Economics Halfen Final Exam Review. What is scarcity? Scarcity is the idea that there are a limited amount of resources to meet unlimited wants and needs

Economics Economics HalfenHalfen

Final Exam Final Exam ReviewReview

What is scarcity?What is scarcity?Scarcity is the idea Scarcity is the idea

that there are a that there are a limited amount of limited amount of resources to meet resources to meet

unlimited wants and unlimited wants and needs. If you have a needs. If you have a

limited supply of limited supply of workers and cannot workers and cannot

finish a job, that is an finish a job, that is an example of scarcity.example of scarcity.

Why is scarcity a Why is scarcity a basic problem of basic problem of

economics?economics?The definition of The definition of economics is the economics is the study of efforts study of efforts

to satisfy to satisfy seemingly seemingly

unlimited wants unlimited wants with scarce with scarce resources.resources.

Why is choice a basic Why is choice a basic problem of economics?problem of economics?

The whole point of The whole point of economics is trying to economics is trying to understand why people understand why people make the choices they make the choices they make. If you make a make. If you make a

choice, there are costs. choice, there are costs. Economists want to Economists want to

know what costs people know what costs people are willing to sacrifice in are willing to sacrifice in

order to chose the order to chose the alternative.alternative.

What does a What does a production production

possibility curve possibility curve tell you?tell you?

The opportunity The opportunity cost of a decisioncost of a decision Guns

Butter

What is What is opportunity cost?opportunity cost?

The most The most desirable desirable

alternative given alternative given up for the up for the decisiondecision

What is a What is a traditional traditional

system?system?A system where A system where the economy is the economy is

based on based on customs, habit, customs, habit,

and ritualand ritual

Give an example Give an example of a traditional of a traditional

system.system.A tribal A tribal

community in community in AfricaAfrica

What is a command What is a command system?system?

A system where the A system where the government controls government controls

the economy and the economy and makes all economic makes all economic decisions. There is decisions. There is

not a lot of not a lot of uncertainty because uncertainty because

everything is everything is government government controlled.controlled.

Give an example Give an example of a command of a command

system.system.Former Soviet Former Soviet Union, North Union, North

KoreaKorea

What is a market system?What is a market system?A system where the A system where the

economy has little or no economy has little or no government control. The government control. The market is regulated by market is regulated by

competition and motivated competition and motivated by self-interest. It does not by self-interest. It does not

provide for everyone’s provide for everyone’s basic needs. It does basic needs. It does

provide individual freedom provide individual freedom for producers and for producers and

consumers. Consumers consumers. Consumers play a key role in WHAT is play a key role in WHAT is

produced.produced.

Give an example Give an example of a market of a market

system.system.The US The US

(with some (with some government government

intervention)intervention)

How does the U.S. How does the U.S. system compare with system compare with

Russia? France? China? Russia? France? China? Mexico?Mexico?

RussiaRussia is in transition to is in transition to a market system. France a market system. France

has a similar market has a similar market system. system. ChinaChina is in is in transition – moving transition – moving

away from a command away from a command system to a market system to a market

based system. based system. MexicoMexico has a similar market has a similar market

system.system.

What does a circular flow What does a circular flow model tell you?model tell you?

The flow of resources between The flow of resources between households and firms. Product market households and firms. Product market is where money flows from households is where money flows from households

to firms in exchange for goods from to firms in exchange for goods from the firms. The factor market is where the firms. The factor market is where

the money flows from firms in the form the money flows from firms in the form of income to households in exchange of income to households in exchange

for their factors of production for their factors of production

(land, labor and capital).(land, labor and capital).

Households Firms

Factors of ProductionIncome

Payment

Goods and Services

Factor Market

Product Market

Use an example to Use an example to explain the circular flow explain the circular flow

model.model.You go to work for ABC You go to work for ABC inc. in exchange for a inc. in exchange for a paycheck. Then you paycheck. Then you

purchase a shirt from purchase a shirt from ABC inc. in exchange ABC inc. in exchange

for payment. The for payment. The government may take government may take

taxes from your taxes from your paycheck and charge paycheck and charge

taxes on the sale of the taxes on the sale of the goods.goods.

How does How does government government

action affect the action affect the circular flow circular flow

model?model? Regulations over Regulations over production, labor production, labor laws, taxes, etc.laws, taxes, etc.

Who is Adam Who is Adam Smith and why is Smith and why is he important?he important? He was a free He was a free

market market philosopher and philosopher and

a classical a classical economist.economist.

What societal What societal values influence values influence

traditional traditional economies?economies?

Custom, ritual, Custom, ritual, habit, familyhabit, family


command command economies?economies?Government Government

control, order, control, order, total equitytotal equity


market market economies?economies?

Freedom, choice, Freedom, choice, self-interest, self-interest, competitioncompetition

What are the What are the economic rights of economic rights of

individuals as individuals as consumers?consumers?

They determine the They determine the products that a free products that a free enterprise economy enterprise economy

provides.provides. Choose who Choose who to purchase from. to purchase from.

Choose what products Choose what products to purchase. Choose to purchase. Choose what price willing to what price willing to

pay.pay.

What are the What are the economic economic

responsibilities of responsibilities of individuals as individuals as consumers?consumers?

They must let They must let producers know what producers know what they want by making they want by making purchasing decisions.purchasing decisions.

What are the What are the consequences of consequences of

economic decisions economic decisions made by individual made by individual

consumers?consumers?If they purchase a If they purchase a

product, that lets the product, that lets the producer know that producer know that there is demand for there is demand for

that productthat product

What are the What are the economic rights of economic rights of

businesses?businesses?They have the right to They have the right to

start any legal start any legal business. They can business. They can

produce whatever will produce whatever will earn them a profit. If earn them a profit. If they are not making they are not making money, they have the money, they have the

right to leave the right to leave the market.market.

What are the What are the economic economic

responsibilities of responsibilities of businesses?businesses?

Disclose required Disclose required information to make information to make

buyers more buyers more knowledgeable and knowledgeable and

safer.safer.

What are the What are the consequences of consequences of

economic decisions economic decisions made by businesses? made by businesses? Positive externalities – Positive externalities – an economic side effect an economic side effect

that generates that generates unexpected benefitsunexpected benefits

Negative externalities – Negative externalities – economic side effect economic side effect

that generates that generates unexpected costunexpected cost

What is profit What is profit motive?motive?

One of the basic One of the basic principles of free principles of free

enterprise. enterprise. Businesses are Businesses are driven by the driven by the

desire to make desire to make money.money.

What ordinances What ordinances and regulations and regulations

must be followed if must be followed if someone wants to someone wants to start a business?start a business? Not Not allall businesses businesses

are required to are required to have licenses.have licenses.

What is voluntary What is voluntary exchange?exchange?


enterprise. enterprise. Consumers and Consumers and

producers choose producers choose who to buy and sell who to buy and sell

from.from.

What are private What are private property rights?property rights? One of the basic One of the basic principles of free principles of free

enterprise. enterprise. Individuals have the Individuals have the right to own property right to own property

and land. They can and land. They can use it as they wish use it as they wish

and transfer it if they and transfer it if they want to.want to.

What is What is competition?competition?


enterprise. enterprise. Businesses can Businesses can

adjust their adjust their prices and prices and products to products to

attract attract consumers.consumers.

What are the What are the benefits of benefits of

individual freedom individual freedom to to consumersconsumers in in

the U.S. free the U.S. free market system?market system?

Choice of what to Choice of what to buy, rights, buy, rights,

protection from protection from products and products and businessesbusinesses


individual freedom individual freedom to to producersproducers in the in the

U.S. free market U.S. free market system?system?

Choice of what to Choice of what to sell, rights, sell, rights,

protectionprotection from from consumersconsumers

What is the role What is the role of the of the

government in government in the US free the US free enterprise enterprise system?system?

Regulation (laws, Regulation (laws, taxes), taxes),

protection, protection, assistance assistance

(subsidies)(subsidies)

Why does the Why does the government make government make

rules and regulations rules and regulations in the US free in the US free

enterprise system?enterprise system? Protect consumers Protect consumers through disclosure through disclosure

law (forcing law (forcing companies to give companies to give

consumers consumers information about information about their products and their products and

services) and services) and producers through producers through

regulationsregulations

How does How does technology affect technology affect

productivity? productivity? Improvements in Improvements in technology allow technology allow an economy to an economy to produce more produce more

output from the output from the same or a smaller same or a smaller

quantity of inputs.quantity of inputs.

Analyze the Analyze the ethical policy of ethical policy of

Union Pacific Union Pacific Corp (pg. 74-75)Corp (pg. 74-75)The issue at the The issue at the

center of the center of the debate was toxic debate was toxic waste clean-upwaste clean-up

What causes What causes changes in changes in demand?demand?

According to the According to the law of demand…law of demand…

price. If price goes price. If price goes up, demand goes up, demand goes

down. If price goes down. If price goes down, demand goes down, demand goes

up.up.

Who is Mary Kay Who is Mary Kay Ash and why is she Ash and why is she

important?important?She started Mary She started Mary

Kay cosmetics. She Kay cosmetics. She is one of the most is one of the most successful female successful female

entrepreneurs ever.entrepreneurs ever.

What causes What causes changes in changes in

supply?supply?According to the According to the law of supply…law of supply…price. If price price. If price

goes up, supply goes up, supply goes up. If price goes up. If price

goes down, goes down, supply goes supply goes

down.down.

Why is it Why is it beneficial to have beneficial to have a variety of goods a variety of goods

available?available?More More

competition, competition, lower prices, lower prices,

more choices for more choices for consumersconsumers

What causes What causes changes in price?changes in price?

When supply When supply increases, prices increases, prices fall and quantity fall and quantity

demanded demanded increases to increases to reach new reach new

equilibriumequilibrium

What does a What does a supply and supply and

demand graph demand graph tell you?tell you?Supply

Demand

EquilibriumPrice

Quantity

How do you use a How do you use a supply and demand supply and demand

schedule to schedule to interpret a supply interpret a supply

and demand and demand graph?graph?

Use the numbers to Use the numbers to draw the graph. draw the graph. You cannot use a You cannot use a graph to make a graph to make a

schedule!schedule!

What are What are responsive prices responsive prices and why are they and why are they generally a good generally a good

thing?thing? They can change They can change easily when there easily when there

are shifts in supply are shifts in supply or demand. You do or demand. You do

not end up with not end up with shortages or shortages or surpluses.surpluses.

What is pure What is pure competition?competition?

A market structure A market structure where many buyers where many buyers

and sellers and sellers participate, both are participate, both are well informed about well informed about products, sellers are products, sellers are able to enter and exit able to enter and exit the market freely, no the market freely, no seller sells a product seller sells a product above the prevailing above the prevailing

market price.market price.

Name an Name an example of a example of a

pure pure competition.competition.

TomatoesTomatoes or any or any agricultural agricultural

marketmarket

What is a What is a monopolistic monopolistic competition?competition?

A market A market structure where structure where many companies many companies sell similar but sell similar but not identical not identical

productsproducts

Name an Name an example of a example of a monopolistic monopolistic competition.competition.

Denim Jeans, soft Denim Jeans, soft drinksdrinks

What is an What is an oligopoly?oligopoly?A market A market

structure where structure where few large firms few large firms dominate the dominate the

marketmarket

Name an Name an example of an example of an

oligopoly.oligopoly.Airlines – Also Airlines – Also cartels which cartels which

only work if the only work if the members keep to members keep to

their agreed their agreed output.output.

What is a What is a monopoly?monopoly?A market A market structure structure

dominated by a dominated by a single sellersingle seller

Name an Name an example of a example of a monopoly? monopoly?

AT&TAT&T, Standard , Standard Oil Trust, The Oil Trust, The Public Water Public Water

CompanyCompany

Who is Bill Gates and Who is Bill Gates and why is he important?why is he important?CEO and Chairman of CEO and Chairman of

Microsoft. He Microsoft. He dropped out of dropped out of

Harvard to form his Harvard to form his computer software computer software

company and become company and become one of the richest, one of the richest, most influential most influential

entrepreneurs ever.entrepreneurs ever.

What are the What are the characteristics of sole characteristics of sole

proprietorships?proprietorships?Least regulated form Least regulated form of business, zoning of business, zoning

laws often keep them laws often keep them from doing business from doing business

from home, unlimited from home, unlimited personal liabilitypersonal liability

What are the What are the characteristics of characteristics of

partnerships?partnerships?General partnership- General partnership-

partners share partners share liability. liability.

Limited Liability Limited Liability Partnership (LLP) – Partnership (LLP) –

all partners are all partners are limited from personal limited from personal

liability in certain liability in certain situations.situations.

What are the What are the characteristics of characteristics of

corporations?corporations?A corporation A corporation has a separate has a separate

entity apart from entity apart from that of the that of the owners and owners and

workersworkers

What are the What are the advantages and advantages and disadvantages of disadvantages of

sole sole proprietorships?proprietorships?

Adv – least Adv – least regulatedregulated

Dis – zoning laws, Dis – zoning laws, unlimited personal unlimited personal

liabilityliability


partnerships?partnerships?Adv – in a limited Adv – in a limited partnership you partnership you only lose your only lose your

initial investmentinitial investment Dis – Tied to Dis – Tied to

partner’s actionspartner’s actions


corporations?corporations?Adv- corporation Adv- corporation has a separate has a separate

entity apart from entity apart from owners and owners and

workersworkers Dis – no one person Dis – no one person

in controlin control

What are the major What are the major events in the history events in the history

of the labor of the labor movement in the US?movement in the US?

The Industrial The Industrial Revolution and Revolution and manufacturing manufacturing

initiated the labor initiated the labor movement in the movement in the early 1800s which early 1800s which

changed the face of changed the face of the US labor forcethe US labor force

Who is Karl Marx Who is Karl Marx and why is he and why is he important?important?

He wrote the He wrote the Communist Communist

ManifestoManifesto and and Das Das KapitalKapital

He was the father He was the father of of

communism/socialicommunism/socialismsm

How do people How do people use credit to get use credit to get

more stuff?more stuff?People use their People use their credit cards at credit cards at stores and the stores and the

credit card issuer credit card issuer pays the store.pays the store.

What role does What role does interest play in the interest play in the

use of credit?use of credit?Interest is the Interest is the

money paid for the money paid for the use of credit. It is use of credit. It is

essentially the essentially the “cost” of credit. “cost” of credit.

Interest from loans Interest from loans is the largest is the largest

source of income source of income for banks.for banks.

What do financial What do financial institutions do?institutions do?Bring together Bring together

funds that savers funds that savers provide and then provide and then lend those funds lend those funds to others which to others which

leads to leads to economic economic expansionexpansion

How has the role of How has the role of financial institutions financial institutions changed over time?changed over time?

Expanded investment Expanded investment opportunities, opportunities,

provided additional provided additional services for more services for more people than ever people than ever

beforebefore

How do financial How do financial institutions institutions

affect affect households?households?Investment Investment

opportunities, opportunities, loansloans

How do financial How do financial institutions institutions

affect affect businesses?businesses? Investment Investment

opportunities, opportunities, loans to growloans to grow

What is insurance and What is insurance and why do people insure why do people insure

their stuff?their stuff?Insurance is money Insurance is money paid to an insurer to paid to an insurer to be used in the event be used in the event of an emergency. If of an emergency. If

nothing happens, the nothing happens, the money is usually not money is usually not

paid back to the paid back to the consumer.consumer.

What is the What is the economic impact economic impact

of investing in of investing in the stock the stock market?market?

Gives companies Gives companies the funds to grow the funds to grow and expand their and expand their

businessesbusinesses

What is the What is the economic impact of economic impact of

investing in the investing in the bond market?bond market?

Money is used by Money is used by company/governmecompany/governme

nt to expand and nt to expand and grow. It does not grow. It does not just sit unused just sit unused until it reaches until it reaches

maturity.maturity.

What are the What are the benefits savings benefits savings

accounts?accounts?Safe, guaranteed Safe, guaranteed

interest, interest, extremely liquidextremely liquid

What are the What are the risks of savings risks of savings

accounts?accounts?Virtually none, Virtually none,

low returnlow return


mutual funds?mutual funds?Intermediaries Intermediaries buy short term buy short term financial assets financial assets and investors and investors receive higher receive higher

interest, interest, diversified diversified

investmentinvestment

What are the What are the risks of mutual risks of mutual

funds?funds?Not insured by Not insured by

the FDICthe FDIC


pension funds?pension funds?Often tax-Often tax-deferreddeferred

What are the What are the risks of pension risks of pension

funds?funds?Depends on the Depends on the type but usually type but usually fairly low risk, fairly low risk,

funds restricted funds restricted until retirementuntil retirement

What are the What are the benefits of benefits of insurance?insurance?

Provides funds in Provides funds in the event of an the event of an

emergency emergency (home, life, (home, life,

health)health)

What are the What are the risks of risks of

insurance?insurance?Money is not Money is not

usually paid back usually paid back if there is no if there is no emergencyemergency

What are the What are the benefits of CDs?benefits of CDs?No fees, Insured No fees, Insured by FDIC, higher by FDIC, higher interest than a interest than a

savings account, savings account, safesafe

What are the What are the risks of CDs?risks of CDs?

Minimum Minimum deposits, deposits,

restrictions on restrictions on access to money, access to money,


bonds?bonds?Safe, high Safe, high interest, interest,

bondholders have bondholders have first claim to first claim to

assets if a assets if a company goes company goes

bankruptbankrupt

What are the risks What are the risks of bonds?of bonds?

No access to money No access to money until bond until bond

matures, Junk matures, Junk bonds are very high bonds are very high

risk but have a risk but have a potentially higher potentially higher

return.return.


stocks?stocks?Potentially high Potentially high return, Easily return, Easily

liquidatedliquidated

What are the What are the risks of stocks?risks of stocks?

Very risky, losses Very risky, losses can be large, can be large,

requires requires understanding of understanding of the stock market the stock market

What is the impact of What is the impact of business cycles on US business cycles on US

history? history? During the 90s, there During the 90s, there was a recession, and was a recession, and although inflation although inflation

remained at less than remained at less than 3 percent, 3 percent,

unemployment fell to unemployment fell to very low levels.very low levels.

How is economic How is economic growth growth

measured?measured?Real GDP per Real GDP per

capita because capita because prices and prices and population population

change over timechange over time

How is economic How is economic stability stability

measured? measured? By looking at By looking at general price general price

levelslevels

Who is Andrew Who is Andrew Carnegie and Carnegie and

why is he why is he important?important?He was a He was a

entrepreneur in entrepreneur in the steel industrythe steel industry

What are the economic What are the economic effects of the development effects of the development

of communication and of communication and transportation systems in transportation systems in

the US?the US?Provide easier methods of Provide easier methods of

communicating communicating information and information and

exchanging goods and exchanging goods and services. For example, the services. For example, the internet has made a huge internet has made a huge impact on the economy.impact on the economy.

When new technologies When new technologies emerge, what economic emerge, what economic effect do they have on effect do they have on the “old way of doing the “old way of doing

things”?things”?An example…a An example…a

country’s production country’s production possibilities increase possibilities increase because the workers because the workers

become more skilled at become more skilled at using a computer. This using a computer. This is an example of growth is an example of growth caused by technology.caused by technology.

How do technological How do technological innovations change innovations change the way goods are the way goods are

manufactured, manufactured, marketed and marketed and distributed?distributed?

They generally make They generally make manufacturing, manufacturing, marketing and marketing and

distribution easier distribution easier and less expensive.and less expensive.

Give some examples Give some examples of types of economic of types of economic information available information available

as a result of as a result of technological technological innovations?innovations?

Stock prices on the Stock prices on the internet, economic internet, economic

news in the news in the newspaper, Fed newspaper, Fed

announcements on announcements on CNNCNN

How do scientific How do scientific discoveries and discoveries and technological technological

innovations create the innovations create the need for rules and need for rules and

regulations to protect regulations to protect individuals and individuals and

businesses?businesses?The growth of the The growth of the

internet has made it internet has made it necessary for the necessary for the

government to make government to make regulations regarding regulations regarding

the security of the security of information onlineinformation online

What are the effects What are the effects of unequal of unequal

distribution of distribution of economic factors of economic factors of

production?production? Unequal distribution Unequal distribution of the 4 factors (land, of the 4 factors (land, labor, human capital, labor, human capital,

physical capital) physical capital) inhibits economic inhibits economic

growthgrowth

How is full How is full employment employment measured?measured?

When there is no When there is no cyclical cyclical

unemployment unemployment (does not take into (does not take into account dropouts)account dropouts)

What kinds of taxes What kinds of taxes are paid at the are paid at the local level and local level and

what are they used what are they used for?for?

Most of the tax Most of the tax money goes to money goes to elementary and elementary and

secondary secondary educationeducation

What kinds of taxes What kinds of taxes are paid at the are paid at the state level and state level and

what are they used what are they used for?for?

Sales and income Sales and income taxes provide the taxes provide the most revenue in most revenue in

most statesmost states

What kinds of What kinds of taxes are paid at taxes are paid at the national level the national level

and what are and what are they used for?they used for?Most money Most money comes from comes from

income taxes. income taxes.

What are the What are the different different

categories of categories of revenues in the revenues in the

US federal US federal budget?budget?

Taxes and non-Taxes and non-tax revenuetax revenue

What are the What are the different categories different categories of expenditures in of expenditures in

the US federal the US federal budget?budget?

Fastest growing Fastest growing category of category of

expenditures in expenditures in recent years has recent years has been entitlement been entitlement

programsprograms

What is taxation What is taxation and why are taxes and why are taxes

included in the included in the Constitution?Constitution?To provide for To provide for

common defense common defense and general and general

welfare (they must welfare (they must be the same in be the same in every state)every state)

How have taxes How have taxes impacted impacted

contemporary contemporary issues and issues and policies?policies?

One of the major One of the major challenges facing challenges facing

the federal the federal government is the government is the

rapid growth of rapid growth of entitlementsentitlements

What are the What are the major goals of US major goals of US economic policy?economic policy?Growth, stability, Growth, stability, balanced budget, balanced budget,

reduced debt, reduced debt, employmentemployment

What impact do fiscal What impact do fiscal policy decisions have policy decisions have

on the economy?on the economy?Fiscal policy is the Fiscal policy is the use of taxing and use of taxing and

spending to influence spending to influence economic activity. economic activity. Policies can either Policies can either

cause the economy to cause the economy to expand or contractexpand or contract

Who is John Who is John Maynard Keynes Maynard Keynes

and why is he and why is he important?important?

He developed He developed Keynesian Keynesian

economics which economics which takes a broader takes a broader

view of the view of the economy than economy than

classical economicsclassical economics

What is the Fed and why is What is the Fed and why is the Federal Reserve the Federal Reserve

System set up the way it System set up the way it is?is?

12 districts, to make sure 12 districts, to make sure every state has access to every state has access to

the Fed.the Fed. It was created to It was created to provide consumers provide consumers

w/access to funds for w/access to funds for business expansion. The business expansion. The

Fed coordinates regulatory Fed coordinates regulatory activities and examines activities and examines

banksbanks

What are the 3 What are the 3 basic tools used to basic tools used to

implement US implement US monetary policy?monetary policy?The buying and The buying and

selling of selling of government government

securities, reserve securities, reserve requirements, requirements, discount ratediscount rate

Why are economic Why are economic policies used and what policies used and what

effect do they have?effect do they have?Monetary policies are Monetary policies are

use to control the use to control the money supply. They are money supply. They are

used to lessen the used to lessen the effect of natural effect of natural business cycles. business cycles.

Expansionary policies Expansionary policies are used to increase are used to increase

output and create jobsoutput and create jobs in the short termin the short term

Where is oil an Where is oil an abundant abundant resource? resource?

The middle eastThe middle east

Why is this an Why is this an issue for the US?issue for the US?We use a lot of We use a lot of

oil. It is the oil. It is the largest category largest category of nonrenewable of nonrenewable energy in use in energy in use in

the USthe US

What is absolute What is absolute advantage?advantage?

A term related to A term related to nations engaged in nations engaged in

trade. When a trade. When a nation can make nation can make

the most of the most of something given all something given all

of the resources of the resources availableavailable

What is What is comparative comparative advantage?advantage?

A term related to A term related to nations engaged in nations engaged in

trade. When a trade. When a nation can make nation can make

the most of the most of something with the something with the least opportunity least opportunity

cost involved.cost involved.

How does How does comparative comparative

advantage affect advantage affect how and why how and why

countries trade?countries trade?Sometimes Sometimes

countries will countries will import a good they import a good they are able to produce are able to produce because their trade because their trade

partner has the partner has the comparative comparative advantage.advantage.

What is the impact of What is the impact of US imports on the US US imports on the US

and its trading and its trading partners?partners?

If a country reduces If a country reduces their imports into our their imports into our country, the demand country, the demand

for comparable for comparable domestic goods will domestic goods will

most likely increase.most likely increase.

What is the impact of US What is the impact of US exports on the US and its exports on the US and its

trading partners?trading partners?If we reduce our exports, If we reduce our exports,

the demand for those the demand for those goods MAY OR MAY NOT goods MAY OR MAY NOT change. There is no way change. There is no way

to tell for sure. Some to tell for sure. Some goods may increase in goods may increase in

demand while others will demand while others will decrease because people decrease because people

will find alternativeswill find alternatives

Why do exchange Why do exchange rates fluctuate?rates fluctuate?

They are They are influenced by influenced by

supply and supply and demanddemand in a in a flexible rate flexible rate

system.system.

How changes in How changes in exchange rates of world exchange rates of world

currencies affect the currencies affect the balance of trade?balance of trade?If the currency If the currency depreciates, the depreciates, the

country’s products will country’s products will become cheaper to become cheaper to

other nations. If the other nations. If the currency appreciates, currency appreciates, the country’s products the country’s products

will become more will become more expensive in other expensive in other

nations.nations.

How does free How does free trade affect trade affect

economic activity?economic activity?Free trade makes it Free trade makes it

easier for easier for importers and importers and exporters to do exporters to do their businesstheir business

How do trade barriers affect How do trade barriers affect economic activity?economic activity?

They restrict the growth of They restrict the growth of export industries in export industries in

developing countries. If trade developing countries. If trade barriers are used to make barriers are used to make domestic goods cheaper, domestic goods cheaper,

domestic manufacturers may domestic manufacturers may lose the economic incentive lose the economic incentive to become more efficient.to become more efficient.

Tariffs also help shield infant Tariffs also help shield infant industries from competitionindustries from competition

What are some What are some benefits to benefits to

participating in a participating in a free trade free trade

agreement?agreement?Trade barriers and Trade barriers and tariffs are reduced tariffs are reduced

or eliminated, or eliminated, trade significantly trade significantly

increasesincreases

What are the costs of What are the costs of participating in a free participating in a free

trade agreement?trade agreement?Jobs can be Jobs can be

eliminated in one or eliminated in one or both countries both countries (although with (although with

NAFTA an equal NAFTA an equal number of jobs were number of jobs were

created and created and eliminated)eliminated)

Describe the level of development in Describe the level of development in the US, Mexico, Iraq, China, India, the US, Mexico, Iraq, China, India,

Russia, Germany, Afghanistan, Brazil, Russia, Germany, Afghanistan, Brazil, and Indonesia.and Indonesia.US – developedUS – developed

Mexico- developedMexico- developedIraq – underdevelopedIraq – underdeveloped

China – developingChina – developingIndia- developingIndia- developing

Russia- developingRussia- developingGermany- developedGermany- developed

Afghanistan- underdevelopedAfghanistan- underdevelopedBrazil – developingBrazil – developing

Indonesia – underdevelopedIndonesia – underdeveloped

How do societal values How do societal values affect the economic affect the economic

development of nations?development of nations?Societies who value Societies who value

tradition, habit, ritual and tradition, habit, ritual and custom develop much custom develop much slower than those who slower than those who

value self-interest, value self-interest, competition, and freedom. competition, and freedom.

Things like $ from Things like $ from weapons, corrupt leaders weapons, corrupt leaders

and colonialism all and colonialism all prevent developmentprevent development

What are property What are property rights?rights?

A set of laws that A set of laws that protect people’s protect people’s

claim to land and claim to land and other property. If other property. If

property rights are property rights are certain, certain,

entrepreneurs are entrepreneurs are more likely to more likely to

make large make large investments.investments.

Trace Transition of Trace Transition of USSRUSSR

Lenin comes to powerLenin comes to power The govt. organizes land into The govt. organizes land into

state farmsstate farms Gorbachev implements glasnost Gorbachev implements glasnost

and perestroikaand perestroika Yeltsin is elected in the 1Yeltsin is elected in the 1stst

democratic electiondemocratic election Gorbachev resigns; end of USSRGorbachev resigns; end of USSR

Trace Transition of Trace Transition of ChinaChina

Mao Zedung comes to powerMao Zedung comes to power The Great Leap ForwardThe Great Leap Forward The Cultural RevolutionThe Cultural Revolution Deng Xiaoping comes to powerDeng Xiaoping comes to power People’s communes are People’s communes are

replaced with contract replaced with contract responsibilityresponsibility

What is interest?What is interest?

The money you pay to borrow The money you pay to borrow moneymoney

The percentage of principle The percentage of principle paid to investors as an paid to investors as an incentive to invest money.incentive to invest money.

It is the “cost” of creditIt is the “cost” of credit It is the primary source of It is the primary source of

income for banksincome for banks

How do you eliminate How do you eliminate Credit Card Debt?Credit Card Debt?

Stop charging/using the credit Stop charging/using the credit cardscards

Pay off the cards with the highest Pay off the cards with the highest interest rates firstinterest rates first

Pay more than the minimum Pay more than the minimum payment even if it is just a few payment even if it is just a few dollarsdollars

Be very careful about companies Be very careful about companies who claim they will help you who claim they will help you eliminate debt and fix your credit!eliminate debt and fix your credit!

What are you rights when What are you rights when buying a home?buying a home?

You can hire a realtorYou can hire a realtor You can tour the propertyYou can tour the property You can have a pre-sale You can have a pre-sale

inspection doneinspection done You have a certain amount of You have a certain amount of

time to change your mind time to change your mind once you sign the contractsonce you sign the contracts

What are your What are your responsibilities when responsibilities when

buying a home?buying a home? You must secure financing…You must secure financing…

qualify for a mortgagequalify for a mortgage You must be present at the You must be present at the

closingclosing

How can you prepare to How can you prepare to make the change from make the change from

renting to buying?renting to buying? Save a down-paymentSave a down-payment Do your researchDo your research Save a “rainy day” fund in Save a “rainy day” fund in

case of emergencycase of emergency Pay down any debt you might Pay down any debt you might

havehave

What are the steps to What are the steps to starting up a small starting up a small

business?business? Research/Design/EducationResearch/Design/Education In some cases, In some cases,

licenses/certificationslicenses/certifications ProductionProduction MarketingMarketing SalesSales AccountingAccounting

How and why should How and why should someone invest in the Stock someone invest in the Stock

Market?Market? How?How?

Meet with a stock Meet with a stock broker/financial advisorbroker/financial advisor

Research companiesResearch companies Why?Why?

Potentially large returnsPotentially large returns

How do you plan for How do you plan for retirement?retirement?

401K401K IRA/Roth IRAIRA/Roth IRA Pension/Company RetirementPension/Company Retirement Mutual FundMutual Fund Do not rely on Social Do not rely on Social

Security!!!!Security!!!!

How should you start saving How should you start saving money?money?

Pay yourself first…direct Pay yourself first…direct deposit money into a savings deposit money into a savings account straight out of your account straight out of your paycheck so you never miss it.paycheck so you never miss it.

Cut expenses that are not Cut expenses that are not necessary (Starbucks, fast necessary (Starbucks, fast food, etc.) and put that money food, etc.) and put that money into savings.into savings.

What are the different types What are the different types of bank accounts?of bank accounts?

SavingsSavings CheckingChecking

Interest bearingInterest bearing General UseGeneral Use

Money MarketMoney Market Certificate of DepositCertificate of Deposit

How do you balance a How do you balance a checkbook?checkbook?

Get balance from bank Get balance from bank statementstatement

Add any outstanding depositsAdd any outstanding deposits Subtract any outstanding Subtract any outstanding

checks/debitschecks/debits Compare the balance to your Compare the balance to your

account registeraccount register

How and why should you How and why should you take out a loan?take out a loan?

How?How? From a bank or credit unionFrom a bank or credit union Not a pawn shop or check cashing Not a pawn shop or check cashing

outlet!outlet! Why?Why?

Car LoanCar Loan Home LoanHome Loan Student LoanStudent Loan NOT spending money, big screen TV, NOT spending money, big screen TV,

etcetc

Who needs to be insured Who needs to be insured and how do you get and how do you get

insuranceinsurance Who?Who?

Life: young families with childrenLife: young families with children Car: everyone…it’s the law!Car: everyone…it’s the law! Health: everyone!!Health: everyone!! Homeowners/Renters: everyone!!Homeowners/Renters: everyone!!

How?How? Contact an insurance company to Contact an insurance company to

applyapply Sign up through workSign up through work

How and why should you How and why should you give to charity?give to charity?

How?How? Research…BBB online, Atty. Research…BBB online, Atty.

Gen officeGen office Why?Why?

Others needier than yourselfOthers needier than yourself Tables could be turnedTables could be turned Good karma!Good karma!

What scams are out there What scams are out there and how do you avoid them?and how do you avoid them? Many scams are out there to prey Many scams are out there to prey

on people who do not know any on people who do not know any better or are desperate for $$.better or are desperate for $$.

If it sounds too good to be true, it If it sounds too good to be true, it probably isprobably is

Research: BBB online, Atty. Gen Research: BBB online, Atty. Gen Office, ask a friend who invested…Office, ask a friend who invested…google is probably the LEAST google is probably the LEAST reliable way to research a scamreliable way to research a scam

Documents

Economics Halfen Final Exam Review. What is scarcity? Scarcity is the idea that there are a limited amount of resources to meet unlimited wants and needs