EOC Outline and Review Sheet Points Possible:100

Due: Monday Dec 5th, 2022

Directions: Answer the following questions to prepare for your final exam. The
exam counts for 20% of your final grade.

State Standard 1: Construct a circular flow diagram for an open market economy,
including elements of households, firms, government, financial institutions, product and
factor markets.

1) What is the circular flow diagram? Explain how it works in your own words. Insert an
image of a circular flow diagram and label it in the space below:

Image:

Labels: Income →Expenditure→ Income →Expenditure

 2) What are the advantages of a market economy? What are the weaknesses? Benefits of a
market economy include increased efficiency, production, and innovation.

3) Who is Adam Smith? What book did he write? Why is he important? The Wealth of Nations.
4) What is the invisible hand? The invisible hand is a metaphor that describes the unseen
forces of self-interest that impact the free market.
5) What is economic efficiency, economic freedom, economic growth? How do they align
with market economies and the goals of the US Economy? Market economies tend to
favor economic freedom, efficiency and growth with full employment being a desirable
side effect of these choices.
6) How do competition and incentives affect the marketplace? Competition in America is
about price, selection, and service. its benefits consumers by keeping prices low and the
quality and choice of goods and services high.

State standard 2: Analyze production possibilities curves to explain choice, scarcity and
opportunity costs.

7) What is a production possibilities curve/frontier? (You need to be able to explain where

recession and efficiency fall on the curve.) What impact does opportunity cost have on
the production possibilities curve? is a model that captures scarcity and the opportunity
costs of choices when faced with the possibility of producing two goods or services.
8) What are some things that can cause the production possibilities curve to shift out?
advances in technology, changes in resources, more education or training (that's what we call
human capital) and changes in the labor force.
9) What does it mean if the PPC shifts out? What does it mean if it shifts inward? output is
decreasing.
10) What is “opportunity cost”? What are trade-offs? what you give up to get what you want.
11) What is scarcity? Scarcity is one of the key concepts of economics. It means that the
demand for a good or service is greater than the availability of the good or service.

Standard 3: Identify the factors of production and why they are necessary for the
production of goods and services.

12) What are the 4 factors of production? Provide one example of each. land, labor, capital,
and entrepreneurship
13) Give an example of a need. Give an example of a want. a toy, expensive shoes, or the
most recent electronics.
14) What is a good? Service? consistently meeting customers' expectations
15) How do we satisfy needs and wants through the use of goods and services? Consumers
satisfy their wants through purchasing goods and services for consumption purposes.
Standard 4: Compare how the various economic systems (traditional, market, command,
mixed) answer the questions: a) What to produce? b) How to produce? c) For whom to
produce?

16) What are the 3 basic economic questions? What goods and services should be produced to
meet consumer needs. How should they be produced, and who should produce them. Who
should receive goods and services?
17) What are the 3 types of economic systems? Give an example of each. Market economy
("hands off" systems, such as laissez-faire capitalism) Mixed economy (a hybrid that
blends some aspects of both market and planned economies) Planned economy ("hands
on" systems, such as state socialism, also known as "command economy" when referring
to the Soviet model)
18) Who answers the basic economic questions in each economic system? a market economy
19) What are the strengths and weaknesses of each type of economic system? The benefits
of a market economy include increased efficiency, production, and innovation.
20) What is a mixed economic system? A mixed economy is an economy organized with
some free-market elements and some socialistic elements
21) What are the 7 US economic goals? efficiency, equity, economic freedom, full
employment, economic growth, security, and stability.

Standard 5: Define supply and demand, quantity supplied and quantity demanded;
graphically illustrate situations that would cause changes in each and demonstrate how
the equilibrium price of a product is determined by the interaction of supply and demand
in the marketplace.

22) Define the law of demand? The law of demand states that when the price of a product
goes up, the quantity demanded will go down – and vice versa.
23) Define the law of supply? The law of supply is a basic economic concept. It states that an
increase in the price of goods or services results in an increase in their supply.
24) Where is the equilibrium point on a supply and demand graph? What does equilibrium
represent? Equilibrium is the point where demand for a product equals the quantity
supplied.
25) Define elasticity of demand. What is an example of an elastic good? An example of
products with an elastic demand is consumer durables
26) Define inelastic demand. What does an inelastic demand curve look like? a vertical line
in graphical presentations
27) What is an example of an inelastic good? The most common goods with inelastic
demand are utilities, prescription drugs, and tobacco products.
28) What are the determinants of demand? income, price, tastes and preferences, prices of
related goods and services, and expectations
29) What are the determinants of supply? technology, the number of suppliers, expectation
of suppliers, feedback from consumers, increase in tax, high wage rate, etc.
 30) What is an economic shortage? Insert a graph/image of an economic shortage below. a
condition where the quantity demanded is greater than the quantity supplied at the
market price.

Image:

31) What is an economic surplus? Insert a graph/picture of an economic surplus below. the
intersection of the supply and demand curve.

Image:

Standard 6: Examine the four phases of the business cycle (peak, expansion (inflation),
contraction (deflation, unemployment), trough)
 32) What are the 4 stages of the business cycle? Define each. expansion, peak, contraction,
and trough
33) Insert an image of a business cycle.

Image:

34) What are the 4 main economic variables that effect the business cycle? Define each.
expansion, peak, contraction, and trough
35) Define recession and depression. What is the main difference between the two? A
recession is a downtrend in the economy that can affect production and employment, and
produce lower household income and spending.
Standard 7: Explain how the Federal Reserve uses the tools of monetary policy (discount
rate, reserve requirement, open market operations) to promote price stability, full
employment and economic growth

36) What are the functions of the Federal Reserve (the Fed)? managing U.S. monetary
policy, regulating bank holding companies and other member banks, and monitoring
systemic risk in the financial system.
37) What is the name of the group of people in charge of the Fed? How many people belong
to this group? The Board of Governors
38) How many district banks for the Federal Reserve are there? 24 Branches
39) Explain the hierarchy of the Federal Reserve. a central authority called the Board of
Governors located in Washington, D.C., and a decentralized network of 12 Federal
Reserve Banks located throughout the U.S.
40) What is the role of the Federal Open Market Committee in the Fed? The FOMC holds
eight regularly scheduled meetings per year. At these meetings, the Committee reviews
economic and financial conditions, determines the appropriate stance of monetary policy,
 and assesses the risks to its long-run goals of price stability and sustainable economic
growth.
41) How does the bank create money? when they lend the rest of the money depositors give
them.
42) What tools can the Fed use to affect the money supply? reserve requirements, the
discount rate, and open market operations.
43) In what way could each tool be used to increase or decrease the money supply? A rise in
reserve ratio decreases the money supply and a fall in reserve ratio increases the money
supply into an economy
a) Reserve requirement: Decreasing the reserve requirement = the Federal
Reserve is pursuing an expansionary monetary policy.
b) Open Market Operations: Buying government securities (bonds) = used by the
Federal Reserve to move the federal funds rate and influence other interest
rates.
c) Changing interest rates (discount rate, Federal Funds rate): increasing interest
rates = the short-term interest rates

Standard 8: Identify the impact of inflation on society.

44) What is the definition of inflation? the rate of increase in prices over a given period of
time
45) What is purchasing power and how does inflation impact it? It can weaken over time due
to inflation.
46) What is the CPI (consumer price index) used to study? price change experienced by
urban consumers
47) Define “wage-price spiral”. How does it affect prices? wages and prices compete
adjusting upwards
48) What is hyperinflation? What does it often lead to for a nation? a surge in prices for
essential goods—such as food and fuel—as demand outpaces supply.

Standard 9: Compare different forms of business organizations.

49) What are the advantages and disadvantages of each of the following:
a) Sole Proprietorships
b) Partnerships (limited/general)
c) Corporations
d) Franchises
e) Multinational corporations
f) Non-profit organizations
g) Conglomerates
h) Cooperatives
50) What is a horizontal merger? Provide an example of a company that has done Coca-
Cola and the Pepsi beverage division
 51) What is a vertical merger? Provide an example of a company that has done it. merger
between eBay and PayPal.
52) Define assets? things you own that you can sell for money
53) Define unlimited liability? the business owners are personally liable for any loss the
business makes.
54) Define limited liability? a type of legal structure for an organization where a corporate
loss will not exceed the amount invested in a partnership or limited liability company
(LLC).
55) Define royalties? fees that one party pays to another in exchange for the use of their
intellectual property, land or rights.

Standard 10: Differentiate between direct and indirect taxes, and describe the
progressivity of taxes (progressive, proportional and regressive).

56) Define luxury tax. Who is required to pay this tax? a sales tax or surcharge levied only
on certain products or services that are deemed non-essential or accessible only to the
super-wealthy.
57) Define sales tax. Who is required to pay this tax? Each sale, admission, storage, or
rental in Florida is taxable, unless the transaction is exempt
58) Define estate tax. Who is required to pay this tax? a person who dies.
59) Define social security tax. Who is required to pay this tax? Both employees and
employers
60) Define income tax. Who is required to pay this tax? income businesses and individuals
within their jurisdiction generate
61) Define excise tax. Who is required to pay this tax? cigarettes, alcoholic beverages, soda,
gasoline, insurance premiums, amusement activities, and betting,
62) What happens to your tax rate when you pay:
a) Regressive taxes
b) Progressive taxes
c) Proportional taxes
63) What is the difference between a direct and indirect tax? A direct tax is one that the
taxpayer pays directly to the government. These taxes cannot be shifted to any other
person or group. An indirect tax is one that can be passed on-or shifted-to another person
or group by the person or business that owes it.

Standard 11: Analyze how changes in federal spending and taxation affect budget
deficits and surpluses and the national debt.

64) What is a budget deficit? A budget deficit occurs when expenditures surpass revenue and
then up impacting the financial health of a country.
65) What is a budget surplus? A surplus budget is a condition when incomes or receipts
overreach costs or outlays (expenditures).
66) What is “pork” or an earmark (in government spending)? What effect does they have on
the federal deficit and debt? Earmarks have often been treated as being synonymous
 with "pork barrel" legislation. Despite considerable overlap, the two are not the same:
what constitutes an earmark is an objective determination, while what is "pork-barrel"
spending is subjective. One legislator's "pork" is another's vital project.
67) What is the purpose of taxes? provide revenue for federal, local, and state governments
to fund essential services--defense, highways, police, a justice system

Standard 12: Describe the risk and return profiles of various investment vehicles and the
importance of diversification.

68) Define the following types of investments. Does this type of investment have high risks or
low risks associated with it?
a) Stock
b) Bonds
c) Mutual fund
d) Certificate of deposit
e) Savings account
f) Money market account
69) What is a dividend? if a company issues a stock dividend of 5%, it will pay 0.05 shares for
every share owned by a shareholder.
70) What is liquidity? Liquidity refers to how quickly and easily a financial asset or security
can be converted into cash without losing significant value.
71) What is diversification? Explain the effect of diversification on risk. the process of
allocating investments across different assets or markets to reduce risk and maximize
returns.
72) What is a Roth IRA? an Individual Retirement Account to which you contribute after-tax
dollars.
73) What is a Traditional IRA? an account to which you can contribute pre-tax or after-tax
dollars
74) How are Roth and Traditional IRAs different? With a Roth IRA, you contribute after-tax
dollars, your money grows tax-free, and you can generally make tax- and penalty-free
withdrawals after age 59½. With a Traditional IRA, you contribute pre- or after-tax dollars,
your money grows tax-deferred, and withdrawals are taxed as current income after age
59½.
75) What does it mean if a bond or CD reaches maturity? the owner is repaid its par, or
face, value.
76) What is a “bull” market? What is a “bear” market? A bear market is a 20% downturn in
stock market indexes from recent highs. A bull market occurs when stock market indexes
are rising, eventually hitting new highs.
NOTE: STUDY THE STOCK TICKER AND BE ABLE TO EXPLAIN WHETHER OR NOT A
COMPANY LOST MONEY OR MADE A PROFIT, HOW MUCH THE STOCK IS TRADING
FOR, WHAT WAS THE HIGHEST PRICE? Key Takeaways. When a stock tumbles and an
investor loses money, the money doesn't get redistributed to someone else. Drops in account
value reflect dwindling investor interest and a change in investor perception of the stock.
Standard 13: Discuss that lenders can pay to receive a borrower’s credit score from a
credit bureau and that a credit score is a number based on information in a credit report
and assesses a person’s credit risk.

77) What are the 3 types of credit? revolving credit, installment, and open credit.
78) What are the 3 C’s of credit? Character, capital (or collateral), and capacity
79) What does it mean to have “no credit”? you don't have active credit accounts reported to
the credit bureaus, or your history is too limited to calculate your credit score.
80) How do you create “bad credit”? Failing to stick to the credit agreement.
81) Explain what each of the following is:
a) A credit cards
b) A debit cards
c) A secured card
d) A charge cards
82) What is interest? How does it affect the repayment of debt? The interest rate is the cost
of debt for the borrower and the rate of return for the lender.