Final Exam Review Sheet – Economics H. Sinclair Unit 1: Economics and Choice Vocabulary Factors of production Diminishing marginal returns Circular flow model Utility Traditional economy Profit motive Opportunity cost Market economy Market failure Marginal cost Command economy Public goods Marginal benefit Socialism Externality Production possibilities frontier (PPF) Communism Subsidy Free Response Topics How do marginal cost and marginal benefit relate to the PPF? What are the advantages and disadvantages of market, traditional, and command economies? How can economies address the problem of market failures and externalities? What are the features of the American free-enterprise system? What is circular flow model, and what does it illustrate? Unit 4: Money, Banking and Finance Vocabulary Money Financial System Stock index Representative money Financial asset Bull market Fiat money Primary market Bond M1 Secondary market Treasury security Gold standard Stock Diversification Bank Stock exchange Option Free Response topics What is money? How does fractional reserve banking work? What do banks do? How are risk and return related? What are the different investment objectives? What are the differences between stocks and bonds? How do bonds work? How do stock market indexes work? Unit 5: Measuring and Monitoring Economic Performance Vocabulary Gross domestic product Aggregate demand Structural unemployment Nominal Aggregate supply Cyclical unemployment Real Macroeconomic equilibrium Poverty rate Nonmarket activities Leading indicators Lorenz curve Business cycle Coincident indicators Gini coefficient Stagflation Unemployment rate Free Response topics What are the limitations to GDP as a measure of economic activity? What causes shifts in aggregate supply and aggregate demand? How are shifts in AS and AD related to business cycles? How are economic indicators related to the business cycle? Differentiate between the kinds of unemployment What is the difference between poverty and inequality?