Milestone STUDY GUIDE Name:

FUNDAMENTALS

1. (F1a) Define scarcity. What is the importance of scarcity to economics?

2. (F1b) Define the 4 productive resources, a.k.a. factors of production.

3. (F1c) Profit is an obvious motivator for entrepreneurs. What are other motivations for entrepreneurs?

4. (F4c) Evaluate the nine “9” strategies for allocating (price, majority rule, contests, force, sharing, lottery, authority, first-come-first-served and personal characteristics) scarce resources based on the criteria of efficiency and equity.

5. (F1d) What is opportunity cost? What is your opportunity cost for working on this study guide?

6. (F2a, b) Using an example, explain rational decision making with the terms marginal benefit and

marginal cost.

7. (F4) What three questions must every society answer because of scarcity?

8. (F3a) Why do individuals and businesses specialize? Give an example of specialization. How does division of labor assist in specialization?

9. (F3b) Define voluntary exchange. Describe the benefits and reasons for voluntary, non-fraudulent exchange.

10. (F2c) Give an example of where a positive and/or negative incentive was used in attaining a desired result.

11. (F4a,b) Compare a market, command, traditional and mixed economic systems using the following

grid.Market Command Traditional Mixed

Define each

Role of private ownership and government

Role of government regulation

Role of competition

Role of consumer sovereignty

Align the broad social goals (efficiency, freedom, security, equity, growth, price stability, full employment and sustainability) withthe economic system in which they would most likely dominate.

12. (F5b) How does government regulation and deregulation impact producers and consumers?

13. (F5a) Provide real world examples of the following: public goods, public services, government redistribution of income. Why does the government do this?

14. (F5a) How and why does the U.S. government protect property rights?

15. (F5a) What is a market failure? How does government resolve these?

16. (F6a, b, c) What is productivity? What effect would investments in physical and human capital have on productivity, economic growth and standards of living?

17. (F6d) Using a production possibility curve model, illustrate trade-offs, opportunity costs, economic growth and efficiency. Yep, that is four”4” separate things to show.

MICROECONOMICS

18. (MI1a) Define resource (factor) market. How is this different from a product market? Give an example of a real life transaction in each market.

19. (MI1a, b) Draw the circular flow of economic activity that shows the relationship among households, firms, product markets, and factor/ resource markets.

20. (MI2a) Draw a fully labeled demand curve. Describe the relationship between the appearance of this curve and the Law of Demand.

21. (MI2a) Draw a fully labeled supply curve. Describe the relationship between the appearance of this curve and the Law of Supply.

22. (MI2c) Discuss how prices serve as incentives to both the buyer and the seller. What is a market-clearing price?

23. (MI2b) Illustrate on 2 separate graphs, the difference in a change in QUANTITY demanded and a change in demand.

24. (MI2b) Illustrate on 2 separate graphs, the difference in a change in QUANTITY supplied and a change in supply.

25. (MI2d) Draw a model of a market and label the equilibrium price as P*. Why is this price so awesome?

26. (MI2e) Draw a model of a market in which there is a decrease in supply. What happens to equilibrium price and equilibrium quantity when this occurs? List 6 things that will make supply change (shift in supply).

27. (MI2f) Draw a model of a market in which there is an increase in demand. What happens to price and quantity when this occurs? List 4 things that will make demand change (shift in demand).

28. (MI2g) Define and give an example of a price ceiling. Illustrate on a graph how a price ceiling will create a shortage. Will this price be too high or too low?

29. (MI2g) Define and give an example of a price floor. Illustrate on a graph how a price floor will create a surplus. Will this price be too high or too low?

30. (MI3a) Using the criteria provided, compare and contrast sole proprietorships, partnerships, and corporations.

# of owners Degree of liability Lifespan of Firm Decision making within the firm

Taxation for the firm

Sole Proprietorship

Partnership

Corporation

31. (MI3b) List characteristics and give examples of the 4 types of market structures. Rank the market structures from least competitive1, to most competitive 4.

Characteristics Examples / RankPure (perfect) competition # of sellers:

Barriers to entry:

Price control:

Product differentiation:

Monopolistic competition # of sellers:Barriers to entry:

Price control:

Product differentiation:

Oligopoly # of sellers:Barriers to entry:

Price control:

Product differentiation:

Monopoly # of sellers:Barriers to entry:

Price control:

Product differentiation:

MACROECONOMICS

32. (MA1a) What is price stability, full employment and steady or sustainable economic growth? Why are these goals of policy makers?

33. (MA1b) Define GDP. What is its significance? Describe the components of GDP when using the output or expenditure model.

34. (MA1c)What is real GDP? Don’t just tell me the acronym …why is this used?

35. (MA1c) Define CPI. Don’t just tell me the acronym … why is this used?

36. (MA1c)What are the qualifications for being unemployed? What is the significance of the unemployment rate? Define full employment (aka natural rate of unemployment).

37. (MA1c) Use an AD/AS graph to show changes in economic growth, unemployment and price stability.

38. (MA1d) Give 2 examples of groups who benefit from unanticipated inflation and 2 groups who lose from unanticipated inflation. Why does this happen?

39. (MA1e) Define seasonal, structural, cyclical and frictional unemployment.

40. (MA1f) Draw and label the stages of the business cycle.

41. (MA1f) Compare and contrast a recession and depression.

42. (MA2a) The 3 functions of money are medium of exchange, store of value and unit of account. What do these mean? How do they work?

43. (MA2b) Describe the organization of the Federal Reserve System using the 12 District banks, Board of Governors and FOMC.

44. (MA2c,d) What is monetary policy? List and define the 4 tools available to the Fed to control monetary policy.

45. (MA2e) What is the Fed’s “dual mandate?”

46. (MA2e) Name 4 ways in which the Fed could fight inflation.

47. (MA2e) Name 4 ways in which the Fed could fight a recession.

48. (MA3a,b) What is fiscal policy? How can it be used to combat inflation? How can it be used to combat recession?

49. (MA3c) What is a budget surplus? budget deficit? How do these impact the national debt?

INTERNATIONAL ECONOMICS

50. (IN1a) What is the difference between absolute and comparative advantage?

51. (IN1b) Why does international trade occur? What is the significance of specialization in international trade?

52. (IN1c) Define balance of trade. What is a trade surplus? What is a trade deficit?

53. (IN2a) Tariffs, quotas, embargoes, standards and subsidies are often considered trade barriers. Why?

54. (IN2b) What are the costs and benefits of trade barriers to domestic consumers and producers over time?

55. (IN2c) Why do nations form trading blocs such as the European Union, NAFTA or ASEAN?

56. (IN2) How are trade blocs different from barriers to trade?

57. (IN2d) Give at least two arguments for and two arguments against free trade.

58. (IN3a) What is an exchange rate? How are exchange rates determined?

59. (IN3b)What will make a currency appreciate (stronger)? What will make a currency depreciate (weaker)?

Year Japanese yenPer U.S. dollar

2000 107.732002 124.09

60. (IN3b) Using the chart above, has the US dollar appreciated or depreciated against the Japanese yen? Why or how?

61. (IN3c) A currency’s depreciation and appreciation can impact international trade and consumer’s behavior. Who are the winners and losers of changes in exchange rates?

PERSONAL FINANCE

62. (PF1a) Using a rational decision making model, evaluate the costs and benefits of post-high school life choices… (i.e. college, workforce, technical schools).

63. (PF1b) Create a saving / investing plan for a future goal. List the goal and your strategies for attaining this investment goal. (see your Budget-O-Rama project).

64. (PF2) What role do banks play in society?

64. (PF2a) Payday lenders, title pawn shops, banks and credit unions are all considered financial institutions. Compare services provided by all. Which provides the most services at the best rate? Which the least at the worst rate?

65. (PF2b) Why do banks and credit unions charge more in interest rates for loans than they give on savings and investing accounts?

66. (PF2c) What is the FDIC? NCUA? Why are they important?

67. (PF2c) Concerning investing, what is the relationship between risk and return? If I say, “I have a can’t miss way for your to double your money.” You should say….?

68. (PF2d) Distinguish between the different types of investment options listed. Where does each fall with respect to degree of risk associated? Are they relatively safe or risky? Why?

Description / definition Conservative (safer)-------aggressive(risky)Savings account

Certificate of deposit

Bonds

Stocks

Mutual funds

69. (PF2d) 401k plans, IRAs, Roth IRAs are all examples of ? Pick one and give an example of how it works.

70. (PF3) What is a tax? How does it impact your spending and savings choices?

71. (PF3a) Define progressive, proportional and regressive taxes. Give an example of each.

72. (PF3b) Explain how an increase in sales tax affects different income groups.

73. (PF3c) What is property tax? (don’t say it is a tax on property) Where does one encounter this and how does it impact communities?

74. (PF4) Discuss at least two advantages and two disadvantages with using credit.

75. (PF4a) How is your credit worthiness determined? Why is it important? What are the 3 C’s of credit?

76. (PF4b) Why should individuals consider interest rates charged when shopping for loans and credit cards? Which financial institutions might charge high rates? Which would charge low rates?

77. (PF4c) Define annual percentage rate (APR)? Where are you likely to see APR?

78. (PF4c) What is simple interest? Compound interest? When would you prefer to see each?

79. (PF4c) What are the differences in fixed and variable interest rates?

80. (PF5b) Why buy insurance? Any insurance. Express your answer using shared liability and asset protection.

81. (PF5a) What kind of insurance can one buy to cover personal property?

82. (PF5a) How are health, disability and life insurance different?

83. (PF5b) Define premium and deductible as they apply to insurance. What is the trade-off between these?

84. (PF6a) Identify what some may call interpersonal or soft skills needed for successful employment.

85. (PF6b) How are education (human capital), employment and income related?