intervention in a market that affects price, quantity, or quality?

Regulation

What term describes the government-controlled price ceiling on apartment prices?

Rent control

What is a strategy that employers use to continue to do business despite high wages?

Replace some of the workers with machines

What is the money an investor receives above and beyond the money initially invested called?

Return

What term describes income received by a government from taxes and nontax sources?

Revenue

In which direction will the demand curve for RVs shift as baby boomers start to retire?

Right

When any effort by a government causes the supply of a good to rise, in what direction will the supply curve shift for that good?

Right

What term describes a measure that bans mandatory union membership?

Right-to-work laws

What is the share of earnings that a business owner pays for the right to be part of a certain business?

Royalties

How do most states finance their capital budget?

Sale of Bonds

What are the major sources of revenue for most state governments?

Sales and individual income taxes

What is an example of a tax for which the percentage of income paid in taxes decreases as income increases?

Sales tax

What term describes income that is not used for consumption?

Saving

What term describes a low-denomination bond issued by the U.S. government?

Savings bond

If a restaurant owner decides to serve only phở in his restaurant, what economic term describes the absence of hamburgers, French fries, and shakes?

Scarcity

What term implies that there are limited quantities of resources to meet unlimited wants?

Scarcity

What causes a change in the demand curve or a shift in demand?

Scarcity of normal and inferior goods

What term describes the theory that suggests that completion of college indicates that a job applicant is intelligent and hard-working?

Screening effect

Driving to a faraway place to find available goods is an example of what economic term?

Search cost

What term describes the financial and opportunity costs consumers pay in looking for a good or service?

Search cost

What term describes when a period of steady work is followed by a period of unemployment each year?

Seasonal unemployment

What is the primary goal of a labor union?

Secure its workers' jobs

What term describes labor that requires minimal specialized skills and education?

Semi-skilled labor

What term describes a situation that occurs when a producer cannot offer a particular good or service at the current price?

Shortage

What is the difference between a shortage and scarcity?

Shortages can be temporary or long-term; scarcity always exists

What is the difference between simple and compound interest?

Simple interest is paid on the principal only; compound interest is paid on both principal and accumulated interest

75% of all businesses are owned and managed by whom?

Single individuals

How are traditional economies characterized?

Small, close communities that avoid change and new technology

Why does a perfectly competitive market require many participants as both buyers and sellers?

So that no individual can control the price

What is the largest category of federal spending?

Social Security

What term describes benefits paid to retired and disabled workers?

Social Security

What term describes a social philosophy based on the belief that democratic means should be used to evenly distribute wealth throughout a society?

Socialism

What term describes a business owned and managed by a single individual?

Sole proprietorship

In the late 1920s, what practice of buying stock led to the ballooning of prices and eventually the collapse of the stock market on Black Tuesday, October 29, 1929?

Speculation and buying on margin

What term describes a decline in real GDP combined with a rise in the price level?

Stagflation

What term describes expenses a new business must pay before the first product reaches the customer?

Start-up costs

During the Free Banking Era between 1837 and 1863, what dominated U.S. banks?

State-chartered banks

What term describes the share representing a portion of ownership in a company?

Stock

What does the limited liability of the owners of stock in a corporation mean?

Stockholders can lose only what they have invested in the corporation

What term describes something that keeps its worth?

Store of value

What term describes an organized work stoppage intended to force an employer to address union demands?

Strike

What term describes when the skills of workers do not match the jobs that are available?

Structural unemployment

What term describes a government payment that supports a business or market?

Subsidy

What term describes goods used in place of one another?

Substitutes

What term describes consumers reacting to a rise in the price of a good by consuming less of it and more of a substitute?

Substitution effect

What term describes a chart that lists how much of a good a supplier will offer at different prices?

Supply schedule

What term describes the relationship between price and total quantity supplied by all firms?

Supply schedule

What term describes a sudden shortage of a good?

Supply shock

Respectively, what term describes a school of economics that believes tax cuts help an economy by raising supply and what term describes a school of economics that believes government spending and tax cuts help an economy by raising demand?

Supply-side economics, demand-side economics

What condition arises when the quantity supplied is greater than the quantity demanded?

Surplus

What is a mutual fund?

A device for pooling the savings of many investors and investing it in a variety of ways

What term describes monetary policy that increases the money supply?

Easy money policy

What term describes a steady, long-term increase in real GDP?

Economic Growth

Which of the following is not an advantage of a free market economy?

Economic equity

What term describes monetary policy that reduces the money supply?

Tight money policy

Respectively, at what value level would the estate of a person who has died have to pay estate taxes and how much money can a person give tax-free each year to several different people?

$5,000,000, $13,000

What would be the annual yield of a bond if the coupon rate was 8.5%, maturity was 10 years, and the par value was $10,000?

$850

How many Federal Reserve Districts are there?

12

If a person has money invested at 9% and the rate of inflation is 5%, how much return are they actually making on their investment?

4%

Respectively, what percentages of adult women are in the work force today and what types of jobs are they doing?

61%, service

What percentage of all businesses are partnerships?

7%

Today's women make approximately what percent of what men make?

81%

What is a corporate bond?

A bond issued by a corporation as a way to borrow money

How is a corporation defined?

A business owned by individual stockholders

What is the main difference between a capital gain and a capital loss?

A capital gain is when a person sells their stock for a financial gain

What do economists call a situation in which consumers buy a different quantity than they did before, at every price?

A change in demand

What is the difference between a primary market and a secondary market?

A primary market's financial assets can be redeemed only by the original investor; a secondary market's assets can be resold

If Mr. Biggsteinbergskiopolos decides to have his students volunteer at a community nursing home after school, what would be a negative externality?

A student would have less time to complete any homework

What is created when the data points on a supply schedule are graphed?

A supply curve

What is the gold standard?

A system in which a country's money is backed with gold.

What does experience show about the relationship of taxation and work?

A tax cut does not necessarily cause workers to work significantly more hours

After the Civil War, the National Banking Acts gave the federal government the power to do what?

ALL OF THE ABOVE

Governments respond to budget deficits by creating money or by issuing what?

ALL OF THE ABOVE

How does the cost-push theory explain inflation?

ALL OF THE ABOVE

If an investor decides to flip a foreclosed house, what would be a positive externality?

ALL OF THE ABOVE

In order to promote economic strength, policymakers pursue what outcome to stabilize the economy?

ALL OF THE ABOVE

The U.S. government's policies to deregulate the banking industry led to a surge of what in the late 2000s?

ALL OF THE ABOVE

The United States Constitution guarantees what important right that allows people to engage in business activities?

ALL OF THE ABOVE

The United States free enterprise economy includes what key economic rights?

ALL OF THE ABOVE

The amount of money that individuals hold depends generally on what factor?

ALL OF THE ABOVE

What do antitrust laws allow the U.S. government to do?

ALL OF THE ABOVE

What does the principle of the law of supply state?

ALL OF THE ABOVE

What factor can affect wages?

ALL OF THE ABOVE

What is a cause of poverty?

ALL OF THE ABOVE

What is a disadvantage of a centrally planned economy?

ALL OF THE ABOVE

What is a disadvantage of a franchise?

ALL OF THE ABOVE

What is an advantage of a sole proprietorship?

ALL OF THE ABOVE

What is an example of a commodity, which is a product that is considered the same regardless of who sells it?

ALL OF THE ABOVE

What is an example of a tax incentive used to encourage or discourage certain behavior?

ALL OF THE ABOVE

What is an example of price discrimination that consumers are willing to tolerate?

ALL OF THE ABOVE

What is considered a negative effect of government regulations?

ALL OF THE ABOVE

What keeps a business cycle going?

ALL OF THE ABOVE

What monetary policy timing example could cause the business cycle to become worse?

ALL OF THE ABOVE

What type of influence on consumers can shift a demand curve?

ALL OF THE ABOVE

Which of the following is not one of the three key economic questions that are addressed to deal with limited economic resources?

ALL OF THE ABOVE

Why do many firms hire temporary workers to do a particular job?

ALL OF THE ABOVE

What does "monetary policy" mean?

Actions the Federal Reserve takes to influence the economy and inflation

How does an economist calculate GDP for one year using the expenditure approach?

Add together all the amounts spent on final goods and services

How do education programs make the economy more productive?

Adding to human capital and labor productivity

Who was the main Federalist backer behind the creation of the first Bank of the United States in 1791?

Alexander Hamilton

What banks must join the Federal Reserve System?

All nationally chartered banks

What comprises the money supply in a country's economy?

All the money available in an economy

What is a prospectus?

An investment report for potential investors

What term describes government policies that keep firms from controlling the price and supply of important goods?

Antitrust laws

What term describes a bill that sets money aside for specific spending?

Appropriation bill

When the government collects taxes and pays our transfer payments as a way to balance the economy, what are these fiscal tools called?

Automatic stabilizers

What term describes federal spending equal to federal revenue?

Balanced budget

What term describes spending that is equivalent to revenue?

Balanced buget

What term describes an institution for receiving, keeping, and lending money?

Bank

What term describes a company that owns more than one bank?

Bank Holding Company

Why are there actually relatively few markets in which there is perfect competition?

Barriers keep companies from entering the market freely

What term describes factors that make it difficult for new firms to enter a market?

Barriers to entry

What term describes the direct exchange of one good for another?

Barter

The United States' mixed economy is based on what?

Based on the principles of the free market, but allows some government intervention

What term describes a period during which the stock market falls steadily?

Bear market

Why do business cycles occur in free enterprise systems?

Because economic decisions about factors such as prices, productions, and consumption are determined by the market

Why did the United States use rationing during World War II?

Because the needs of the armed forces created tremendous shortages

On average, 28% of total compensation in the U.S. economy today is comprised of what?

Benefits

What term describes business conducted without regard for government controls?

Black market

Respectively, what term describes federal funds given to the states in lump sums and what term describes an area where companies can relocate free of certain local, state, and federal taxes and restrictions?

Block grants, enterprise zones

What is generally the difference between blue-collar workers and white-collar workers?

Blue-collar workers have industrial jobs; white-collar workers have professional or clerical jobs

What term describes the seven-member body that oversees the Federal Reserve System?

Board of Governors

What term describes a certificate issued by a corporation promising to repay the amount it has borrowed?

Bond

What happens to consumer and business spending when the interest rates go up?

Both types of spending decreases

What term describes a business that specializes in trading stocks?

Brokerage firm

Respectively, what term describes a situation in which the government spends more than it takes in and what term describes a situation in which the government takes in more than it spends?

Budget deficit, budget surplus

What is an example of using physical capital to save time and money?

Building extra space in a factory to simplify production

What term describes a period of macroeconomic expansion followed by a period of contraction that may last many years?

Business cycle

What term describes a period of macroeconomic expansion followed by a period of contraction?

Business cycle

What are the leading economic indicators supposed to predict?

Business cycles

What term describes a semi-independent business that pays fees to a parent company for exclusive rights to do business in a certain area?

Business franchise

What term describes an authorization from the local government to carry on an enterprise?

Business license

What term describes any establishment formed to carry on commercial enterprises?

Business organization

What is the main principle of Adam Smith's "The Wealth of Nations?"

Business prospers by finding out what people want and providing it

Respectively, what term describes the interest rate that the bond issuer will pay the bondholder and what term describes the amount that an investor pays to buy the bond that will be repaid to the investor at maturity?

Coupon rate, par value

What term describes the device that allows its holder to buy goods based on a promise to pay?

Credit Card

What term describes the loss of funds for private investment due to government borrowing?

Crowding-out effect

What term describes the coins and paper bills used as money in a society?

Currency

What term describes when unemployment rises during economic downturns and falls when the economy improves?

Cyclical unemployment

Who buys and sells stocks on a minute-by-minute basis to try to make a profit?

Daytraders

Simple interest is paid on the principal only; compound interest is paid on both principal and accumulated interest

Debit Card

What term describes a device that allows its holder to buy goods and have the payment deducted from a checking account?

Debit Card

Approximately 22% of the total federal budget is spent on what?

Defense

What term describes a graphic representation of a demand schedule?

Demand curve

Respectively, what M1 term describes money in checking accounts and what M1 term describes the ability of assets to be used as cash, or directly converted into, cash?

Demand deposits, liquidity

How does the price range affect the elasticity of demand for a product?

Demand for a good can be inelastic at a low price, but elastic at a high price

What effect does the availability of many good substitutes have on the elasticity of demand for a good?

Demand is elastic

Which theory says that inflation occurs when the demand for goods exceeds the existing supply?

Demand-pull theory

What term describes the loss of the value of capital equipment that results from normal wear and tear?

Depreciation

What term describes the government no longer deciding what role each company can play in the market and how much it can charge?

Deregulation

Unlimited personal responsibility, limited access to resources, and lack of permanence are all examples of what for sole proprietorships?

Disadvantages

What term describes the rate the Federal Reserve charges for emergency loans to commercial banks?

Discount Rate

What term describes money lawmakers have a choice about spending?

Discretionary spending

What term describes when quantity supplied is not equal to quantity demanded?

Disequilibrium

Who issues United States paper currency?

District Federal Reserve banks

What term describes spreading out investments to reduce risk?

Diversification

What term describes a portion of corporate profits paid out to stockholders?

Dividend

What term describes money that can be easily divided into smaller units of value?

Divisibility

What is likely to be the best approach to a recession that is expected to turn into an expansion in a short time?

Do nothing and let the economy fix itself

What term describes money that must withstand the wear and tear that comes from being used over and over again?

Durability

What term describes consumer goods that last for a long time?

Durable goods

How does a perfect market influence output?

Each firm adjusts its output so that its costs, including profit, are covered

What term describes a written document indicating the amount of money the government will receive and spend?

Federal budget

What term describes the interest rate Federal Reserve banks charge each other for loans?

Federal funds rate

What term describes money that has value because the government has ordered that it is an acceptable means to pay debts?

Fiat money

What term describes an institution that helps channel funds from savers to borrowers?

Financial intermediary

What term describes an arrangement that allows the transfer of money between savers and borrowers?

Financial system

What term describes the federal government's use of taxing and spending to keep the economy stable?

Fiscal policy

What term describes a twelve-month period that is used for financial calculations?

Fiscal year

What term describes income that does not increase even when prices go up?

Fixed Income

What term describes a cost that does not change no matter how much is produced?

Fixed cost

How is the total cost of a factory or other production site determined?

Fixed cost plus variable cost

What term describes a system that keeps only a small part of a deposit on hand and lends out the rest?

Fractional reserve banking

What term describes a single seller that has the right to sell goods in an exclusive market?

Franchise

What is the most recent US President who was not influenced by Keynesian economics?

Franklin D. Roosevelt

What term describes an economic system characterized by private or corporate ownership of capital goods?

Free enterprise

In what type of economic system would individuals answer the three key economic questions of what to produce, how to produce it, and who consumes that which is produced?

Free market

What term describes a situation in which resources are distributed according to price?

Free market

What term describes someone who would not choose to pay for a certain good or service, but would reap the benefits of it anyway if it was provided as a public good?

Free rider

What term describes when people change jobs or get laid off?

Frictional unemployment

What is the maximum output that the economy can sustain over a period of time called?

Full-employment output (productive capacity)

How does the government encourage an increased level of productivity?

Funding research and development projects at many levels

What is an example of a good for which the demand is likely to become more elastic over time if price changes dramatically?

Gasoline

What is an example of a nondurable good?

Gasoline

What term describes a business in which all partners share in both responsibility and liability?

General partnership

What term describes the invisible barrier that keeps women and minorities from advancing to the top ranks in business?

Glass ceiling

What term describes physical objects such as a wok or chop sticks?

Goods

What are intermediate goods?

Goods used in the production of final goods

What is the government's role in controlling externalities in the American economy?

Government tries to encourage positive externalities and limit negative externalities

How is government intervention in a modern economy useful?

Governments are more able to meet some needs and wants and all members of society have an opportunity participate

What term describes paper money that was issued by the U.S. Treasury during the Civil War?

Greenback

What term describes the dollar value of all final goods and services produced within a country's borders in a given year?

Gross domestic product (GDP)

What term describes the total value of all final goods and services produced in a particular economy in a year?

Gross domestic product (GDP)

How does the government calculate GDP?

Gross national product (GNP), Net national product (NNP)

To improve its standard of living, a nation's economy must do what?

Grow through innovation

What term describes a phrase that refers to the trade-offs that nations face when choosing whether to produce more or less military or consumer goods?

Guns and butter

What term describes a company that has the exclusive right to sell a new good or service for a specific time period?

Patent

What must an owner of a sole proprietorship do if the business fails?

Pay all the business debts

What is a common factor in all nonprofit business?

Pay no income tax

What term describes the height of an economic expansion?

Peak

Why do people need to buy and sell products or services?

People need to provide the market with foods and services

What term describes a market with many well-informed buyers and sellers, identical products, and free entry and exit?

Perfect competition

What are the two main economic problems that Keynesian economics seeks to address?

Periods of recession/depression and inflation

What term describes assets such as furniture, boats, and jewelry?

Personal Property

What term describes a collection of financial assets?

Portfolio

What term describes the percentage of people in a particular group who live in households with income below the poverty threshold?

Poverty rate

In 2009, a single parent with one child with an income level less than $15,000 per year falls below what?

Poverty threshold

What term describes the income level below which income is insufficient to support a family or household?

Poverty threshold

What term describes setting the market price below the cost in the short term to drive competitors out of business?

Predatory pricing

Why did the U.S. government sue Microsoft in 1999 for being a monopolistic firm?

Predatory pricing and requiring customers to buy other products

A demand curve is only accurate for a specific set of market conditions and what is the only factor affecting demand on a demand curve?

Price

What provides a language of exchange where producers can measure demand and consumers express demand for a product?

Price

What term describes the legal maximum that can be charged for a good?

Price ceiling

What term describes an agreement among firms to sell at the same or very similar prices?

Price fixing

What term describes a measurement that shows how the average cost of goods or services changes over time?

Price index

What is a major characteristic regarding the prices in monopolistic competition?

Prices are higher than in perfect competition

What term describes the rate of interest banks charge on short-term loans to their best customers?

Prime rate

What term describes the amount of money borrowed?

Principal

In a free market economy, who owns the factors of production?

Private households and firms

What term describes selling state-run firms to individuals, which are then allowed to compete with one another in the marketplace?

Privatize

What term describes an agricultural marketing organization that helps members sell their products?

Producer cooperative

Respectively, what term describes a market in which households purchase the goods and services that firms produce and what term describes a market in which firms purchase the factors of production from households?

Product market, factor market

What do economists create when they collect data on a country's technological level and the resources it has available?

Production possibilities curve

What term describes a graph that shows alternative ways to use an economy's resources?

Production possibilities curve

What term describes the line on a production possibilities graph that shows the maximum possible output?

Production possibilities frontier

What term describes the idea that markets regulate themselves?

Productive capacity

What is an organization that attempts to improve the image and working conditions of people in a particular occupation?

Professional organization

What does a free market provide as an incentive for firms to increase or decrease goods based on consumer demand?

Profit

What term describes a tax in which the percentage paid increases as income increases?

Progressive tax

What is the purpose of both deregulation and antitrust laws?

Promote competition

Respectively, what term describes a tax on the value of a property and what term describes a tax on the dollar value of a good or service being sold?

Property tax, sales tax

How does one describe the saving rate?

Proportion of disposable income that is saved

What is the main purpose of federal taxes on tobacco and alcohol products?

To discourage the use of these products

Americans have a high standard of living and have shifted the production possibilities frontier outward via a good work ethic and what which allows an economy to produce more output from the same quantity resources?

Technology

What allows the United States economy to operate more efficiently and productively, increasing GDP and giving U.S. businesses a competitive advantage in the world?

Technology

What cash transfer program replaced an earlier welfare program that was criticized for making people dependent on welfare and did not encourage recipients to take responsibility for their lives?

Temporary Assistance for Needy Families (TANF)

Why does monetary policy usually have a streamlined inside lag?

The Federal Open Market Committee (FOMC) can act almost immediately

What 1947 legislation may have been a reason for the decline in union membership?

The Taft-Hartley Act

What gives the U.S. government the right to collect taxes?

The U.S. Constitution

Who appoints the members of the Board of Governors of the Federal Reserve?

The U.S. President

How do economists measure the consumption of a good?

The amount of a good that is bought

What is labor productivity?

The amount of output produced per worker

In what situation would making a decision at the margin be possible?

The available alternatives can be divided into increments

Why are Social Security and Medicare spending expected to increase further in the near future?

The baby boomer generation will qualify for both programs

As part of the nation's recovery from the Great Depression of the 1930s, the banking system was reformed in what way?

The banking system was taken off the gold standard

How does a pension fund act as an investor?

The company invests the money collected from employers and/or employees

If marginal cost becomes higher than price, what happens to a company?

The company will lose money on each additional unit produced

What does the Lorenz Curve illustrate about the economy?

The distribution of income

What determines the incidence of a tax?

The elasticity of demand of the product taxed

What effect does a rise in the cost of machinery or raw materials have on the cost of a good?

The good becomes more expensive to produce

How will consumers react to the incentive of a higher price on a good or service?

The negative incentive will cause consumers to purchase less of the good or service if it is of lower quality

What does the unemployment rate represent?

The percentage of the total labor force that is unemployed

What is the required reserve ratio (RRR)?

The portion of a deposit that a bank must keep on hand

How does the controller of a monopoly decide at what price to set for goods?

The price at which the profit is maximized

What is the underground economy?

The products and income that are not reported as incomes to the government

Why might Soviet economic planners have favored heavy industry over the makers of consumer goods?

The products of heavy industry provide material for many other industries

How do falling prices affect supply?

The quantity demanded rises

What is the major advantage of a business that is a partnership rather than a sole proprietorship?

The responsibility for the business is shared

How does the risk involved in a money market mutual fund compare with the risk of a certificate of deposit (CD)?

The risk of a money market mutual fund is slightly greater than that of the CD

How does a bond sale made by the Fed affect the money supply?

The sale decreases the money supply

Why does the Federal Reserve System have a high degree of political independence?

The system is owned by the banks

What does "full employment" mean?

There is no cyclical unemployment

How did collectives in the Soviet Union avoid the competition that drives a free market economy?

There were no incentives for competition because the government determined prices, wages, and products

How do public goods limit a free market economy?

They allow government, and not consumers, to make some economic decisions

What effect do low interest rates have on business investment?

They encourage investment

Why do political pressures give an incentive to politicians to practice expansionary fiscal policies?

They want to make decisions that benefit the people who elect them, not necessarily the best decision for the economy

What term describes a person who makes a decision to use one more or one less unit of something, such as time or workers?

Thinking on the margin

How would you describe a tax that is assessed according to the benefits-received principle?

Those who receive the benefits a tax provides are the people who pay the tax

What is the term for a situation in which a person is overqualified for the job he or she has?

Underemployment

What term describes an economy that is not using all its resources to gain the maximum possible production?

Underutilization

What term describes a state law that establishes rules for partnerships?

Uniform Partnership Act

What term describes that any two units of money must both have the same purchasing power?

Uniformity

What is generally the major difference between union and nonunion workers?

Union workers earn more money for similar work

What term describes something that serves as a way to compare values?

Unit of account

When elasticity of demand for a good is exactly 1, how is demand described?

Unitary

What term describes a cost that rises or falls depending on the quantity produced?

Variable cost

What term describes production costs or externalities paid by the general public?

Variable costs

What is the term for the joining of two or more firms involved in different stages of producing the same good or service?

Vertical merger

What term describes rising wages causing higher prices which cause higher wages?

Wage-price spiral

How have the earnings of U.S. workers changed over the last 20 years?

Wages of non-college graduates have gone down

Since the 1930s, what term describes the main government effort to ease poverty by collecting taxes from individuals and redistributing some of those funds?

Welfare

When do diminishing marginal returns occur?

When additional workers increase total output at a decreasing rate

What is one reason the government has only limited control of its spending?

When criteria have been set for a program there is no control of how many people will qualify

When should one decide not to do or use one additional unit of some resource?

When the opportunity cost outweighs the benefits

What is critical in determining whether something is produced as a public good?

Whether the benefits to society are greater than the total cost

What term describes taking out a part of an employee's income as it is earned for taxes?

Withholding

What term describes a program requiring work in exchange for temporary assistance?

Workfare

What eventually caused the United States economy to recover from the Great Depression?

World War II

What term describes an arrangement whereby cities and towns designate separate areas for businesses?

Zoning law

What is a credit union?

a cooperative lending institution for a particular group