ECONOMICS



ECONOMICS MRS. SURIAN

FINAL EXAM REVIEW SHEET EXAM on

WED 1/22 & TH 1/23

Bring a PENCIL & PEN

NO ELECTRONIC DEVICES ALLOWED IN CLASSROOM!

MICROECONOMICS

Ch 1-Life is Economics

*Four factors of production- natural resources, capital, labor, entrepreneur

*Scarcity- the central problem in economics; why is everything considered to be scarce?

*Tradeoffs v. Opportunity costs- secondary effect = consequence (+ or -)

Choice Value of second choice (What you could have done.)

Ch 2- Economic Systems

*Capitalism- 5 pillars: consumer sovereignty, free/private enterprise, private property, competition, profit motive

*Types of Economies (command, market, mixed market; characteristics of each)

| |command |market |

|What is produced? |government |consumer |

|How it is Produced? |government |producer |

|For when is it produced? |government |producer |

Ch 3- Demand (think “consumer”)

*Demand-based on consumers wants and needs; demand shown when people buy . . .

*Law of Demand/DemandCurve- negative slope; as price increases, demand decreases

*Law of Supply/Supply Curve- positive slope; as price increases, supply increases

*Elasticity/Inelasticity- Rule of thumb: “expensive, elastic . . .” amount D in Demand

Demand Supply

Ch 4- Supply (think “producer”)

*Circular Flow Model-rules of; 4 sections of the CFM*Fixed v. Variable costs of a business-E.g. variable = inventory, wages Fixed = salary, rent

*Profit motive-the main driving force or motivator in a market economy

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Ch 5- Prices

*Equilibrium price(point)-the price at which the demand and supply curves meet

*Surplus/ shortage-when does each occur? Where is price forced?

Ch 6-Market Structures

*Monopoly- one producer of a product (>90% industry)

*Oligopoly-few suppliers of one type of product. E.g. 12, 20 eg. Gas stations, airlines

*Laissez Faire-Gov’t “Government Hands Off”

*Antitrust legislation-Sherman Antitrust Act (1890) Makes monopolies ILLEGAL! except for: **Natural monopoly = LIPA & SCWA

Ch 7-Business Organizations

*Sole proprietorship, partnership, corporation (differences between them) see chart in notebook

*Limited/unlimited liability-levels of responsibility in certain types of businesses

“Liability” = responsibility

“Life” = will the business still exist?

Ch 8- Labor and Wages

*Federal Minimum wage- currently $7.25 What groups of people usually receive it? Youth and Elderly

*NYS Min. Wage- currently $________

*Salary v. wage-salary is a fixed income whereas a wage is a/an hourly income

Ch 9- Sources of Capital & Credit (EE bonds)

*Time deposits-has a maturity date e.g. certtificate of deposit(CD) 6 months, 12 months etc…

*types of banking accounts e.g. savings, checking, money market

*”Rule of 72”-divide interest rate by 72 # of years to double your money in the bank

*Important terms to know about Credit- e.g. grace period, Card Act of 2009, minimum pmt.

APR, FICO score =credit score

*Bankruptcy-aka “filing chapter 11”

to improve disclosure(information) to consumers

*Loans- Mortgage loan term ______ yrs, Auto/car loan term- ______ Student loan term- ______

*What loan NEVER gets erased? Student loans

*Amortization (calculator) What does it calculate/show you? amt. of payments, # of payment,

can play around and change the length (term) and interest rate to see what you can afford

MACROECONOMICS

Ch 10- Economic Performance GDP = Gross Domestic Product

*GDP and problems with calculating its accuracy; durable/ non-durable goods Know formula:

*4 phases of the business cycle:

Ch 11-Economic Challenges

*4 types of unemployment Cyclical, structural, seasonal, frictional

*Inflation- increase in price level *Hyperinflation extreme decrease in value of money

How is it measured? by CPI = Consumer Price Index (Market basket of goods/services)

What is the “base year?” base year = 0, general increase in price level

*Income v. Wealth- income = flow of value of value v. wealth = accumulation of value of value

*Poverty threshold (poverty line)- $ amount (based on # of people in household) whereby if fall below that $, you are “poor”( according to the government) Eligible for food stamps, welfare etc..

*Minimum Wage- currently $ 7.25 hour; NYS =$8.00 per hour as of 1/1/14

*Pros/Cons of raising min. wage- Affect on worker???? Affect on business owner????

Ch 13- $Money

*What is fiat money? Money that has value simply because people all believe it does=faith

*3 functions of money- store of value, measure of value, medium of exchange

*4 characteristics of money acceptable, portable, divisible, stable value

*FDIC-Federal Deposit Insurance Corporation- currently insures $250,000 per depositor

Ch 14- The Federal Reserve and Monetary Policy

*Federal Reserve System (“The Fed”)- main function of? -to maintain a stable $ supply; raise and lower interest rates as it sees fit (if want to motivate people to spend= lower interest rates)

*Reserve Requirement- banks must keep 10% of all deposits in the bank ; cannot lend out/invest

*3 ways banks make money- loans (interest), invest in stock market (cap gains), circulate $

Ch 15- Fiscal Policy & Taxes (FISCAL = having to do with MONEY)

*Fiscal Policy- monetary policy (having to do with money and the economy)

*Federal budget-US Government spending of funds to benefit the nation

*Fiscal year (Oct 1st to Sept 30th)

*National debt-total deficits from years past to the present day (17.3 TRILLION! As of 2014)

*Deficit-yearly debt: calculated annually; when outlays exceed revenue ($ spent > $ earned) OR O>R

*Taxable year (Jan 1st to Dec 31st) (spend income)

*Taxes-types of taxation-income, property, gift, cap. gains, corporate income, “sin” taxes etc

*Gross (total) vs. net pay (taxes taken out of one’s paycheck) “net is what you get” (after taxes)

*FICA (Social Security) and other taxes from paycheck, etc. (medicate, unemployment insurance)

OTHER TOPICS:

*Investing Unit

*Capital gain/loss-gain- money made (gain)/lost (loss) from the sale of stock

*Dividend-money paid to a stock holder from corporate profits (usually a small amount per share)

*Diversification-investing in various industries (stocks); lessens risk

*Bull/Bear market-Bullish (high) / Bearish (low)

*DOW Jones Industrial Avg. –index of 30 common stocks; represents “market health”

*Job of the Securities and Exchanges Commission (SEC)- Gov’t regulatory agency; regulates insider trading, corruption in stock market etc.

*401K, 403b, 529 Plan and other deferred compensation plans

401, 403b- retirement accts. 529 Plan- college savings acct.

IRA= individual retirement acct.

IPO-=initial public offering; when a stock is offered to the public for the first time

*Outsourcing- contracting a business function to someone else; usually outside the country

*Advantages and disadvantages of outsourcing-

Adv-cheap labor= lower prices, faster production,

Disadv.- removes US jobs; gives jobs to other nations; less $ in/to U.S.

*Who we use for outsourcing? China, India, many other nations with a willing workforce

*Examples of companies that outsource- Apple (China-Foxcomm factory,) other “American” companies, most clothing companies etc

ADDITIONAL NOTES:

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