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AP Gov Review Answer Key

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Economics 101
#1 Economics is all about maximizing one's ______________ utility
#2 Alternative that must be forgone in order to pursue a certain action. Put another way, the benefits you could have received by taking an alternative action Opportunity Cost
#3 What are all 6 traits of a Market Economy? No partial points Private Property Markets and Prices Incentives/Self Interest Freedom of choice (this is debatable but is part of the “classic definition”) Competition Limited government role
#4 'process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. Creative destruction
#5 To use price discrimination sellers must be able to prevent ____________, which means they must prevent consumers who buy an item at a lower price from reselling it at a higher price. Arbitrage
Fiscal and monetary policy
#1 _____________ policy is set by congress and the White house. It involves the authority to tax and spend Fiscal
#2 Janet Yellan is one of the primary driver's of setting_______ policy at the ______________ Monetary and Federal Reserve
#3 Funds the bank must hold in cash, either in their vaults or on deposit at a Federal Reserve Bank Reserve Requirement
#4 The buying and selling of government securities through primary dealers by the Federal Reserve in order to control the money supply Open Market Operations
#5 The interest rate charged by the federal reserve to banks for loans through their discount window Discount Rate
Surprises and alphabet soup
#1 The economic value of an employee's skill set Human Capital
#2 ___________________ is when two parties in a transaction do not have the same information. I need the term and an example asymmetric information
#3 What is GDP? words, definition and equation necessary Gross Domestic product, the total value of goods produced and services provided in a country during one year.
#4 What is CPI? words and definition Consumer Price Index: A measure that examines the weighted average of prices of a number of consumer goods and services
#5 The market in which banks can borrow or lend reserves, allowing banks temporarily short of their required reserves to borrow from banks that have excess reserves Federal funds market
Financial Market
#1 The actual profit from an investment after adjusting for inflation Real Return
#2 A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings Stocks
#3 A debt investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate. Bonds
#4 The ability to convert an asset to cash quickly liquidity
#5 The theory that all market participants receive and act on all of the relevant information as soon as it becomes available efficient markets theory
Government and the Economy
#1 What is the cost or benefit that affects a party who did not choose to incur that cost or benefit Externalities
#2 Government has to provide these goods or services because of the free rider problem Public Goods
#3 what do you call legislation to limit monopolistic behavior? Anti-trust laws
#4 what is a Laffer curve and what economic theory support supply side economics
#5 What are all 6 justifications for government intervention in the economy? Also I need a specific example of each one. No partial points Maintaining Legal and social Framework, correcting externalities, providing public goods, redistributing wealth, stabilizing the economy, and regulating competiyion
Final Question