Economic FInal Test

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Economic Final Yusuke ver.

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Difference between our deficit and debt: Deficit is where the government spends more than it has in one year while debt is deficits built up over years.
What are the economic gains because of immigration?: More efficient, cost less. efficient, pay more taxes than benefits received.
Subsidies Effect on Price: government pays supplies money that allow supplies to drop prices at all price points but makes companies less efficient
Short selling: Selling a stock you don't own, you'll buy the stock later to pay off the brokerage
Main type of taxes collected by federal government: income tax
How can a country benefit even when there is a trade deficit?: The country buys more than it sells so more goods and services are available.
Calculating EPS (earnings per share): Net income / Shares circulating. Higher is better, more earnings per share
Productivity's Effect on Supply: High Productivity causes supply to shift right(more) because there is more being produced, therefore increasing supply. THe more pruduct is produced, the the number of quantity offered at all price points changes
3 Qualities of EffectiveTaxes: 1. equally applied 2. simple to follow 3. efficiently collected
Open Market Operations (buy/sell US bonds): Most flexible and most frequently used mean of implementing U.S. monetary policy. Open market operations enable the Federal Reserve to affect the supply of reserve balances in the banking system and thereby influence short-term interest rates and reach other monetary policy targets.
Who benefits from a weak US dollar?: Suppliers and companies. American consumers and FOREIGN companies benefit from a weak US dollar.
Calculate PE ratio: (Stock Price)/(EPS)
Interpreting a Production Possibilities Fronteir: Diagram that represents the combinations of goods/services an economy can produce when all resources are employed. Predicting what will make you the most money in production.
Marginal Income Tax Scale: different % of tax for different levels of income. The more income you get, the more levels you have to pay.
Price celling: maximum legal price that can be charged for a product
What is elastic demand?: Item that quantity demanded at price levels drops rapidly as price changes. Sign we don't need it
Effects of inflation: GOOD: Debtors debt is smaller. BAD: Savings are wasted
Public goods: A product consumed by everyone and whose use by one individual does not decrease the satisfaction or value available to others.
Tax withholdings: Employer takes part of your paycheck to pay your taxes
Price floor: Law banning a price below a certain price
What is elastic supply?: That demand is based on the supply(horizontal line).
What are the main type of taxes collected by the California government?: Income tax, sales tax, property tax.
Buying on Margin: Buying stocks by way of a loan from a broker
AFL-CIO: Collection of unions. 10 million workers.
Price Equilibrium: The point on a supply and demand chart where supply equals demand (the intersection). When demand equals supply. price that leaves neither a surplus nor a shortage at the end of the trading period
How many euros can one dollar buy right now?: 67
Comparative advantage: Making a product where you have the lowest opportunity cost. Doing what you are best at.
Inelastic supply: When companies cannot change their production fast; the change in price causes a relatively smaller change in quantity supplied
Entrepreneur: someone who adds value to things (creates or improves) in order to sell it for profit
Dow Jones Index: index of 30 most traded stocks of big public companies
Changes on the federal fund rate: Federal Reserve sets a target on the interest rate banks should loan money to each other
Inflation: when the price of all goods rise. the increase in the price of some set of goods and services in a given economy over a period of time.
Tariff: Tax on foreign goods. tax placed on an imported product
Why were new currencies backed by valuable goods like gold?: All currencies must first build the population's trust in its worth. By saying that it can be exchanged for gold, people were more likely to trust it.
Real GDP growth: GDP adjusted for inflation. It is equal to (GDP divided by the inflation rate) ( 3 %)
Who benefits from a strong US dollar?: Consumer. American companies and FOREIGN consumers benefit from a strong US dollar.
NASDAQ index: index of 4000 stocks of typically newer public companies, many tech companies
Socialism: Economic system in which government owns some factors of production and has a role in determining what and how goods are produced.
Main type of taxes collected by city government: sales and property tax
What is the Federal Reserve: the central bank of the United States
Finding the Supply and Demand Line on a Graph: Supply increases as the price increases, so it has a positive slope. Demand decreases as the price increases, so it has a negative slope.
Floating currency: currency that uses flexible exchange rate is a type of exchange rate regime wherein a currency's value is allowed to fluctuate according to the foreign exchange market as its exchange rate regime.
Why is it more likely the government will regulate businesses who sell products with inelastic demand: because no matter what, these products are always necessary and demanded and the gov just wants to make sure that everyone has access to the products no matter what the price is. Because then the economy won't be hurt as much due to the taxation and the government can get the money it needs.
S&P 500 Index: an index containing the stocks of 500 Large-Cap corporations, most of them being US corps.
How does the money multiplier work?: Money that is loaned out gets placed into a bank account, and a fraction of that money is loaned out, and the process goes on.
Reading a Supply and Demand Chart: At a given price, one line shows quantity supplied while the other shows how much demand there is for a product at a given price. x-axis=quantity/amount, y-axis=price
Income transfer: When money is giving to the poor class by the government. This money can be either from taxes or from taking it from the higher class.
How do governments and businesses use the power of incentives: to maximize their profits/benefits
What is the significance of the low and high PE ratio?: Low PE ratio - Lower stock price, higher earnings per share. High PE ratio - Higher stock price, lower earnings per share.
Role of shares in corporate governance: A share of stock is a slice of ownership in the company. Each share equals a vote. Votes elect a board of directors. The board of directors, not the shareholders, pick the CEO. If a company wants to control another it becomes the majority shareholder, giving it sway over the board of directors.
Utility: relative satisfaction from consumption of goods
Protectionism: favoring trade barriers that protect domestic industries
Earned income tax credit: Tax refund given to poor who work
Negative Externality: the harm, cost, or inconvenience the 3rd party suffers because of others' actions
Volubtary Export Restraint: Asking a country to limit the number they export
Factors that create monopolies: NATURAL: resource is put to best use by having only one firm produce it, GEOGRAPHIC: a monopoly based on the absence of other sellers in a certain geographic area, TECHNOLOGICAL: based on ownership or control of a manufacturing method, process, or other scientific advance (patent protects ideas, copyright protects words), GOVERNMENT: a monopoly the government owns and operates
How do banks make a profit?: Banks make a profit by charging interest rated on loans.
Recognizing the Difference Between Shift in Demand Quantity and Shift in Total Demand: Shift in Demand Quantity: moving up and down a line with changes in price; line does not move. Shift in Total Demand: moving the entire line to the left or to the right. The conditions have changed to make the product more or less popular at all prices.
Compliments: A product that is usually bought with another, together. (ex. hot dogs and hot dog buns)
Who is the Federal Reserve Chairman?: Ben Bernanke
Dumping: selling products in other countries at cheaper prices than it takes to produce them in your own country
Law of demand: price lower, want more. Price higher, want less. The quantity demanded of a good or service varies inversely with its price.
Law of supply: Higher price, higher production. Lowered price, lowered production.
GDP per Capita: the dollar amount of real GDP produced on a person basis. The US GDP per Capital is 43K. GDP/person
Privatization: Letting the private sector take over an area that was typically run by the government.
Quota: Limit on number of foreign goods
What is economics?: Social science dealing with the study of how people satisfy seemingly unlimited and competing wants with the careful use of scarce resources.
How do increases taxes affect the economy: it decreases economic growth and consumer spending. (but in long term will increase people's spending and help the economy.)
Cost Benefit Analysis: The process you go through to select the option that gives you the most benefit (utility)
Real interest rate: The real interest rate is the growth rate of purchasing power derived from an investment.The normal interest rate minus the inflation rate
Surplus on a Supply and Demand Chart: When Supply is above Demand. Normally to the right of the intersection point.
Capitalism/Free Enterprise/Market Economy: Businesses create something that they think people will buy, people buy it, and then businesses produce more. A market is a place were goods are exchanged.
What is inelastic demand?: demand for the item will not change much as the price increases. more steep more inelsastic
Our total national debt: 9 trillion. Accumulative total of all deficits over the years
Why do people invest in a company with a high PE ratio?: A high PE ratio can mean that the company's stock value is increasing and there is a chance of it increasing even more in the future.
Circular flow: relationship between money income and and spending as an economy as a whole
Price discrimination: practice of charging customers different prices for the same product
Change the Reserve Requirement: Federal Reserve sets what percentage of money must keep at the bank, and what can be lent out as loans
Main type of taxes collected by California government: income, sales, and property tax
Elastic demand: Demand that changes quickly in respect to price change
Dividents: Company profit divided by number of shares available. A company can choose not to give dividends; rather, they put profit from stock towards company growth.
Technology Effect on Supply: Inventions make work faster and changed the quantity offered at all price points. Technology causes supply to be shifted right because better technology makes it easier to produce goods.
Index fund: list of stocks that help guage the performance of the stock market
Inelastic demand: Demand that remains steady in respect to price chagne
Current rate of inflation in US: 3.54% or 3%
Bonds: Documents used to borrow money that asure to pay the money back with interest.
Shortage: Shoppers want more than there is supply (demand line above supply line)
What are the economic losses because of immigration?:: Native workers losses their jobs and there will be lower wages.
What are the reasons for having taxes?: 1) Raise money 2) Equalize wealth 3) Deter bad behavior
3 Reasons for Having Taxes: 1. raise money (stop inflation) 2. equalize wealth 3. deter bad behavior
Oligopolies: a few large sellers dominate the industry
Concept of scarcity: Everything is in limited supply
Significance of the low and high PE ratios: A high PE ratio shows that investors are paying more for each unit of income and low means investors are paying less for each unit of income. Also stocks with a high earning rate is sold at a high P/E value.
Incentives: Something that motivates us
what is inelastic supply?: No matter the supply, there will always be the same demand(vertical line).
Role of the FOMC: The FOMC has 7 board members who meet with 5 district presidents to give advice to the chairman.
Business Cycle: Economy goes through up and downs as a natural cycle
GDP: Market value for total number of final goods/services produced within a country (US GDP is 13 trillion). total number x price
Communism: Owned/Directed by state/government
WTO: The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. Promotes smooth and free trade
Elastic supply: Companies can change production fast; the change in price causes a relatively larger change in quantity supplied
Opportunity Cost: The cost (lost benefit) of the thing you gave up. Ex: Giving up money from missing work to go to school.
How do we make a dollar stronger?: Trade surplus and lower interest rates.
Role of the Federal Reserve: The Fed is the gatekeeper of the U.S. economy. It is the bank of the U.S. government and, as such, it regulates the nation's financial institutions.
Difference between paying interest and paying principle: Paying principle is to pay back debt while paying interest is just paying interest on a loan.
Profit margin: Price Sell - (minus) price it takes to make product
Stocks: Shares of ownership in a company. If you buy company's stock, you share in company profits (dividends). Stocks are sold to raise $ for a company.
Communism: Economic system in which factors of production are collectively owned and directed by the state; theoretically classless society in which everyone works for the common good.
Cost of input changes effect on supply: if the raw materials of a product costs more, the supply will decrease. if the raw material costs less, then the supply will increase
NAFTA: North American Free Trade Agreement. Removed tariffs on products traded between Canada, United States and Mexico.
Role of the FDIC: Insures bank accounts up to $100,000.
What power do unions have?:: They can do collective bargaining, boycott, picket, strike and receive political support. They can act as a unified group, and defend one another against bigger corporations.
Maquiladora: Factories in Mexican towns close to the US/Mexico border. The US exports materials to the factory for assembly, then is re-exported back to the US.
Federal Resrve Chairman: Ben Burnanke
Calculating Martket Cap: stock price) x (shares circulating). This shows how big the company is
Sunk cost: Cost that cannot be recovered
Shortage on a Supply and Demand Chart: When Demand exceeds Supply. Normally to the left of the intersection point.
Trade-offs: What you gave up in order to have the thing you chose; the thing that you lost so you could gain something else. alternative choices (things you give up to get something else)
US total national debt: 9 trillion
Changing the discount rate: Federal Reserve loans money to banks at a rate lower than what consumers get. lower discount rate: banks lower their rates; more people borrow money, speeds up the economy. higher discount rate: banks increase their rates, less people borrow money, slow down economy
Deductible: The amount of money which the insured party must pay before the insurance company's own coverage plan begins.
productivity and its connection to economic growth: Productivety describes how quickly we can create a product. The more productive our country becomes, the majority of people become better off (we get more products for the same work).
Mutual funds: Pool of $ invested by professionals in a certain group of stocks (picked by theme). The price of a mutual fund is based on value of pooled investment divided by # of mutual fund shares. The professional works for a fee and profits from fees are split among investors.
Why does the government fund basic science?: The government funds basic science because companies have no incentive to fund basic science, because they don't make a profit. If researchers aren't paid, there will be no incentive to progress science.
What are the main type of taxes collected by the federal government?: Income tax.
What are the main type of taxes collected by the city government?: Sales tax, property tax.
Substitutes: A product that can be replaced by another product. (ex. butter and margerine)
Alternative minimum income tax: An extra tax some people have to pay on top of the regular income tax. The original idea behind this tax was to prevent people with very high incomes from using special tax benefits to pay little or no tax.
Four Needs to a Healthy Market Economy: a. private property rights (including intellectual), b. freedom to make and spend money however you want, c. freedom to exchange goods and services, d. freedom to keep your profits
Identify Surplus on a Supply & Demand Chart: situation in which the quantity supplied is greater than the quantity demanded at a given price; area above crossed point of lines on chart
Globalization: to extend to other or all parts of the globe; make worldwide
Why doesnt the Fed Just print money?: The value of the dollar will go down. Inflation.

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