Introduction to Economics

Introduction to Economics

Question 1 - 10 • Define Goods

Answer 1 – 10 • The things of value that can be seen or touched

Question 1 - 20 • Define - Natural Resources

Answer 1 – 20 • The things found in the world around us- water, air, land, minerals, that are used in the production of goods.

Question 1 - 30 • Define- Economics

Answer 1 – 30 • The study of how people choose to use scarce resources to satisfy their needs and wants; the study of choice

Question 1 - 40 • Define- Opportunity Cost

Answer 1 – 40 • That which one must give up in order to buy another product of service.

Question 1 - 50 • Define- Capital Resources AND Name/Define the two subcategories.

Answer 1 – 50 • The machines, tools, and buildings used in the production of goods and services. • Physical capital- equipment and structures • Human capital- investments in people- such as education and job training

Question 2 - 10 • What is the difference between a shortage and scarcity?

Answer 2 – 10 • A shortage can be temporary or long-term, but scarcity always exists.

Question 2 - 20 • What does a production posibilities graph show?

Answer 2 – 20 • It shows alternatives to what an economy can produce

Question 2 - 30 • The law of increasing costs causes the line of the Production Possibilities graph to _________?

Answer 2 – 30 • Curve

Question 2 - 40 • What is the outer line of a Production Possibilities Graph show? What is it called?

Answer 2 – 40 • The outer line shows the maximum possible output with any given combination • This is the Production Possibilities Frontier (or Curve)

Question 2 - 50 • Draw and label a Production Possibilities Graph

Answer 2 – 50

Question 3 - 10 • Name the four types of Economic systems

Answer 3 – 10 • Traditional, Command, Market, Mixed

Question 3 - 20 • What to systems is a Mixed Economy comprised of?

Answer 3 – 20 • Command and Market

Question 3 - 30 • Define- Market Economy. Give one trait of a Market economy.

Answer 3 – 30 • An system in which decisions are made by individuals competing to earn profits based on supply and demand. • Individual/ Private ownership, profits are motive for work, competition determines price…

Question 3 - 40 • Define- Command Economy. Give one trait of a Command economy.

Answer 3 – 40 • An economy in which the government or other central authority makes all ecnomic decisions

Question 3 - 50 • Name That Economy: In Country D, business owners make most economic decisions. As long as they abide by fair trade policies, the can decide what to produce, how to produce, and for whom to produce without government intervention. The decisions are made by business owners based on what happens in the market.

Answer 3 – 50 • Mixed!

Question 4 - 10 • What types of services do banks provide? (List three)

Answer 4 – 10 • Savings accounts, checking accounts, loans, financial counseling etc.

Question 4 - 20 • Where does the bank get the money to make loans from? (Give two examples)

Answer 4 – 20 • Savings accounts, extra funds in checking accounts, bank earnings (from interest)

Question 4 - 30 • What is the Federal Reserve System? Give one example of a service they provide.

Answer 4 – 30 • It is a “bank for bankers” • Services include- lending money to member banks, regulating member banks through procedures.

Question 4 - 40 • What is a reserve ratio? Who needs to follow it?

Answer 4 – 40 • Reserve ratio- the FED requires member banks to deposit a certain amount of money with its regional Federal Reserve Bank.

Question 4 - 50 • What role does the FED play in maintaining a healthy economy?

Answer 4 – 50 • When there are indications of inflation, the Board of Governors raisings the FEDs discount rate, this takes money out of circulation, there for stabilizing prices.

Introduction to Economics