Econ 103 Final Exam Study Guide

Econ 103 Final Exam Study Guide Economics Correct Answer: the social science which seeks to understand how humans make decisions in the face of scarcity given unlimited wants Scarcity Correct Answer: human wants for goods, services and resources exceed what is available Factors of Production Correct Answer: land, labor, capital Gross Domestic Product (GDP) Correct Answer: the total dollar amount of all final goods and services produced in a country in one year Microeconomics Correct Answer: the branch of economics that studies the economy of consumers or households or individual firms Macroeconomics Correct Answer: the branch of economics that studies the overall working of a national economy - growth, unemployment, inflation Monetary Policy Correct Answer: economic policies conducted by the countries' central bank, which manipulates the money supply, interest rates, or banking regulation Fiscal Policy Correct Answer: economic policies that involve government spending and taxes Command Economy Correct Answer: where economic decisions are passed down from government authority and where the government owns the resources Market Economy Correct Answer: economic decisions are decentralized, private individuals own resources ad businesses supply goods and services based on demand Public Policy Correct Answer: the process by which a society makes and enforces decisions on what behavior is acceptable and what is not Private Correct Answer: the individual citizens Public Correct Answer: government Nominal figures Correct Answer: current year data and statistics (has not been adjusted for inflation) Real figures Correct Answer: data and statistics that have been adjusted for inflation Real GDP Correct Answer: (Nominal GDP/Price Index) x 100 Base year Correct Answer: reference year for constructing an index and which is usually assigned an arbitrary index value of 100 Per capita Correct Answer: per person Human Development Index (HDI) Correct Answer: a summary measure of average achievement in key dimensions of human development: a long and healthy life, being knowledgeable and have a decent standard of living Earmarks Correct Answer: parts of the budget set aside for specific projects Intertemporal choice Correct Answer: where decisions made today can affect choices facing individuals in the future Tragedy of the Commons (collective-action problem) Correct Answer: situation in which people acting individually and in their own interest use up commonly available but limited resources, creating disaster for the entire community positive economic statement Correct Answer: A statement that can be proved or disproved by reference to facts normative economic statement Correct Answer: an opinion, which cannot be shown to be true or false by reference to the facts Model Correct Answer: simplified version of how systems operate Law of demand Correct Answer: P and Q are inversely related Law of Supply Correct Answer: P and Q are directly related Price Correct Answer: amount that a buyer pays for a unit of the specific good or service Quantity Correct Answer: an amount of specific units Demand (Demand curve) Correct Answer: relationship between P and Q shown on a graph (demand in the sand) Supply (supply curve) Correct Answer: relationship between P and Qs shown on a graph Cost of production Correct Answer: amount of money it takes the producer to buy all of the factors of production to create a final good or service Equilibrium Correct Answer: Qd=Qs Surplus Correct Answer: at existing price, quantity supplied exceeds quantity demanded Shortage Correct Answer: at the existing price, quantity demanded exceeds quantity supplied Movement from point to point along the curve Correct Answer: A change in quantity demanded and quantity supplied is caused by a change in price Shift the curve Correct Answer: a change in demand is caused by a change in the non-price determinant Determinants of demand (shift the curve) Correct Answer: change in income (normal or inferior good), change in tastes and preferences, price of a related good (complement or substitute), change in future expectations, size of population Normal Good Correct Answer: income goes up and demand goes up or income goes down and demand goes down Inferior good Correct Answer: inco