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31 Cards in this Set

  • Front
  • Back
What are the 5 Characteristics of perfect competition?
1)Large # of buys and sellers
2)Buyers and Sellers deal in identical products
3)Each Buyers and Seller act inddependently
4)Buyers and Sellers Free to enter into and conduct
5) and get of out business
What are the 5 types of market failures?
Inadequate competition
Resource Immobility
Public Gooods
What are 4 types of monopolies?
Natural, geographic, technological, and government
Why do private producers fail to provide public goods?
B/c a market economy produces those items that can be withheld if ppl refuse to pay
What is the traditional theory of wage determination?
uses the market forces of supply and demand to explain wage rates
How cam the burden of tax be shifted from goods that have elastic demand?
If the demand for a product is elastic, less of the tax is shifted to the buyer
How can the burden of a tax be shifted for goods that have inelastic demand?
If more of the tax is shifted to the buy then more is inelastic.
Ex of taxes that are based on th ebnefit principle
gas tax
tire tax
Ex of taxes that are based on the bability to pay principle
individual income tax
Ex of taxes that are proportional tax
city occupational tax
Ex of taxes that are progressive
federal income tax
How did the tax reforms of 1980s and the 1990s change the income tax structure
Taxes reduced and brackets wre smaller. death taxes lowered
(check answer)
What are the advantages and disadvantages of value added tax?
Adv- hard to avoid, hard to shif the burden of tax to another group, easy to collect, encourages people to save more
Disadv-tends to be invisible to consumers; it would compete with state sales tax
How can tax cuts impact economic growth?
Tax cuts allow the econ to grow bc ppl put more money back into the econ
Explain 3 ways government spending can impact the econ
Higher interests, higer taxes and bonds
Explain the relationship of the federal deficit to the federal debt
Defcit adds to the federal debt
Identify & explain the 4 ways the federal debt can impact the econ?
Taxes are needed to pay interst on the debt the distribution fo income is altered nd purchasing power is tranfered from th eprivate sector to the public sector
What are ex of transfer payments?
Social security, welfare, unemployment, compensation, and for ppl with disabilities
What are ex of how imcome is redistrubuted in the economy?
By increasing or decreasing transfer payments; gov decides where to make expenditures
What areex of madatory spending and discretionary spending
mand-social security and medicare
discret-military, coast guard,welfare
How does the federal gov raise additional revenue when it is running a deficit?
Action by House-appropriations bill, action by senate-congressional budget office evaluate and projects futrue revnues and expenditures that will result form the legislation, final approval sent to president for signature
What are the disadvantages of a barter econ?
Not all products can be divided into pay
Have to be a "mutual coincidence of wants"
What are the 3 functions of money?
Medium of exchange
Measure of value
Store of value
What are the advantages and disadvantages of a gold standard?
adv-ppl feel more secure if they know it can be converted into gold
prevents gvment from printing too much currecny
disadvantages-godl stock my not grow fast enough. ppl suddenly decide to connvert to gold -drianing gvment gold reserves
When and why did the U.S. go off the gold standard?
bc of the dpression and uncertain times ppl felt safer with godl so they cashed in heir dollard for gold, but the gold standard in 1934.
Why was deposit insurance deeloped in the 1930?
bc of the great depression
Who owns the fed?
privately owned by member banks
What is the sructure of the fed
7 member bard of gov for the fed reserve system. the fed was inteded to operate as a system of 12 independent and = powerful banks
What is th e mosts important responsibility of the fed?
monitoring the reservces of its state chartered banks. the fed also has broad legislative authorty over bank holding companies
identify and explain each of the 3 tools of monetary policy
reserve requirements-gives the feds considerable control over $ supply
Open markets Operations is the buying and selling of gov securtiy in the financial markets
discoutn rate-when the fed charges interest on loans to financia instititues
Hw do changes in affect the cost of credit?
In the short run it would affect interest rates or the price of credit and in the long run it would affect the level of price inflation.