Economic Challenges
Economics Final Exam Study Guide
Critical Standard #1: Intro to Economics
▪ What is economics?
▪ Scarcity
▪ Opportunity Cost/ Benefit
▪ Factors of production
o Human capital vs. physical capital
▪ 3 basic economic questions
▪ Economic Systems Characteristics
o Traditional
o Command
o Market
o Mixed
▪ Production Possibilities Frontier/graph
o What does it illustrate?
▪ Concept of Guns and butter
▪ Safety Nets/Know examples
Critical Standard #2: Demand
▪ Know what a demand curve looks like
▪ Law of Demand
▪ Substitution Effect
▪ Income Effect
▪ Demand Schedule: Read and Graph
▪ Demand Shifters (SCAPE)
▪ What is the one thing that causes movement along the curve?
▪ Graph Shifting of Demand Curve
▪ Normal Goods
▪ Inferior Goods
▪ Complements
▪ Substitutes
▪ Elasticity vs. Inelasticity
o Define
o Factors affecting Inelasticity
Critical Standard #3: Supply
▪ Law of Supply
▪ Supply Schedule: Read and Graph
▪ Supply Shifters (TGIPS)
▪ What is the one thing that causes movement along the curve?
▪ Production Costs
o Marginal Costs
o Fixed Costs/Variable Costs
o Marginal Product of Labor
o Marginal Revenue
o Increasing/Decreasing/
Marginal Returns
▪ Equilibrium
▪ Excess Demand/Shortage
▪ Excess Supply/Surplus
▪ Price Ceiling/Price Floor
Critical Standard #4: Economic Challenges
▪ 3 major goals of the U.S. Economy
▪ Distribution of Income/Poverty
o Reasons for uneven distribution of income in US
o Poverty Rate vs. Threshold
o Causes of Poverty
o Implications of Purchasing Power
▪ Unemployment
o Frictional
o Seasonal
o Structural
o Cyclical
o Full Employment
o Underemployment
o Discouraged Worker
o Civilian Labor Force
o Understand safety nets such as food stamps, Medicaid/Medicare, social security, etc.
▪ Inflation
o Purchasing Power
o Consumers Price Index
o Constant vs. Real Dollars
o Creeping Inflation
o Chronic Inflation
o Hyperinflation
o Quantity Theory
o Demand-Pull Theory
o Cost-Push Theory
▪ Gross Domestic Product
o Expenditure Approach
o Final Goods
o Intermediate Goods
o Inaccuracies when measuring GDP
Critical Standard #5: Govt and the Economy
▪ Taxes
o Tax base vs. Tax Rate
o Proportional/Progressive/
Regressive Taxes
▪ Fiscal Policy
o What is fiscal policy?
o Expansionary Fiscal Policy
o Contractionary Fiscal Policy
o Fiscal Policy Options
▪ Classical Economics
▪ Keynesian Economics
▪ Supply Side Economics
o Budget Surplus/Deficit/Balanced
▪ Federal Reserve and Monetary Policy
o What is monetary policy?
o Purpose/functions of the Federal Reserve
o Be familiar with the federal reserve districts
o What is the role of the FOMC?
o Regulating the money supply
o Money Creation
o Reserve requirements
Critical Standard #6: Globalization
o Trade Surplus/Deficit
o Specialization
o Absolute and comparative advantages
o Trade Barriers
▪ Tariffs
▪ Import Quotas
▪ Voluntary Export Restraints
o Protectionism Arguments
o World Trade Organization’s goal
o NAFTA
o Largest trading partners
o Outsourcing
o Near Shoring
o Off Shoring
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