Final Exam PDF

**Production Possibilities frontier**- represents the maximum output combinations of two goods or services an economy can produce given its available resources and technology - - - **Externalities-** positive or negative side effects of an economic activity that affects third parties, occur...

**Production Possibilities frontier**- represents the maximum output combinations of two goods or services an economy can produce given its available resources and technology - - - **Externalities-** positive or negative side effects of an economic activity that affects third parties, occurs in production and consumption - - Examples- Vaccination, Education, Public Parks, and Research and Development **Perfect competition-** is a market structure where many buyers and sellers trade identical products and companies can enter or exit the market without barriers. They are price takers- accept the market's equilibrium price.no price control **Federal Transfer Programs**-a government payment to individuals or entities that does not require any goods or services in return. Help achieve reducing poverty, providing assistance during economic hardship, or redistribute income to reduce inequality Examples- Social security, Medicare, Nutrition Assistance Program, or Unemployment insurance **Business Cycle**- Alternating periods of economic growth and contraction, which can be measured by changes in real GDP - - - - **Types of economic systems** **Traditional economy**- economic decisions are based on customs, traditions, and beliefs **Command Economy**- government makes all the decisions regarding the production and distribution of goods and services. **Market Economy-** decisions about production, investment, and distribution are driven by the supply and demand in the marketplace. **Mixed economy**- combines elements of both market and command economies. Government and private sectors coexist in the economic system. **Social economy-** government or society owns and controls the means of production and distribution of goods or services. **Price level and aggregate demand** Price level- average price of goods and services in a country Aggregate demand- total quantity of goods or services demanded in an economy at various price levels **Sources of federal tax revenues-** - - - **Banks and the money supply** Money Multiplier- initial deposit can lead to a greater increase in the total money supply through repeated lendings by banks. M1 Money supply- physical currency, checking account and demand deposits M2 Money supply- all of M1 plus savings account and money market account **What causes a shift in demand-** Increase in income, changes in prices of related goods, change in consumer preference, change in consumer expectations, changes in the number of consumers in the market, changes in government policies. **Scarcity-** resources are limited or insufficient to meet human needs and wants **Marginal benefit and Marginal Cost** Benefit- additional benefit received from consuming one more unit of a goods or service Cost- additional cost incurred from producing or consuming one more unit of a good or service **Monopolistic competition**- many firms that sell differentiated products and easy entry and exit from the market. They have some market power **GDP**- total value of all final goods and services produced within a country's borders during over a time period **Unemployment-** people in the civilian labor force who are without jobs and are not actively seeking jobs. **Socialism-**economic system in which the means of production are owned and controlled by the state government. Helps reduce economic inequality and prioritizes the welfare of the community **Capitalism-** economic system in which the means of production owned and controlled by private operators. Driven by market force. Goal is to create profit. **Aggregate Supply Curve**- total quantity of goods and services that are produced in an economy are willing and able to supply at different price levels. **Trade Barriers-** government imposed restrictions that limit international trade Tariff- tax imposed on imported goods or services Quota- limit on the quantity of good that can be imported or exported during a given period. Subsidies- government financial support provided to domestic producers