Final Exam Review
Vocabulary Words:
What is Economics: Economics, thinking at the margin, land, capital, Physical capital, human capital, shortage, scarcity, efficiency, underutilization, macroeconomics, microeconomics, opportunity cost, guns or butter, factors of production
Economic Systems: Invisible hand, continuum, economic system, self-interest, safety net, communism, laissez faire, collective, socialism, specialization
Supply and Demand: Law of Demand, Law of Supply, Ceteris Paribus, supply, demand, substitute, complement, Income effect, equilibrium, normal good
Reality Store: Mutual Funds, Premium, Property tax, Interest, Excise tax, Collision insurance,
Comprehensive insurance, Progressive tax, Proportional tax, Credit union, Debit card, Income tax, Stock,
Deductible, Liability insurance, Lemon, Sales tax, Co-payment
Federal Reserve: Board of Governors, Federal Open Market Committee, Lender of Last Resort
Be able to answer the following questions:
1. What are examples of a shortage?
2. An economy that uses its resources to make the most goods and services would be considered...
3. What does it mean to make a gun or butter decision?
4. How can you examine opportunity cost? Why must the opportunity cost always be something desirable?
5. Why are all goods and services scarce?
6. Give an example of physical and human capital.
7. What does a decision-making grid show?
8. Give three examples of land.
9. What does it mean if a company is underutilizing its resources?
10. What are the characteristics of a centrally planned economy?
11. What are weaknesses of a centrally planned economy?
12. What are characteristics of a traditional economy?
13. What is the struggle among various producers for consumer's business called?
14. What incentive motivates a manufacturer to sell a product?
15. What are advantages of a free market?
16. What does specialization do for an economy?
17. What are the three key economic questions?
18. What struggles might citizens of a centrally planned economy making a transition to a market-based system have?
19. Why would a completely free market economy not be a practical one for any major country?
20. What are some safety nets we talked about in class?
21. Why do markets exist?
22. Why did collectives in the Soviet Union inefficiently produce agriculture products?
23. Why does a free market need some government intervention?
24. What is the motivating force behind a free market?
25. What does it mean that China is in transition?
26. In what economy would an entrepreneur have the most opportunity to try to achieve success?
27. If a consumer is willing and able to buy a good or service, what does he/she create?
28. What kind of system is the U.S. economy based on?
29. What determines the price and the quantity produced of most goods?
30. How did the baby boomers change the demand for many different goods in the United States?

31. What will cause the demand curve to shift? Give an example of a shift in the demand curve to the right and a shift in the demand curve to the left.
32. What will cause the supply curve to shift? Give an example of a shift in the supply curve to the right and a shift in the supply curve to the left.
33. Describe why a shift along the demand curve is different than a shift of the demand curve.
34. If a price is expected to drop, what will happen to the current demand?
35. If sellers expect the price of a good they have for sale to increase in the near future, what would they do?
36. How many years does it typically take to earn a bachelor's degree?
37. What is an example of progressive tax and proportional tax?
38. What happens if you do NOT pay the entire amount you owe to a credit card company?
39. What are four major categories of Social Security?
40. List the various bank services we talked about.
41. What are the four steps to successfully creating a budget?
42. What are the four steps to establishing credit?
43. What are the seven steps for the journey of a check?
44. What determines the value of a check?
45. Do most cars appreciate over time?
46. Is renter's insurance optional?
47. What happens if a bank fails? Do you lose your money? Why or why not?
48. What discourages people from defaulting on a loan?
49. What are three reasons someone SHOULD buy a home?
50. How do you get taxes back once you pay them?
51. Explain the term equity.
52. How does a bank make money?
53. How many district banks are there in the Federal Reserve system?
54. How did the Federal Reserve operate during the Great Depression?
55. Who is on the Board of Governors?
56. What are some important functions of the Federal Reserve?
57. What was a bank run?
58. What is NAFTA?
59. What are three arguments in favor of protectionism?
60. What are some of the arguments against protectionism?