1. Civics-Economics Test Review Test Date 4/22/08 60 Questions/180 Points

2. The Basic Economic Problem  Scarcity  All resources are scarce so all goods and services are scarce.

3. Needs v. Wants  Needs are things that you have to have for survival.  A want is anything else.

4. Goods v. Services  Goods are physical and tangible objects.  Services are actions or activities that a person performs for another.

5. Factors of Production  Land  Labor  Capital

6. Three Basic Economic Questions  What to produce?  How to produce?  For whom to produce?

7. Opportunity Cost  The most desirable alternative to a chosen activity.  Production possibilities graph  Efficiency  Underutilization  Guns or Butter Decision

8. Entrepreneur  Risk-taker that starts a business.

9. Adam Smith  Laissez-Faire  Wealth of Nations

10. Economic Systems  Traditional  Command  Market  Mixed

11. Law of Demand  Consumers will buy more goods and services at lower prices.

12. Law of Supply  Producers will be willing to produce more when they can charge higher prices.

13. Equilibrium  Price where supply and demand are equal (no shortage or surplus)

14. Disequilibrium  Price where supply and demand are not equal (creates a surplus or a shortage)

15. Business Organizations  Sole Proprietorship  Partnership  Corporations (stock/dividends) You should know the percentage each organization represents as well as the advantages and disadvantages.

16. Corporate Mergers  Horizontal  Vertical  Conglomerate

17. Inflation  What is it?  Demand-pull  Cost-push  CPI and market basket

18. Gross Domestic Product  What does it measure?  Export  Import

19. Unemployment  Structural  Frictional  Seasonal  Cyclical  Underemployment

20. Business Cycle  What is it?  Expansionary  Peak  Contractionary  Trough  What happens to GDP and unemployment during each phase?  Recession  Stagflation

21. Monetary Policy  What is it?  Expansionary Purpose  Expansionary Tools  Contractionary Purpose  Contractionary Tools

22. Fiscal Policy  What is it?  Expansionary Purpose  Expansionary Tools  Contractionary Purpose  Contractionary Tools