Final Review

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Final Review

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• Mr. Hess
• Economics

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Inflation

• A steady rise in prices throughout the economy
• The entire economy
• All products!

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Imports

• Goods that are brought from another country into
  ours

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Labor Specialization

• The process by which people choose to concentrate
  on one job of greater skill by pursuing
  additional education and training
• More specific the job the higher the pay!

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Aggregate Demand

• The demand for everything in our entire economy

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Public Good

• A service or product provided by the government.
  Everyone benefits from it no matter whether they
  pay taxes or not.

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Resource Price

• The price of a good that is needed to make
  another good.
• EG oil is necessary to make gas
• Price of oil goes up, so will gasolines

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Scarcity

• Everything in the world is in short supply
• It is the fundamental problem of economics

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Credit

• Your ability to borrow other peoples money
• If its bad, you get no loans!

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AFL-CIO

• The biggest labor organization in the USA today

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Great Depression

• Period of seriously inhibited productivity growth
  that existed during the decade of the 1930s

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Deficit

• A budget situation in which revenue does not
  cover expenses, money must be borrowed to pay
  bills
• EG The US governments current budget

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Dividends

• The share of profits bestowed to stockholders

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Say

• Supply creates its own demand

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John L. Lewis

• Founder of the CIO in 1935
• The George Washington of the American labor
  movement

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Thomas Jefferson

• Third President of the US who believed in
  conservative principles of small central
  government
• Opposed starting a national bank

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Contraction

• A period of economic activity whereas the rate of
  GDP decreases from year to year

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Sole Proprietorship

• A business formation in which all liability is
  assumed by the owner(s)
• Most common business formation in the US today

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Fair Labor Standards Act

• 1938 act of congress that established a minimum
  wage, 48-hour work week, and overtime pay

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Gross Domestic Product

• The dollar value of all final goods and services
  produced in a nations economy in one year
• Final goods only
• 10 Trillion this year
• C I G (i-e)

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Depreciation

• The yearly decline of value experienced by
  businesses in some capital resources
• EG a car loses 20 of value each year

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Regulation

• A rule or restriction placed upon a business in
  how it produces a product or provides a service
• EG EPA rules that prohibit dumping of wastes in
  schoolyards

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Liquidate

• The selling of capital assets and to turn them
  into cash

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Unemployment Rate

• The percentage of the American workforce that is
  either working or looking for work

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Exports

• Products and services made by Americans then sent
  to other countries

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M2

• The category of money supply that includes
  currency, checking and savings accounts
• The most common monetary figure referenced by
  economists

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monopoly

• A market situation in which one company dominates
  production of a good or service

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Flat Tax

• A tax that charges each person the same
  percentage of income

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Collective Bargaining

• The process by which a union negotiates with
  employers for new contracts

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Corporation

• A business formation that has registered papers
  with its state of origin
• Has limited liability
• Never expires
• Seen as an individual by the law

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Mortgage

• A loan with which one buys land or a house

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Socialism

• Economic system in which the factors of
  production are owned by the state

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Non-Profits

• Business formations/corporations whose primary
  purpose is not to make money.
• Surplus revenue used to grow the business
• EG Heart Association, Saint Ignatius.

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Debt

• The amount of money our government has borrowed
  from banks and bondholders due to its continued
  deficits
• Currently 6.3 Trillion

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Trough

• The bottom most point of a business cycle
• Also called a recession

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Profit

• Gross revenue costs ?

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Laffer

• Economist who theorized that fiscal policy
  concentrating on businesses and business owners
  can most effectively revive an economy
• EG Reaganomics, supply-sided theory

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Public Corporation

• A corporation that has issued stock to the public
  through an IPO
• gone public

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National Labor Relations Act

• 1935 Act of congress that gave unions the right
  to collectively bargain of behalf of their
  membersip

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Producer Price Index

• Economic indicator that tracks the prices of
  products used primarily by manufacturers

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Liability

• Legal and financial responsibility for the
  actions of an individual or a business

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Principal

• The amount of money you borrow in a loan

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Real Income

• Your income over time compared to the rate of
  inflation
• IE A 5 raise is really only 3 if inflation
  rates are 2

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Trade Deficit

• A situation that exists when a nation imports
  more goods and services than it exports

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Fiscal Policy

• The act of a government in which it taxes
  citizens in order to provide goods and services

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Discount Rate

• The lowest rate set by the Federal Reserve
• Money lent to banks in trouble

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Oligopoly

• A market situation in which the production of a
  good or a service is dominated by only a few
  companies

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Progressive Tax

• A system of taxation in which a government takes
  a higher percentage of income from those citizens
  that make more money

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Medium of Exchange, store of value, measure of
value

• What are the functions of money?

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Entrepreneur

• A person who takes the initial risk of time and
  capital to start a business

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Diversification

• The dispersal of surplus money into a wide
  variety of investments

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Communism

• A socialist regime that is headed by a
  dictatorship

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Perfect Competition

• A market situation in which there are many
  producers, many consumers, and no government
  intervention

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capital, natural resources, labor,
entrepreneurs, technology

• What are the factors of production?

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Asset

• Something that you own that is worth some sort of
  money

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Ralph Nader

• The father of American consumer activism

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Alexander Hamilton

• The father of American liberal thought who
  proposed a strong federal government and a
  national bank

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Union

• Labor organization that collectively bargains on
  behalf of its membership

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Peak

• The top level of production in a business cycle

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Partnership

• A business formation in which two or more
  individuals share responsibility and liability

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The Business Cycle
Expansion
Peak
contraction
Trough
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Social Security

• FICA tax program that provides transfer payments

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SEC

• Government regulatory agency responsible for the
  stability of stock and bond markets
• Investigate insider trading and corporate fraud

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Economy

• A system of consuming and producing

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Futures

• An investment in which you buy a contract to take
  delivery of a commodity at a pre determined date

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Money Income

• Your take home pay from year to year without
  inflation figured in

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Opportunity Cost

• The dollar value of the economic decisions you
  did NOT make
• IE if you build a school right now, you cant
  go and build a new community pool

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Wage

• Hourly pay

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Interest

• Percentage of money you pay to use someone elses
  capital
• Usually calculated on a yearly basis with monthly
  installments,

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Capital

• Factor of production that includes money and
  anything you buy with money

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Foreclosure

• To default on a mortgage

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Equity

• The amount of something that you own
• IE another name for a stock
• -- what portion of your house you own

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401K

• Most popular retirement program in the US today
• Pretax, tax-exempt investments

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IPO

• Companies go public in a process called an ____
  _____ _____.

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Some Foreign Moneys

• English
• Russian
• French
• Chinese
• Mexican
• Japanese
• German

• Pound
• Ruble
• Euro
• Yuan
• Peso
• Yen
• Euro

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Adam Smith

• Author of The Wealth of Nations
• Father of modern capitalistic thought
• invisible hand

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Reaganomics

• Conservative economic policy of the 1980s that
  promoted lower taxes and less government
  regulation

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Strike

• Workers that refuse to work are on

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Deductions

• These are amounts of money that you can subtract
  from your gross income when you file your taxes
• Children, charitable contributions, mortgage
  interest

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Sherman Anti-Trust Act

• 1890 Act of congress that forbade any contract,
  combination or conspiracy in the restraint of
  trade

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FDIC

• Government regulatory agency that oversees banks
  and insures your deposits up to 100,000

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Microeconomics

• Field of Economics that studies individuals,
  businesses and the choices that they make

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Bond

• An IOU issued by a government or a corporation
• They pay you interest over time for the use of
  your capital

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Options

• A contract that you invest in that gives you the
  right to buy or sell a share of stock at a given
  price at some point in the future

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Floating Exchange Rates

• The American dollar fluctuates against foreign
  moneys due to a system of . . .

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Comparative Advantage

• Situation in which a country has the ability to
  produce a product more cheaply and efficiently
  than another country
• IE The opportunity cost of Haiti producing cars
  is so expensive when compared to that of the USA

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Prime Rate

• The interest rate that banks loan money to their
  best customers

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Productivity

• The efficiency with which people and countries
  provide and create goods and services

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Saving less, and buying more

• People react to higher lower rates in the economy
  by . . .

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Bankruptcy

• A legal declaration of your inability to pay debt

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Collateral

• Money or property put up as a good faith measure
  for the repayment of a loan

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Poverty Rate

• Percentage of American citizens who live in a
  household of 4 that makes less than 17,100

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Going Public

• Selling stock in your company to raise capital
  for expansion

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Karl Marx

• Author of the Communist Manifesto, Father of
  Socialism

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Alan Greenspan

• Led the Federal Reserve through the boom of the
  1990s
• Current chair

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Political Action Committee (PAC)

• Organization that raises for a specific cause in
  order to lobby congress

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Consumer Price Index (CPI)

• Economic indicator based upon the prices of
  80,000 products
• Our most reliable indicator of inflation

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FOMC

• The decision making body of the Federal Reserve
• Meets every 6 weeks on a Tuesday

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Open Market Operations

• The Fed controls our money supply through the
  bond market
• The Federal Reserve loosens the money supply by
  buying bonds

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Stock

• A certificate of ownership in a public corporation

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JM Keynes

• 1930s economist that advocated the use of
  government taxes and programs to control an
  economy
• Demand-sided ideas

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They must decide what gets produced and
consumed, and thus, what gets produced and
consumed

• What role do individuals play in an economy?

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They assume risk, create new businesses, and thus
bring about economic growth

• What do entrepreneurs do?

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Less of something else is produced

• If a factory or country is FULLY productive, more
  of one product can only be produced if . . .

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More stuff in less time

• When workers are more specialized and are better
  trained, their become able to produce . . .

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Productive!

• When a company buys new machinery and equipment,
  we should expect that the workers will get more .
  . .

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Individual acting for themselves in competitive
markets!

• Who does a better job of deciding what gets
  produced and consumed?

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Both you and the store benefit.

• When you get something on sale, who benefits from
  this?

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medium of exchange

• When you buy a sweatshirt, what role does money
  play?

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competitive markets and free trade

• What keeps businesses from gouging consumers with
  very high prices?

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Higher

• A decrease in the supply of sweatshirts will
  result in ____ prices.

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Fewer, more expensive cars

• What will a shortage of steel do to the market
  for cars?

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Electrical engineers are more scarce and their
labor is more specialized

• Electrical engineers make more money than bus
  drivers because . . .

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Everyone benefits no matter what taxes they pay

• Government provides something like national
  defense because . . .

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Increase supply and decrease price

• Breaking up a monopoly in the phone industry
  should do what to price and quantity of phone
  service?

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Go up

• In a free market, when worker output increases,
  wages should

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Controlling pollution is cheaper than its
negative impact

• Why does the government make pollution illegal?

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Good and free access to factors of production

• What limits our GDP (productivity)?

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People would consume less

• How would declining incomes impact consuming?

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Less spending

• How do higher taxes impact consumers and
  businesses?

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It should decrease!

• What happens to unemployment when the economy
  grows at a higher rate?

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it goes down, this is called a real income

• What happens to standard of living when inflation
  goes up faster than income?

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It increases the money supply

• When the Fed lowers the reserve requirement,
  banks can lend out more money. What does that do
  to the money supply?

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LESS

• More trade, coupled with more job training and
  specialization will result in ____ worldwide
  unemployment

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Deficit

• If the government cannot pay its bills, it will
  borrow money. This is called a budget ______

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Inhibits free trade

• Tariffs, taxes on imports, tend to have what
  impact on free trade.

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No. They tend to favor one industry over another

• Can tariffs ever be fairly assessed on imports?

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Trade Deficit Definitely a bad thing

• The value of your countrys imports exceed the
  value of exports. Whats that called?

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Holy Hell Yes!

• Do the values of our moneys around the world
  impact world trade?

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Strengthened

• If a dollar is worth more euros than it was worth
  yesterday, we can say that the dollar ______
  against the euro.

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Makes them more affordable

• What will a weaker dollar do to the value of
  American goods in France?

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Real per capita income growth over time

• What is the best measure of our standard of
  living?