EOCT General Review
Fundamental Concepts
1. Identify an example of land, labor, capital, entrepreneurship at a restaurant.
2. Define scarcity. Give two ways to allocate scarce resources.
3. Draw a PPC for a country that can produce 9million lbs of oranges or 10million lbs of lemons. - Show what happens on the graph if an insect destroys ½ their lemon crop.
4. Complete this sentence: rational decisions occur when ______are greater than ______.
5. What is the relationship between specialization and voluntary exchange? Give an example of a worker that specializes.
6. Both parties in a trade gain as long as the exchange is ______and non-______.
7. What are the three basic questions all economies must answer?
8. What is de-regulation and why is it sometimes beneficial for a market?
9. For each term below, identify whether it is more associated with command or market economies.
Private ownership profit motive
consumer sovereignty competition
government regulation freedom
security stability
equity growth
10. Why does the government provide public goods and services in the economy?
11. Why is it important for the government to protect property rights? (Which factor of production does this protection encourage?)
12. Fill in the blanks: Productivity is the relationship of _____ to ______. To improve productivity and encourage growth, countries and businesses should invest more in _____ and _____.
13. What is GDP per capita and how does it relate to standard of living?
Microeconomic Concepts
14. On a correctly labeled circular flow diagram, what flows from households to the factor market? What flows from businesses to the factor market? What flows from households to the product market?
15. What is the role of buyers and sellers in the marketplace?
16. What is the role of money in the marketplace?
17. Define or explain the Law of Supply and Law of Demand.
18. If a market is operating at the market clearing price, what TWO things are equal to each other? (The answer is NOT supply and demand!!!)
19. Graph what happens in a market when consumer preference for a good increases. What happens to equilibrium price and quantity?
20. What happens to equilibrium price when there is an improvement in technology? Why?
21. What happens to equilibrium price and quantity when incomes increase at the same time the government places a tax on the producers? (may help to show on a graph)
22. What does price elasticity mean? What is a good that has inelastic demand? What is a good that has inelastic supply?
23. Explain and show the difference between price ceilings and floors.
24. What is the largest reason a company would choose to incorporate? Why might they stay a sole proprietorship?
25. What is the relationship between these three words: profit, incentive, entrepreneurship?
26. What is the primary difference between a monopoly and monopolistic competition? What is the primary difference between monopolistic competition and pure (or perfect) competition? What is the difference between an oligopoly and monopolistic competition?
27. Give an example of an industry that operates as: pure competition, monopolistic competition, oligopoly, and monopoly.
Macroeconomic Concepts
28. Identify one example of an item that is counted under EACH of the components of GDP (C+I+G+NX).
29. How is the Unemployment Rate calculated?
30. What is the CPI and how is it measured?
31. How is stagflation different than inflation?
32. Explain what happens to unemployment, inflation, and real GDP as the economy moves from a trough to a peak.
33. Give an example of cyclical, structural, and frictional unemployment.
34. What is the difference between national debt and deficit? What is the opposite of a budget deficit?
35. What is the relationship between the Board of Governors, Federal District Banks, and the FOMC?
36. What are the three basic tools of Monetary Policy (the FED)? Which one applies to the phrase “buy bigger, sell smaller”?
37. When the economy is in a recession, what should the Fed do with the discount rate, reserve requirement, and open market operations to help?
38. What are the ONLY two tools of fiscal policy?
39. If the government uses an expansionary fiscal policy, how will the deficit be affected?
International Trade
40. What is comparative advantage and how does comparative advantage relate to trade?
41. When a person writes a check to a charity in Africa, how are our balance of trade and balance of payments affected? What is different if we sell a shipment of American-made wheat to Africa?
42. Why would a domestic consumer argue AGAINST a quota or tariff? Why would a domestic producer argue FOR them?
43. If a country wanted a trade barrier that would be beneficial to their domestic consumers and producers, what trade barrier would be the most effective?
44. What is one of the primary goals of the EU, NAFTA, & ASEAN?
45. Based on the following exchange rates, if Jim has 4US dollars, how many Euros can he get? If he as 4 Euros, how many US Dollars can he get?
1USD / 1 EuroUSD / 1 / 1.38
Euro / .72 / 1
46. What groups of people benefit when the US Dollar appreciates against most other world currencies?
Personal Finance
47. How do people respond to incentives generally?
48. What is the primary difference between a bank and a credit union?
49. Which interest rate is typically higher: the one the bank pays you for your money, or the one they charge for a loan? Why?
50. What is the relationship between risk and return when investing? Rank these three from riskiest to least risky: savings account, bond, stock, mutual fund
51. Why are people who LEND money hurt by inflation?
52. What is the difference between progressive and regressive taxes?
53. Identify 3 SPECIFIC things (not just the 4 Cs) that can affect your credit worthiness.
54. What is the primary difference between health insurance and disability insurance?
55. What is the difference between a premium and a deductible when dealing with insurance? If my policy has very high deductibles, what should I expect to happen to my premiums?
56. Why is compound interest better than simple interest when saving?
57. What is an annual percentage rate and how is it different than an annual fee?
58. What is the basic relationship between education and income(and standard of living)?
EOCT General Review
Fundamental Concepts
1. Land – Anything “natural”, lettuce, meat, water, fruit, fish in a fish tank, etc.
Labor – Any human working, waitress, cook, chef, manager, maitre D, etc
Capital – Machines/tools, tables, silverware, oven, cash register, etc
Entrepreneur – the person in charge of gathering and organizing the other factors, usually involves taking a risk with money so it is most likely the owner of the restaurant
2. Unlimited wants and needs, limited resources. Pricing, lottery, first come, first served, specific trait or characteristic, voting, etc
3.
4. Marginal BENEFITS are greater than marginal COSTS
5. Specialization CAUSES a need for voluntary exchange. Example: because I am a teacher all day, I do not spend time learning how to fix my car. When my car breaks, I voluntarily call a mechanic and exchange money for his service.
6. Voluntary and non-fraudulent.
7. What to produce, How to produce and For Whom to produce
8. Deregulation is the process or reducing or removing government involvement in a market. It is usually beneficial because it leads to increased competition, lower production costs and lower prices in a market (although there are exceptions to this).
9. COMMAND------MARKET
Private ownership
profit motive
consumer sovereignty
competition
government regulation
freedom
security
stability
equity
growth
efficiency
10. To avoid people getting benefits they are not paying for. This is known as the “Free rider” problem. Things like Military, police protection, 911, public education, etc are all things everyone gets a benefit from, but no one individual would be likely to pay for at a rate that would maintain a market for that service.
11. To encourage entrepreneurs to take risks and develop new products that they can profit from.
12. inputs to outputs, education and technology
13. The total dollar amount of goods produced in a country’s borders divided by the population. Although it is not a perfect measure of standard of living, typically a higher GDP per capita is associated with higher income levels across the country, thus a higher standard of living.
Microeconomic Concepts
14.
Households to factor market: Services (labor mainly)
Businesses to factor market: Money (to pay for labor)
Households to Product Market: Money
15. To work together to determine market clearing price (equilibrium price). Buyers look for low prices and sellers want high prices.
16. To facilitate exchange between buyers and sellers
17. Law of Supply – there is a DIRECT relationship between price and quantity supplied.
Law of demand – there is an INVERSE relationship between price and quantity demanded.
18. Quantity supplied and quantity demanded
19. Demand increases (shifts right). Equilibrium price and quantity are higher.
20. Supply increases (shifts right) thus lowering the equilibrium price.
21. Demand increases, supply decreases. Prices DEFINITELY increase, quantity is unknown.
22. The measure of how much a change in price affects quantity. Medicine has an inelastic demand because even a large increase in price may not drastically change the amount purchased. Gasoline works in a similar fashion. A concert venue has inelastic supply because the number of seats available doesn’t depend on price.
23. Price ceiling:
This causes a SHORTAGE because people want Q4, but sellers will only sell at Q1.
PRICE FLOOR
This causes a SURPLUS because producers produce at qs, but buyers only want Qd.
24. Incorporating means the individuals in the company are no longer liable, therefore, they can take more risks. As a sole-proprietorship, however, they owners get to keep all profits.
25. Profit is an incentive for entrepreneurs to take risks.
26. A monopoly has only one seller. Monopolistic competition has many sellers. In monopolistic competition, the sellers are selling similar, but differentiated products that they try to advertise their differences. In pure competition everyone is selling the exact same thing so there is no need for advertising. Monopolistic competition and oligopolies are very similar. The only major difference is that in Oligopolies, there are only a few dominant industries
27. Pure Comp – doesn’t FULLY exist, agriculture is close, stocks, textiles. Mon. Comp – fast food, clothing. Oligopoly – gas companies, car manufacturers, Home Depot/Lowes, Monopoly – water authority, MARTA
Macroeconomic Concepts
28. C – purchases of most food, haircuts, legal services, doctor visits
I – purchases of machinery, new homes, factories, etc
G – roads, teachers, military, national parks
NX – purchases of American cars by Japan, imports of French cheese
29. Number unemployed/labor force x 100
30. CPI – Consumer price index, a measure of inflation of prices. It is measured by comparing the change in price of a market basket of goods over time.
31. Inflation is only a rise in prices. Stagflation is a rise in prices and a drop in GDP or a rise in prices with a rise in unemployment
32. Unemployment decreases, inflation increases, real GDP increases
33. Cyclical – laid off because economy is bad, Frictional – moves from one city to another with spouse, quits one job to look for another, graduates from school and starts looking for a job. Structural – laid off because skills are no longer needed by the economy or the natural resources that supported the job are gone
34. National deficit is when the government spends more than they make in one year. National debt is ALL the money owed by the federal government. The opposite of national debt is national surplus.
35. Board of governors is at top. They are appointed by the president. The 12 Reserve banks are next. They carry out the day to day jobs of the Fed. When the 12 reserve bank presidents meet with the Board of Governors, they form the FOMC to make monetary policy.
36. Open market operations (buy/sell treasury bonds), discount rate, reserve requirement
37. BUY bonds (make money supply bigger), Lower the discount rate and lower the reserve requirement
38. Government spending and taxing decisions
39. Expansionary fiscal policy means Lowering taxes, increasing government spending or both, therefore, the deficit for that year will increase. This is sometimes called deficit spending.
International Trade
40. Comparative advantage means being able to produce a good at a lower opportunity cost compared to another country producing the same good. The theory of CA says countries/companies should specialize in the goods in which they have comparative advantage and trade for other goods they need.
41. The charity check does NOT affect the balance of trade because there is no good or service exchanged. The balance of payments is decreased because American currency has left the US. When we sell wheat to Africa, however, we have EXPORTED a good and the balance of trade AND balance of payments experience a positive increase.
42. Domestic consumers would argue that tariffs make imports more expensive and that drives the equilibrium price higher. Domestic producers might argue that their workers cannot compete with lower wages in other countries and these barriers even the playing field.
43. Subsidies because a subsidy encouraged producers to produce more and will likely drive market prices lower.
44. Promote free trade
45. 4 USD = 2.88 Euros, 4 Euros = 5.52 US Dollars
46. Anyone holding dollars: US travelers in other countries, US businesses that are buying things in other countries, etc
Personal Finance
47. Predictably
48. Banks offer more services, are generally bigger, and are owned by shareholders or people who buy stock in the bank. Credit unions are owned by the people who have accounts there.
49. The one they CHARGE for a loan because that is the amount people must pay them. It has to be larger so they can make a profit on loans.
50. As risk increases, potential for higher return increases. Stock, mutual fund, bond. Savings accounts are technically even safer than bonds.