Flashcard Set Preview
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| 1 |
Four Sectors of the economy
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1.) households2.) businesses3.) International4.) government (Public Sector)
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| 2 |
Functional Distribution of income
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indicates how society's money income is divided among wages, rents, interest, and profits.
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| 3 |
Personal Distrubtion of Income
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how total income is distributed among households
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| 4 |
Three ways househols spend income
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1.) Save2.) Spend3.) Pay Taxes
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| 5 |
Two reasons for saving
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1.) Security --> provide a nest for retirement2.) Speculation --> Purchase securities...
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| 6 |
Three types of personal consumption expenditures
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1.) Expenditures on Durables- items which last more than three years2.) Expenditures on Non-Durables-...
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| 7 |
Define and explain the difference between a plant, firm, and and industry
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1.) Plant- a physical establishment which helps in making and/or distributing of G/S.2.) Business...
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| 8 |
Vertical, horizontal and conglomerate combination of plants
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1.) Vertical Combination of Plants- the firm owns plants at the various stages of the production...
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| 9 |
Three ways the government redistributes income
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1.) Transfer Payments - ex. welfare checks, food stamps2.) Market Intervention- gov modifies...
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| 10 |
Externalities/Spillover effects
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when 2 parties make a transaction and it effects a third party.
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| 11 |
Free Rider Problem
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someone who receives the benefit of G/S without contributing to its cost. Ex: Illegal Immigrants
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| 12 |
Two ways government corrects spillover effects
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1.) Legislation- specific laws designed to make firms responsible.2.) Specific Taxes- Ex: Let...
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| 13 |
Positive Externalities
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Ex: Education benefits society. It leads to a more productive society and less money is needed...
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| 14 |
Public Goods
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G/S Provided by the government
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| 15 |
Three reasons why the government must provide G/S
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1.) Some goods are just too expensiveEx: Patriot Missiles, Highways, etc2.) Exclusion Principle-...
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| 16 |
Government exhaustive expenditures
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directly absorb and employ resources and the resulting production is part of domestic output.ex:...
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| 17 |
Government non-exhaustive expenditures
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contribute nothing to domestic productionex: Welfare payments, Unemployment Compensation
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| 18 |
What are the three types of federal revenue?
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1.) Personal Income Tax2.) Payroll Tax3.) Corporate Income Tax
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| 19 |
Five Economic Functions of Government
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1.) Legal and Social Framework2.) Maintaining Competition3.) Redistribute Income and help solve...
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