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ECONOMICS EOC REVIEW PART 1

Chapter 1: What is Economics? (pg. 2-21)

1. List and define and provide an example of the 4 main factors of production (resources)

2. List (again) the 4 main factors of production but this time write a short explanation as to how/why each is

important to a business.

3. Define and provide an example of a need

4. Define and provide an example of a want (be able to compare/contrast to a need

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5. Define and provide an example of a good

6. Define and provide an example of a service (be able to compare/contrast to a good)


Chapter 1: What is Economics? (pg. 2-21)

1. Define scarcity.

2. What impact does scarcity have on people? (What does it force them to do?)

3. Define trade-off and provide an example.

4. Define opportunity cost and provide an example.

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5. Identify a possible opportunity cost for each of the following choices: (a.) studying for a test on a

Saturday afternoon (b.) using all the money you received for your birthday to pay for music on iTunes (c.)

spending four hours playing Call of Duty on a Tuesday night (d.) having four slices of pizza for lunch

6. Define Production Possibilities Curve.

Look at the following PPC and answer the questions that follow.

7. What two goods/services is this country producing?

8. How many boats can this country produce if they are making 4,000 trucks per year? What will the

opportunity cost be in it increases its truck production to 7,000 trucks per year?

9. Why would production at point D in the graph represent underutilization of resources?

10. Suppose the curve shifted to the right; what does a shift to the right in the PPC indicate? A shift to the left?

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Chapter 2: Economic Systems (pg. 23-45)

Chapter 3: American Free Enterprise (pg. 49-73)

1. What are the three key economic questions?

2. What are the four types of economic systems?

3. Define and provide advantages and disadvantages for each of the following:

a. Traditional Economy

Advantages:

Disadvantages:

b. Market Economy*

Advantages:

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Disadvantages:

c. Command Economy

Advantages:

Disadvantages:

d. Mixed Economy

Advantages:

Disadvantages:

4. Complete the following chart:

Economic System Three Questions Answered by:

Traditional

Free Market

Centrally Planned

Mixed

5. Define free enterprise (pg. 50)

6. List and define each of the characteristics of the American free enterprise system (9).

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7. Complete the following chart:

Roles of the Government Examples

Regulating Business

Promoting Growth

Providing Public Goods

Providing a Safety Net

*Indicates repetition/importance: Part 4 also asks what a free market is and what the

advantages/disadvantages are


Chapter 2: Economic Systems, Section 1: mainly Societal Goals (pg. 25-27)

Chapter 2: Economic Systems, Section 2: The Free Market (pg. 29-34)

Chapter 2: Economic Systems, Section 4: Mixed Economies (pg. 39-44)

1. List and define the 5 Economic goals/societal values that every society pursues to some degree. (pg.25-

27)

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2. How do self-interest and competition affect the free market? (pg. 33)

3. Explain what Adam Smith meant by the “invisible hand” of the marketplace. (pg. 33)

4. Draw a Circular Flow Model of a Market Economy. (pg. 31)

5. Define Factor Market + Product Market.

6. Define Households + Firms

7. Based on the circular flow model you created, what is the primary item that changes hand in the

monetary flow?

8. What is the role of firms in the free market economy?

9. Draw a Circular Flow Model of a Mixed Economy. (pg. 40)

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10. According to this model, how does the government affect the monetary flow in a mixed economy?

11. Give one example of how the government can interact with a firm in the product market?


Chapter 4: Demand (pg. 85-105)

Chapter 5: Supply (pg. 109-129)

Chapter 6: Prices (pg. 133-147)

DEMAND

1. Define demand (remember, 2 parts).

2. What is the Law of Demand?

3. Does a change in the price of a good cause the demand curve to shift? Why or why not?

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4. List and explain what causes the demand curve to shift (PP DIET).

5. Name at least 3 goods that could be bought as complements to hamburgers.

6. List at least 3 goods that could be considered substitutes for movie tickets.

7. If demand for a good increases, what will happen to the demand for its complement?

8. If demand for a good increases, what will happen to the demand for its substitute?

9. If demand for a good is elastic, what will happen when the price increases?

10. If demand for a good is inelastic, how will a drop in price affect demand for the good?

11. Name the 4 factors that determine a good’s elasticity.

12. Why does demand become more elastic over time?

SUPPLY

13. Define supply.

14. What is the Law of Supply?

15. What factors cause the supply curve to shift?

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16. Analyze and explain the impact on the supply curve for American-made computers for each of the

following events:

a. The government places and excise tax on laptops.

b. An engineer invents a way to produce desktop cases more cheaply

c. European countries end an import quota on American-made computers.

17. Suppose TV networks raise the fees that cable TV systems must pay to show their programs. How would

that affect the supply of programs for cable TV?

a. Do higher fees lead to a change in the quantity supplied or a change in supply?

PRICES (Supply + Demand)

18. Describe how each of the following would affect equilibrium in the egg market:

a. Scientists breed a new chicken that lays twice as many eggs a week.

b. An outbreak of food poisoning is traced to eggs.

c. A popular talk show host convinces her viewers to eat an egg a day.

19. Complete the graph below with the information from the market schedules for bagels provided and then

answer the questions that follow.

Price Quantity

Demanded

Quantity

Supplied

$.50 1400 800

$1.00 1200 900

$1.50 1000 1000

$2.00 800 1100

$2.50 600 1200

$3.00 400 1300

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a. At $3.00 per bagel, how many bagels do you

sell on an average day?

b. At $3.00 per bagel, how much money per day

are you taking in from bagels?

c. At $3.00 per bagel, do you have a shortage or

a surplus of bagels? How many bagels per day

are you throwing away? What would need to

happen to reach equilibrium?

d. At $1.00 per bagel, do you have a shortage or a surplus of bagels? What would need to happen to reach

equilibrium?

e. If the price of per bagel changed from $2.00 to $2.50, is that a change in demand or a change in quantity

demanded?

f. If Dr. Oz expressed grave concern over the connection between bagels and cancer and urged his viewers to

limit all bagel consumption, would that create a change in demand or a change in quantity demanded?


Chapter 8: Business Organizations (pg. 191-213)

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1. Define sole proprietorship.

2. What are its advantages and disadvantages?

3. What is unlimited liability? Why is it the biggest disadvantage of a sole proprietorship?

4. How does the lack of fringe benefits affect the sole proprietor’s ability to run a business?

5. Define partnership.

6. Define assets.

7. What does the term limited liability mean?

8. How do general partnerships, limited partnerships, and limited liability partnerships differ?

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9. What are the advantages and disadvantages of a general partnership?

10. What are the advantages and disadvantages of a limited liability partnership?

11. Define business franchise. (pg. 200-201)

12. What are royalties?

13. What are the advantages and disadvantages of a franchise?

14. Define corporation.

15. What are the advantages and disadvantages of a corporation?

16. What is the financial impact on owners when a corporation is sued and loses its case?

17. What is a dividend? What kind of tax must be paid on dividends received by stockholders?

18. Stocks and bonds allow corporations to expand and invest in human capital. What are the benefits in

investing in human capital?

19. How do horizontal mergers, vertical mergers and conglomerates differ?

20. A major meat producer decides to create a vertical merger that will advertise, “From the stable to your

table.” How could it achieve this goal? What other businesses would it have to acquire?

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21. Which business in a conglomerate earns the most profits? Why is it that conglomerates do not tend to

decrease competition?

22. What is a multinational corporation?

23. How does a multinational corporation benefit consumers and workers?

24. What are the negative impacts of a multinational corporation?

25. A farmer has the choice of selling milk to a multinational food conglomerate or to join other farmers to

form a cheese cooperative.

a. What is a cooperative?

b. What possible benefits does the cooperative provide individual farmers over selling their milk to a

large corporation?

26. Define and give an example of a nonprofit organization.


Chapter 12: Gross Domestic Product and Growth, mainly Section 2: Business Cycles (pg. 315-322)

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1. Label the graph with the four stages of the business cycle.

2. Define each stage (4) of the business cycle.

3. List and describe the four main variables that affect the business cycle.

4. How can interest rates push a business cycle into a contraction?

5. What are the factors that affect the phases of a business cycle in peak periods?

a. Which factor is the most difficult to predict?

6. What is the difference between recession, depression, and stagflation?

7. What major event allowed the US to recover from the Great Depression?

a. With regard to this event, did the government or private sector see the greater spending increase?

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b. Name two goods/services that would have been a part of this increased spending.

8. Why did a 21% credit card interest rate in the 1980s create problem within the business cycle?

a. What happened to the unemployment rate during this period?

b. Why might the government not lower interest rates to spur the economy when inflation is high?

9. Why is the stock market considered to be a leading indicator of economic change?


Chapter 13: Economic Challenges, mainly Section 2: Inflation (pg. 342-348)

1. Define inflation.

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2. Ten years ago you could buy a soda for $0.75. Today the same soda costs $1.25. What factors might have

caused the price of soda to rise?

3. What might cause inflation in food prices?

4. How does inflation influence purchasing power?

5. What is hyperflation?

6. What causes a wage-price spiral, and how does it affect the economy?

7. What are three possible effects of inflation? Explain or give an example of each.

8. Why is the Consumer Price Index (CPI) important?

9. What categories of goods and services are included in the CPI market basket?

a. What is the purpose of including these categories?

b. Why might an individual family experience an inflation rate that is higher than the national

average?

10. Sharp inflation rate increases in 1974 and 1980 were due in part to increases in food and oil prices. Look at

the graph below and then answer the questions that follow.

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a. In what two years was the inflation rate highest?

b. Why was the period from 1974 to 1982 a difficult time for people on fixed incomes?



Chapter 14: Taxes and Government Spending (mainly pg. 364)

Chapter 15: Fiscal Policy, Section 3: Budget Deficits and the National Debt (pg. 408-414)

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1. Define tax. (pg. 364)

2. Describe the purpose of taxation. (pg. 364)

3. Define budget deficit and budget surplus.

4. Define national debt.

5. How might a budget deficit be related to the national debt?

6. What are three possible problems with having a national debt? (pg. 410-411)

7. An earmark is defined as: a provision in Congressional legislation that allocates a specified amount of

money for a specific project, program, or organization

Pork is defined as: government money that is spent on projects done to help the political careers of elected

officials

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*What are the effects of earmarks or pork in the federal budget?

* information is not found in the book.


Chapter 14: Taxes and Government Spending (pg. 364-387)

1. Complete the following chart on the Three Types of Tax Structures.

Type of Tax Description Example Ron’s Taxes on a

$50,000 Income

Mary’s Taxes on

a $150,000

Income

Proportional

Progressive

Regressive

2. Suppose Michelle earns $40,000 per year and Rosa earns $100,000 per year. Under a proportional tax, who

would pay a greater percentage of her income in taxes?

3. Define the following: (pg. 369-374)

a. Sales tax

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b. Estate tax

c. Social Security

d. Income tax

e. Excise tax

f. Gift tax

4. Would a person earning $15,000 per year and a person earning $30,000 per year be in the same federal

income tax bracket? Why or Why not?

5. Suppose Florida imposed a new tax on milk. How would this decision affect the owner of an ice cream

store?

a. How would it affect wealthy customers?

b. Would it affect poor consumers the same way? Why or why not?

6. If you get a part-time job, what taxes will you probably pay on your earnings?

a. How will the government collect these taxes?

7. A direct tax will refer to any levy that is both imposed and collected on a specific group of people or

organizations. An example of direct taxation would be income taxes that are collected from the people who

actually earn their income.

a. Provide another example of a direct tax.

8. Indirect taxes are collected from someone or some organization other than the person or entity that would

normally be responsible for the taxes. A sales tax, for instance, would not be considered a direct tax

because the money is collected from merchants, not from the people who actually pay the tax (the

consumers).

a. Provide an additional example of an indirect tax.

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Chapter 16: The Federal Reserve and Monetary Policy (pg. 419-441)

1. Define fiscal policy (pg. 392)

2. What is expansionary policy? (pg. 395-396)

a. The goal with this policy is to achieve economic growth. How is this achieved?

3. How is contractionary policy different from expansionary policy.

a. The goal with this policy is to reduce economic growth. How is this achieved?

4. How is the Federal Reserve System structured? (pg. 422-424)

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5. Describe the two issues that the Panic of 1907 forced the nation’s banking system to address.

6. What is the role of the Federal Open Market Committee (FOMC)?

a. Why do you think the FOMC is drawn from so many different sectors of the Federal Reserve

Board?

7. Using Section 2: Federal Reserve Functions (pg. 425-428), complete the flowchart below.

Functions of the FED Serve Government Serve Banks Regulate Banks Regulate Money Supply

8. Define money creation. (pg. 429)

9. How do banks create money simply by going about their business making loans? (pg. 429-431)

10. Using Section 3: Monetary Policy Tools (pg. 429-434), complete the table below.

Controlling the Money Supply

Tools To increase it To decrease it

Reserve requirements

Discount Rate

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Open market operations

11. Define easy money supply. (pg. 436)

a. Why would the Federal Reserve enact an easy money policy?

12. Define tight money supply.

a. Why would it enact a tight money policy?


Personal Finance: Fundamentals of Good Credit (pg. PF22-23)

Personal Finance: Ready. Set. Charge? (pg. PF24-25)

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1. List and describe the 3 C’s that determine a credit score.

2. What are the five factors considered in your credit score?

3. What are the effects of having bad credit or no credit at all?

4. What are the advantages to using credit?

5. What are the disadvantages?

6. Look at the credit report below and answer the questions that follow.

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Credit Report

a. What is Maria’s Credit Score? What credit category is she in?

b. How long has Maria been employed in her current position?

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c. What types of credit is Maria using?

d. How much does Maria still owe on her student loan?

e. What is Maria’s monthly payment on her car loan?

f. What is the balance on Maria’s credit card?


Personal Finance: Investing with Dollars and $ense (pg. PF10-13)

Personal Finance: Building Your Portfolio (pg. PF14-15)

Personal Finance: Get Personal with Your Savings Plan (pg. PF18-19)

Personal Finance: Retirement Planning: Me? Now? Why? (pg. PF20-21)

1. How do saving and investing benefit the American economy?

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2. Describe the risk-reward relationship in The Risk Pyramid and provide an investment example at each

level. (pg. PF12)

3. List and describe at least 5 different ways you could save/invest your money.

4. Define liquidity.

a. What are 2 examples of highly liquid investments?

b. What is an example of an investment that is difficult to cash out quickly (lower liquidity)?

c. The more liquid an investment, the (more OR less) interest it pays.

d. The less liquid an investment, the (more OR less) interest it pays.

5. What is the risk/reward difference between a bond and a stock? (pg. 295)

6. Define the three main types of retirement accounts:

a. Social Security

b. IRAs

c. 401(k)s

7. How do IRAs and 401(k)s differ from Social Security in terms on risk and reward?

8. Define the following:

a. Bull market (pg. 296)

b. Bear market (pg.296)

c. Capital gains (pg. 292)

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9. Look at the newspaper stock report below and answer the following questions.

a. How many shares of Dole stock were traded on this day?

b. How did Dole Food’s shares do on this day compared to the previous day’s close?

c. Which companies stock performed the worst on this trading day?

d. Which performed best?

e. Which of the companies listed pays the highest dividend?

f. How many of the companies listed reached their high price for the year on the day the chart was

published? Which companies are they?

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10. The chart below shows the five-year rate of return on different types of investments. Look over the chart

and answer the questions on the left.

a. Which type of investment shows the greatest

potential reward? Why?

b. Which shows the greatest risk? Why?

c. How do 10-year bond s and treasury bills compare

to each other?

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