Final Review

M/C-(55 questions) types of resources-human, physical, capital; scarcity v shortage; production possibilities curve; key economic questions; command, free, and traditional economies; future price relative to current demand; simple analysis of a demand curve; elastic supply; excess demand and excess supply; natural monopolies and perfect competition; socially beneficial organizations (non-profits); types/forms of businesses-partnerships, etc.; effects of the minimum wage; future job growth in developed countries; characteristics of money; representative v commodity money; financial intermediaries; interest rate paid to the bondholder; basic components of bonds; calculation of GDP; tax and its impact on elastic v inelastic products; mandatory v discretionary spending; fiscal policy; supply side economics; Keynesian economics; federal reserve districts; easy money policy; money multiplier and the RRR; instruments of the Fed to influence the change of money supply; the Fed during the Grt Depr; tools of monetary policies; international free trade organizations; effects of exchange rates; the role of the World Bank and IMF with LDCs; characteristics of developed nations; OPEC.

Matching
Set 1-increasing marginal returns, market supply curve, diminishing marginal returns, total cost, marginal revenue, law of supply, marginal product of labor, variable, marginal cost, elasticity of supply, supply schedule, regulation, quantity supplied.
Set 2-corporate income tax, incidence of a tax, estate tax, deductions, regressive tax, real property, proportional tax, Medicaid, individual income tax, withholding, gift tax, Social Security
Set 3-individual income tax, balanced budget, tax return, discretionary spending, tax incentive, mandatory spending, tax exempt, Medicare, tax assessor, tariff, tax base, personal property

Short Answer
1. Explain what has happened to most of the large centrally planned economies. Why has this has happened?
2. How does the budget percentage that a person spends on a certain good affect the elasticity of demand for that good? Give a specific example.
3. What are some of the advantages of opening a franchise business?
4. Explain what the gold standard is and why it is no longer used in the United States.
5. Describe the four phases of the typical business cycle.

Essay
1. Write two paragraphs that explain how governments can use a variety of tools to manage the economy.
2. Compare the following investment instruments: stocks, bonds, and mutual funds by analyzing their advantages and disadvantages. Explain how a 25 year-old’s investment strategy may differ from a 50 year-old’s strategy. Lastly, explain the concept of a diversified investment portfolio and its value to investors of any age.
3. Explain the different business structures available in the United State today. Compare their advantages and disadvantages by providing examples of types of businesses that would likely use each of the structures explained in the first part of the questions.
4. Explain the differences between a free market, centrally planned economies, and socialistic economies as found in Sweden. Which economy is better for the most people? Why?
5. Explain the benefits of international, low-tariff trading to the world economy and to individual countries. Also explain what developed countries should do to help less developed countries (LDCs)?