Final Study Guide Prentice Hall

CONOMICS STUDY GUIDE
CHAPTERS 1 – 18 (Prentice Hall text)

Chapter 1 – What is Economics
Section 1
Define economics.
Explain why scarcity and choice are basic problems of economics.
Describe the three factors of production and the two types of capital.
Section 2
Explain the relationship between trade-offs and opportunity costs.
Describe the different types of economic products.
Section 3
Explain the information provided by a production possibility curve and the factors that affect it.

Chapter 2 – Economic Systems
Section 1
Identify the three key economic questions.
Describe the characteristics, advantages, and disadvantages of the traditional, command, and market economies.
Section 2
Explain why markets exist.
Explain the circular flow of economic activity.
Identify the advantages of a free market economy.
Section 3
Describe how a centrally planned economy is organized.
Identify the problems of a centrally planned economy.
Section 4
Explain the rise of mixed economic systems.

Chapter 3 – American Free Enterprise
Section 1
Describe the tradition of free enterprise in the U.S. and the constitutional protections that underlie it.
Explain the basic principles of the U.S. free enterprise system.
Describe the role of the consumer and government in a free enterprise system
Section 2
Explain how the government tracks and seeks to influence business cycles.
Section 3
Identify examples of public goods.
Explain how the government allocates some resources by managing externalities.
Section 4
Summarize the U.S. political debate on ways to fight poverty.
Describe the main programs through which the government redistributes income.


Chapter 4 – Demand
Section 1
Explain the law of demand.
Understand how the substitution effect and the income effect influence decisions.
Section 2
Explain the difference between a change in quantity demanded and a shift in the demand curve.
Explain the causes of a change in quantity demanded.
Explain the factors that could cause a shift in the demand curve.
Section 3
Explain the concept of demand elasticity and how to calculate it.
Identify when demand curves are elastic and inelastic.
Identify factors that affect elasticity.

Chapter 5 – Supply
Section 1
Explain the law of supply.
Interpret a supply graph.
Explain the relationship between elasticity of supply and time.
Section 2
Explain how firms decide how much labor to hire to produce to a certain level of ouput.
Identify the types of production costs.
Section 3
Explain factors that can create changes in supply.
Identify three ways that the government can influence the supply of a good.

Chapter 6 – Prices
Section 1
Explain how supply and demand create balance in the marketplace.
Describe price ceilings and price floors and explain their effects.
Section 2
Identify the determinants that create changes in price.
Describe how a market reacts to a fall in supply or a shift in demand.
Section 3
Explain the advantages of using prices as a way to allocate economic products.
Explain problems that arise with a command economy, such as rationing, shortages, and black market.

Chapter 7 – Market Structures
Section 1
Explain the four conditions of perfect competition.
List two common barriers that prevent firms from entering a market.
Section 2
Explain monopolies and how they are formed, including government monopolies.
Section 3
Describe characteristics and give examples of monopolistic competition.
Explain how firms compete without lowering prices.
Describe the characteristics and give examples of oligopoly.
Section 4
Summarize three market practices that the government regulates or bans to protect competition.
Define deregulation and list its effects on several industries.

Chapter 8 – Business Organizations
Section 1
Describe the characteristics, advantages, and disadvantages of the sole proprietorship.
Section 2
Explain the different types of partnerships.
Describe the advantages and disadvantages of partnerships.
Section 3
Describe the characteristics, advantages, and disadvantages of corporations.
Identify types of corporate combinations.
Section 4
Explain how a business franchise works.
Identify different types of cooperative organizations.
Summarize the purpose of nonprofit organizations and the different types.

Chapter 9 –Labor
Section 1
Describe how trends in the labor force are tracked.
Section 2
Explain the relationship between supply and demand in the labor market.
Identify the relationship between wages and skill level.
Explain reasons for the discrepancy in pay between men and women.
Describe factors that affect wage levels.
Section 3
Describe the purpose of labor unions.
Explain why union membership has declined.
Describe several ways to resolve labor and management differences.

Chapter 10 – Money and Banking
Section 1
Explain the three uses of money.
Describe the six characteristics of money.
Explain the sources of money’s value.
Section 2
Explain the purpose of the Federal Reserve System.
Describe the protection offered by the FDIC.
Note: American leaders in the early United States wanted to establish a stable banking system in order to promote international trade and economic growth.
Section 3
Explain the functions of financial institutions.
Identify the different types of financial institutions.
Chapter 11 – Financial Markets
Section 1
Explain how investing contributes to the free enterprise system.
Explain how the financial system works to transfer funds from savers to borrowers.
Describe the role of various nonbank financial intermediaries.
Identify the trade-offs among risk, liquidity, and return.
Section 2
Identify three components of bonds.
Identify different types of bonds.
Identify the types of major financial assets and their characteristics.
Section 3
Explain the benefits and risks of buying stockes.
Describe how stocks are traded.
Explain how stock performance is measured.

Chapter 12 – Gross Domestic Product and Growth
Section 1
Explain how Gross Domestic Product (GDP) is measured.
Identify the main limitations of GDP
Section 2
Explain the phases of a business cycle.
Identify four key factors that keep the business cycle going.
Section 2
Explain how unemployment is measured.
Describe five types of unemployment.
Section 3
Describe how economists measure the growth of the U.S. economy.
Identify factors that influence economic growth.

Chapter 13 – Economic Challenges
Section 1
Describe the different types of unemployment.
Describe how full employment is measured.
Section 2
Explain the effects of rising prices.
Explain the use of price indexes to compare changes in prices over time.
Identify the causes and effects of inflation.
Section 3
Define who is poor according to government standards.
Describe reasons for income inequality and poverty.

Chapter 14 –Taxes and Government Spending
Section 1
Describe types of tax bases and tax structures.
Explain the economic impact of taxes.
Identify the characteristics of a good tax.
Identify who bears the burden of a tax.
Section 2
Describe the process of paying individual income taxes.
Identify typical items that can be claimed as a tax deduction, such as home mortgage interest, charitable donations, and some medical expenses.
Describe other types of taxes.
Section 3
Explain the difference between mandatory spending and discretionary spending.
Describe major entitlement programs.
Identify categories of discretionary spending.
Section 4
Explain where state taxes are spent.
Identify major sources of state revenue.
Summarize local government spending and revenue.

Chapter 15 – Fiscal Policy
Section 1
Describe how the government uses fiscal policty as a tool for achieving economic goals.
Describe the impact of fiscal policy decisions on the economy.
Section 2
Summarize the basic principles of classical, Keynesian, and supply-side economics.
Section 3
Explain the importance of balancing the budget.
Explain how the federal deficit is related to the federal debt.
Explain the impact of the federal debt on the economy.

Chapter 16 – The Federal Reserve and Monetary Policy
Section 1
Describe the structure of the Federal Reserve System.
Section 2
Explain the roles of the Federal Reserve System.
Section 3
Describe the process of money creation.
Explain tools of monetary policy.
Section 4
Explain the difference between an easy money policy and a tight money policy, and the conditions for which each is used.

Chapter 17 – International Trade
Section 1
Explain the advantage of international trade.
Section 2
Identify different types of trade barriers and their effects.
Summarize arguments in favor of protectionism.
Section 3
Explain how changes in exchange rates of world currencies affect international trade.

Chapter 18 – Economic Development and Transition
Section 1
Describe what is meant by developed nations and less developed countries.
Section 2
Identify causes and effects of rapid population growth.
Identify the importance of human capital to development.
Identify “brain drain”.
Section 3
Identify sources of funds for economic development.
Section 4
Identify steps in moving from a centrally planned economy toward a free market economy.