COURSE FINAL STUDY GUIDEName: ______

(25 points)

* The answers for this study guide must be written out in order to receive credit.

1) What is economics?

2) What is scarcity AND what does it force us to do?

3) What are the four factors of production discussed in class?

4) What is opportunity cost AND what slogan can help us remember its main idea?

5) What are the three basic questions every economic system must answer?

6) What are the main economic goals AND opportunity costs (in terms of other goals) of:

  • Market economies:
  • Command economies:

7) Who is Adam Smith AND what did he write (be sure to include the economic system he favored in your answer)?

8) What are the main characteristics of (also know what type of economic system they are):

  • Socialism:
  • Communism:

9) What is the invisible hand?

10) What does it mean to say that a country’s economy is in transition?

11) What is the difference between demand and quantity demanded?

12) Whose actions does demand/supply refer to AND how do the laws of demand and supply help us determine which way their respective curves slope on the graph?

13) What are we talking about when we talk about elasticity of demand? What is elastic/inelastic?

14) What happens to price when demand/supply increases/decreases?

15) What is price equilibrium AND where can it be found on a supply and demand graph?

16) What is the relationship between return and liquidity AND return and risk?

17) What are the highest rated bonds AND what does this mean in terms of risk and return?

18) What is the purpose of municipal bonds AND what do they offer the investor that other bonds don’t?

19) Why would be an advantage AND a disadvantage of putting your money in a savings account?

20) What does stock represent AND what are two things that might happen to your money if you buy stock?

21) What is the DOW used for AND who (in general) is included on it?

22) What does GDP measure AND, in terms of location, what is included in it?

23) What is Real GDP AND why is it used?

24) Who is considered unemployed AND what do economists consider full employment?

25) What is a discouraged worker?

26) What does the CPI measure?

27) What is fiscal policy AND how does it relate to a budget and a fiscal year?

28) What are the three main goals of fiscal policty?

29) How would you know that a country has a budget deficit instead of a surplus?

30) What two things can be said about the national debt in terms of bondholders and budget deficits?

CHAPTER 17 AND 18 TOPICS

1) Trade barriers:

  • Direct:
  • Indirect:

2) What is free trade?What are the arguments made for free trade?

3) What is protectionism?What are the arguments made for protectionism?

4) NAFTA

  • What does it stand for?
  • Who’s involved?
  • What is its main goal?

5) What type of system determines exchange rates today AND how is this done?

6) If the exchange rate went from 1USD = 100JPY to 1USD = 105JPY, which currency appreciated and which currency depreciated?

7) How does a strong U.S. dollar affect

  • Imports from China (or anywhere overseas)?
  • Exports to China (or anywhere overseas)?

8) How does a weak U.S. dollar affect:

  • Americans selling to foreigners?
  • Americans buying from foreigners?

9) What is a trade deficit?/What is a trade surplus?

10) What are two ways that a trade deficit can be corrected (think inc./dec. imports/exports)?

11) What are characteristics of developed nations?

12) Why would real GDP-per-capita be a better measurement for development than simply GDP?

13) What challenges to development do many LDCs face?