Economics Final Exam Review
Terms / Vocabulary
1. Paradox of Value 2. Scarcity 3. Vertical Merger 4. Horizontal Merger 5.Compound Interest 6. Equilibrium Price 7. Factors of Production –describe and create illustration for each
8. Opportunity Cost 9. Gross Annual Income
10. Laissez Faire 11. Consumer Sovereignty 12. Determinants of Elasticity13. Elasticity 14. Deficit Spending 15. Fiscal Policy 16. Gross Domestic Product 17. 16th Amendment 18. Price Collusion 19. Limited Role of Government-
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Review Questions: Financial Literacy
1. A) What are the steps involved in setting up a personal budget.
1. B) if you are on a budget, are you required to eliminate ALL entertainment expenses?
2. Essential expenses should not be more than _______% of gross monthly income.
3. Show how a person would calculate their monthly gross income if their gross annual income was
$45000.
4. Which of the following would NOT be considered an important financial goal? Circle: Creating a
retirement fund, building an emergency fund, saving for big ticket items like a car, new furniture,
vacation, saving up for groceries
5. Explain why building an emergency fund is an important financial goal.
6. Which of the following would be considered a short-term goal for a typical high school senior?
Circle: Money for college expenses / saving for retirement / saving for a down payment on an expensive
home in River Oaks / Beginning to build an emergency fund
7. Why is it important to begin to save and invest at a young age?
8. What are the advantages of using the direct deposit system?
9. Why is it important to “pay yourself first”?
10. Explain how a person would determine how much money is in their checking account. Explain how a
bank statement would be important in this process.
11. What happens if a person writes a check that exceeds the amount of money in their checking
account?
12. Identify three important considerations involved in selecting a bank.
13. Explain why the FDIC was created.
14. What should a person do if they have MORE than $250,000 they want to have on deposit in an FDIC
account?
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15. Identify three advantages of investing in mutual funds.
16. Identify three disadvantages of investing in a mutual fund.
17. What are three consequences of having a low credit score and poor credit history?
18. What are the defining characteristics of a person best suited for buying a home instead of renting?
19. Rate the following savings and investing options according to the amount of interest each
investment typically pays. Low or no interest to higher interest: money market account, certificate of
deposit, regular savings account, regular checking account, hide in cookie jar
Which of these investments would be considered the best low risk or no risk options?
Fundamental Economic Concepts
20. Create a visual representation of the Circular Flow Model.
21. Describe what is happening in the Circular Flow Model. Be sure to explain how the Circular Flow
Model illustrates economic interdependence.
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22. Why is scarcity the “fundamental economic problem”?
23. Define and identify the advantages and disadvantages of each business structure.
Definition: Sole Proprietorship advantages
disadvantages
Definition: Partnership advantages
disadvantages
Definition: Corporation
advantages
disadvantages
24. What are three things that would be included in the legal document known as “The Articles of
Partnership”?
25. Identify each of the following important economic thinkers and explain their views regarding the role
of government in the economy. Which would favor a laissez faire approach to economic issues?
Adam Smith
Karl Marx
Frederich Hayek
John Maynard Keynes
Milton Friedman
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26. What are the main characteristics of the free enterprise system?
27. What are the main characteristics of a command economy?
28.A) Provide one example of each economic system:
Free Enterprise
Command
28. B] What are other terms used to refer to a free enterprise system?
28.C) is the American economy a pure capitalist system or a modified private enterprise system?
29. Explain the purpose of each of the laws or agencies:
Sherman Antitrust Act
Clayton Act
Pure Food and Drug Act
Federal Trade Commission
30. Write a general statement that applies to all of the items listed in #29.
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31. Which economic goal is being pursued by the minimum wage law?
Economic Freedom or Economic Equity
32. Which economic and social goal is the trade-off when the government establishes a minimum wage
law?
Economic Freedom or Economic Equity
33. Describe the views of a person who favored laissez faire policies.
34. Create a graph that shows a surplus and a graph that shows a shortage.
Surplus
Shortage
35. Create a graph that shows the Law of Supply and a graph that shows the Law of Demand
Law of Supply
Law of Demand
36. Create a graph that shows equilibrium price.
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37. Create the economic model called the Production Possibilities Frontier. Label the points that
represent full potential and not full potential. Explain what is being illustrated with this model.
38. What factors would result in the frontier being pushed out and to the right? What would be the
effect of the frontier being pushed out and to the right?
39. Create a model of the business cycle and label the parts. Which section of the business cycle would
correspond with a reduction in the unemployment rate? Remember, if the unemployment rate
decreases, more people are working.
40. What is the purpose of an antitrust law?
41. What are the three criteria of effective taxes?
42. What are the two principles of taxation?
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43. The federal income tax is a ____________________________ type of tax.
44. The sales tax is a ____________________________ type of tax.
45. What is the purpose of a sin tax?
46. What does FICA stand for and what does it fund?
47. How will the baby boomers impact FICA programs?
48. What are the three main steps in creating the federal budget?
49. Provide 3 examples of federal spending that falls into the mandatory spending category.
50. Provide2 examples of spending that falls into the discretionary category.
51. Identify and describe the four types of unemployment.
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52. Identify and describe the characteristics of the four market structures. Place them on a continuum
from least competitive to most competitive.
Continuum Below
Most Competitive
Least Competitive
_________________________________________________________________________________
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