Economics Final Exam Review



Economics Final Exam Review

Unit 1 Intro to Economics

1. _I__ What, How, For Whom?

2. _H__ Limited resources compared to unlimited wants

3. _F__ Land, Labor, Capital

4. _D__ Economy which incorporates aspects of many economic systems

5. _J__ Market where inputs are sold

6. _K__ Market where finished goods are sold

7. _E__ Economy where government controls all productive resources

8. _A__ What is given up when a choice is made

9. _G__ Economy where goods and services are distributed based on historical patterns

10. _C__ Study of small business and individuals

11. _B__ Father of Capitalism, “invisible hand theory” of economics

A. Opportunity Cost D. Mixed Economy G. Traditional Economy J. Factor Market

B. Adam Smith E. Command Economy H. Scarcity K. Product Market

C. Microeconomics F. Factors of Production I. Basic Economic Questions

Production Possibilities Frontier: Graph and figure out the opportunity cost for the following

DVD Players

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Televisions

Combination Televisions DVD Players Opportunity Cost

A 0 35 __0___

B 10 32 __3___

C 20 27 __5___

D 30 20 __7___

E 40 11 __9___

F 50 0 __11___

a. Why can’t this economy produce 30 DVD Players and 40 Televisions? Not enough resources / frontier

b. What problem occurs if this economy produced just 15 Televisions and 20 DVD Players? Not using all resources

Circular Flow Model Label the following A

B

a. What type of an economy is being shown? Mixed Economy

b. What moves clockwise? Goods and Services

c. What moves counter-clockwise? Money

d. What type of an economy would it be if the middle box was missing? Market Economy

e. What occurs at Point A? Goods and services are exchanged for money

f. What occurs at Point B? Factors of production are exchanged

Unit 2 Stocks, Bonds and other Investments

1. _G__ Investor who anticipates a decline in the value of a stock

2. _F__ Investor who anticipates an increase in the value of a stock

3. _J__ Corporate profits paid to stockholders on a per share basis

4. _I__ A certificate that represents ownership in a corporation

5. _H__ A certificate that represents debt owed by a corporation

6. _E__ The business will continue to exist if ownership changes hands

7. _A__ A business owned by two or more persons

8. _B__ Business form which produced the majority of output in the U.S. economy

9. _D__ Partial owners of a corporation

10. _C__ Individual ownership of a business

A. Partnership D. Stockholders G. Bear Trader J. Dividend

B. Corporation E. Unlimited Life H. Bond

C. Sole Proprietorship F. Bull Trader I. Stock

1. _C__ plan that allows individuals to save a certain amount of money, untaxed to be for retirement.

2. _F__ Money earned when a stock increases in value, is taxed at a lower rate than income.

3. _D__ A business loses a major lawsuit. The owners lose their business and are still faced with debt.

4. _E__ A gauge used to measure the stock market by looking at 30 leading companies.

5. _A__ A stockholder that has the ability to vote on issues involving the company.

6. _B__ A stockholder that does not have the ability to vote, but is guaranteed a dividend payment.

A. Common Stock C. IRA E. Dow Jones Ind. Average

B. Prefered Stock D. Unlimited Liability F. Capital Gains

52-week WKL YTD

Hi($) Low($) Name TKR Div PE Last ($) Chg ($) Chg ($) % Chg

23.28 13.45 AT&T T .95 8 10.53 d +.07 +.01 -6.2

51.11 30.25 Citigrp C 1.60 14 49.23 -.25 -.17 +1.5

26.82 25.98 iStar pfE SF 2.65 17 27.15 u -.04 +.03 +.4

100.43 73.17 IBM IBM .64 23 99.39 +.16 -.13 +6.7

30.00 22.50 Microsoft MSFT .16 33 27.40 -.25 -.57 -1.5

60.20 46.25 Walmart WMT .36 27 54.69 +.84 +3.73 +6.0

50.41 17.30 Yahoo YHOOs … 82 46.70 -.28 -.49 +2.4

a. How much of a dividend per share does AT&T pay? .95

b. Which stock has the highest PE ratio? Yahoo

c. Which stock was one of the most active for this trading day? Microsoft (underlined)

d. Which stock has the largest range 52-week high and low? Yahoo

e. Which stock reached a new 52-week low on this day? AT&T

f. Which stock is a preferred stock listing? iStar

g. Which stock has the smallest range in its 52-week high and low? iStar

h. Which stock reached a new 52-week high on this day? iStar

i. What was Citigroup’s closing price on the Previous day? 49.48

j. What stock experienced the greatest gain for the day? Walmart

k. What stock has suffered the largest percentage loss for the year? AT&T

l. Which stock experienced a change of at least 5% on this day? IBM (bold)

m. Which stock recently experienced a stock split? Yahoo

n. Which stock had the largest gain for the week? Walmart

Other Forms of Investment- Rank the following from the safest to the riskiest form of investments

Corporate Bonds 3

Savings Bonds 1

Junk Bonds 5

Common Stock 4

Preferred Stock 2

Unit 3 Supply & Demand

Price

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Quantity

a. At $8, is there a surplus or shortage? Surplus

b. At $4, is there a surplus or shortage? Shortage

c. At what point does the equilibrium occur? Price $6 and Quantity 6

Substitute and Complimentary Goods Label the following if it is a Substitute (S) or Complimentary Good (C)

C Shirts & Ties C Chicken Wings & Hot Sauce S Strawberries & Raspberries

C Hamburgers & Cheese S WPOP & Pepsi C Cheerios & Milk

S Doughnuts & Danish S Disney & Universal S Smoothie & Slurrpie

Supply & Demand- For each of the following indicate whether the action will cause M- Movement Along the Line, SL- Shift Left /In , or SR- Shift Right /Out AND if it is Supply or Demand

1. Ford reduces production cost by using foreign made material and foreign labor SR - Supply

2. Increased fuel costs make delivery from Federal Express more expensive SL - Supply

3. American Eagle raises the price of jeans M - Supply

4. What will happen to cream if the price of coffee triples? SL - Demand

5. What will happen to the sales of Nike sneakers if Adidas lowers the price of their shoes? SL - Demand

6. Apple lowers the price of their PCs M - Supply

7. What will happen to the sales of flashlights if there is a power outage for a week? SR - Demand

Supply Curves Plot the following and label Before S1, and After S2 for Proctor & Gamble when the price of rice decreases.

BEFORE AFTER Price

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1. What happened to the supply curve? SR Quantity

2. Why did this happen? Input costs were reduced, can make more

Demand Curves Plot the following and label Before D1, and After D2 for Starbucks, when McDonald’s introduces a new gourmet coffee that is slightly cheaper.

BEFORE AFTER Price

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1. What happened to the demand curve? SL Quantity

2. Why did this happen? Similar good is cheaper

3. What type of goods would this be considered? Substitute

1. _E__ No matter what the price people buy the same amount

2. _A__ As price goes up, people buy less

3. _D__ As price goes up, businesses will supply more

4. _C__ A slight change in price results in a large change in the amount purchased

5. _B__ The intersection of the supply curve and the demand curve

6. _G__ What causes the supply or demand curves to shift

7. _F__ Rule about the satisfaction a consumer gets from purchasing one more unit of a product will lessen

with each additional unit purchased.

A. Law of Demand B. Equilibrium C. Elastic D. Law of Supply

G. Anything other than price E. Inelastic F. Law of diminishing marginal Utility

Unit 4- Global Economy

1. _D__ The ability of one country to produce more of a good than another country

2. _E__ Millions of dollars being given to some of America’s wealthiest corporations by the government.

3. _A__ The practice of moving American jobs to other countries to reduce costs

4. _F__ Negotiations between business and employees together, over conditions of employment

5. _B__ The ability to produce a good with a lower opportunity cost

6. _G__ Market with only one supplier and no close substitutes

7. _J__ Benefit that larger firms use to operate more efficiently

8. _H__ Market with a few suppliers and no close substitutes

9. _I__ A single business which is regulated by the government, for example utility companies.

10. _C_ Organization of workers who seek better working conditions and wages.

A. Outsourcing B. Comparative Advantage C. Labor Unions

D. Absolute Advantage E. Corporate Welfare F. Collective Bargaining

G. Monopoly H. Oligopoly I. Controlled Monopoly

J. Economies of Scale

Foreign Trade-Ex Germany & Poland

Assume Germany and Poland maximize the use (on ppf) of the same amount of labor and land

BEFORE TRADE GERMANY POLAND

1. Both countries specialize in producing just steel 80 units 50 units

2. Both countries specialize in producing just wheat 40 units 50 units

OPPORTUNITY COST CONDITIONS

1. Both countries want to increase steel production by 1 unit Costs ½ unit wheat Costs 1 unit wheat

2. Both countries want to increase wheat production by 1 unit Costs 2 units steel Costs 1 unit steel

a. Which country has an absolute advantage in steel? Germany

b. Which country has an absolute advantage in wheat? Poland

c. Which country has a comparative advantage in steel? Germany

d. Which country has a comparative advantage in wheat? Poland

e. What do you think Germany should specialize in producing? Steel

f. What do you think Poland should specialize in producing? Wheat

Unit 5- Gross Domestic Product (GDP)

For each of the following, place the letter that corresponds to the correct response below

C: If the item would be considered consumption

I: If the item would be considered investment

G: If the item would be considered government spending

XN: If the item would be considered net export

N: If the item would NOT be counted in GDP measurements

1. C You spend $8.00 to attend a movie

2. N A family purchases a used car for $10,000

3. N A man stays at home to care for the house and kids

4. C A family purchases a new home for $110,500

5. C A businessman pays a tailor $65.00 to alter a suit

6. G The government increased defense expenditures by $450 million

7. Xn You purchase a new Toyota that was manufactured in Japan

8. N A bartender earns $200 in tips

9. Xn Fisher-price sells toys in France

10. I Ford Motors purchases new robotics for its production line

In November 1998 you bought a new Honda Civic at a cost of $18,400. In 2002 your tires needed to be replaced at a total cost of $240. Each year from 1999 to 2002 you spent $100 (4 times at $25 each) to have the oil changed. In 2002 you had new brakes installed at a cost of $187.

1. How many dollars would be recorded in 1998 GDP? 18,400

2. How many dollars would be recorded in 2000 GDP? 100

3. How many dollars would be recorded in 2002 GDP? 527

Year Nominal GDP Real GDP GDP Deflator

1970 15,200 26,400 57.5

1980 24,650 24,650 100

1990 58,415 30,850 189.4

1. What was the inflation rate in the economy from 1970-1980? 42.5%

2. From 1980-1990 what was the increase in Nominal GDP? 33,765

3. From 1980-1990 what was in increase in Real GDP? 6,200

4. Why is there such a difference between Real and Nominal GDP from 1980-1990? Price Increased

CPI

Year CPI

1998 96.2

1999 100.0

2000 104.3

1. Between what years was inflation the highest? 1999-2000

2. Between what years was inflation the lowest? 1998 - 1999

Unemployment- For each of the following indicate whether the individual would be classified as (E) Employed, (U) Unemployed, (NC) Not Counted

1. NC You quit your job and go to college

2. NC You retire last year from being a professional bowler

3. E You work 10 hours a week at Wegmans

4. U You are 16 and filled out a job application

5. E You serve in the United States military and are stationed in the U.S.

For each of the following indicate the type of unemployment described, (ST) Structural, (C) Cyclical, (F) Frictional, (SL) Seasonal

1. SL As winter begins, most life guarding jobs are reduced

2. ST Your work is shifting production overseas

3. SL After Christmas, inventory is reduced

4. ST Your position is being replaced by robots

5. F You quit your job and move to Las Vegas to find better employment

For each of the following indicate whether the individual would be classified as (E) Employed, (U) Unemployed, (NC) Not Counted

Tonawanda has a population of 22,700. Of that 22,700

E 13,500 are employed as full time workers

NC 250 are unemployed and have stopped looking for work (discouraged workers)

U 450 are unemployed but are looking for work

NC 100 are retired and have not looked for work in over a year

1. How many people in Tonawanda would be considered unemployed? 450

2. How many people make up Tonawanda’s work force? 13,950

Label the Business Cycle

B

A C

D

A Expansion B Peak C Recession (contraction) D Trough

Prices are Increase Prices are Highest Prices are Decrease Prices are Lowest

Unemployment Decrease Unemployment Lowest Unemployment Increase Unemployment Highest

Real GDP is Increase Real GDP is Highest Real GDP is Decrease Real GDP is Lowest

Unit 6- Money, Taxes and the Federal Reserve

1. _B___ Taxes and government spending

2. _D___ Discount rate, Reserve requirement, Open Market Operations

3. _C___ Currency (paper and coins) and checking account deposits

4. _A___ Medium of exchange, store of value, measure of value

A. Functions of money C. M1 or basic U.S. money supply

B. Components of Fiscal policy D. Components of Monetary policy

1. __H__ Federal program that provides monthly payments to people who are retired or unable to work

2. __G__ State and Federal government program that helps pay health care costs for low-income and

disabled persons

3. __B__ State government program that provides medial care to those workers injured on the job

4. __E__ Federal program that provides low cost health insurance for the aged

5. __I__ Federal and State government program that provides income based on need

6. __C__ Tax that is often unnoticed by the public

7. __F__ Tax that takes a greater percentage of income from low income earners

8. __A__ Tax that takes a greater percentage from high income earners

9. __D__ Tax that takes the same percentage from all income earners

A. Progressive Tax D. Proportional Tax G. Medicaid

B. Worker’s Compensation E. Medicare H. Social Security

C. Sin Tax F. Regressive Tax I. Welfare

Controlling the Economy

A) If the government were in a recession, what would the government or Federal Reserve do with the following?

Fiscal Policy- Taxes Lower Government Spending Raise

Monetary Policy - Reserve Requirement Lower Discount Rate Lower Open Market Operations Buy

The money supply needs to- Increase , expand, grow

B) If the government were experiencing inflation, what would the government or Federal Reserve do with the following?

Fiscal Policy- Taxes Raise Government Spending Lower

Monetary Policy - Reserve Requirement Raise Discount Rate Raise Open Market Operations Sell

The money supply needs to- Decrease, shrink, slow down

1. _E___ These words, which appear on all U.S. currency, gives it value.

2. _B___ An example of the ability-to-pay principle of taxation.

3. _A___ A tax that is often unnoticed by the public.

4. _G___ A good provided by the government that can be used by all citizens on an equal basis.

5. _D___ An example of the benefits-received principle of taxation.

6. _H___ The most dependable tool of fiscal policy.

7. _F___ The total borrowing of the federal government

8. _I___ Insurance that protects the first $100000 of deposits in a bank account

9. _C___ The amount of tax collected exceeds the amount of spending for a year.

A. Sin Tax D. Thruway tolls G. Public Good

B. Income Tax E. Legal Tender H. Automatic Stabilizer

C. Budget Deficit F. National Debt I. F.D.I.C.

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Product Market

People

Government

Business

Factor Market

PRICE QUANTITY

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PRICE QUANTITY

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PRICE QUANTITY

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PRICE QUANTITY

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