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Gov Mid term review Answer Key

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Financial Markets
#1 A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings Stocks
#2 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
#3 The actual profit from an investment after adjusting for inflation Real Return
#4 A measure that examines the weighted average of prices of a number of consumer goods and services, it measures inflation Consumer Price Index
#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
Information
#1 The economic value of an employee's skill set Human Capital
#2 When two parties in a transaction do not have the same information Assymetric information
#3 a problem caused by an person pursuing his own interests rather than the interests of the entity who hired him Principle Agent Problem
#4 Exists when one person does not have to suffer the consequences personally yet can receive rewards Moral Hazard
#5 A paradox in decision analysis in which two individuals acting in their own best interest when given the opportunity to choose between several varying outcomes. As a result of following a purely logical thought process to help oneself, both participants, unkown to one another, find themselves in a worse state than if they had cooperated with each other. However because neither party knew the other's choice, any decision could be the wrong one Prisoner's Dilemna
Government and the Economy
#1 Complete control of an industry by one person or group Monopoly
#2 What is the cost or benefit that affects a party who did not choose to incur that cost or benefit externality
#3 Government has to provide these goods or services because of the free rider problem Public good
#4 what do you call legislation to limit monopolistic behavior? Anti Trust laws
#5 a representation of the relationship between rates of taxation and the resulting levels of government revenue. Laffer Curve
Economics 101
#1 An Economic system where Economic decisions are made by individuals competing to earn profits based on supply and demand Market Economy
#2 economic term referring to the total satisfaction received from consuming a good or service. Utility
#3 an incentive that has an unintended and undesirable result which is contrary to the interests of the incentive makers Perverse incentive
#4 a tax in which the tax rate increases as the taxable amount increases Progressive tax rate. You are going to see a tax chart on the multiple choice section
#5 'process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.' Creative destruction
Surprise!
#1 What would happen to price if the supply of a good decreased? goes up!
#2 a government-imposed price control or limit on how high a price is charged for a product Price Ceiling
#3 Why would some economists oppose raising the minimum wage? I need at least three ECONOMIC reasons I am the judge for the answer. You are going to be asked to respond to Flagstaff's Ballot Initiative 414
#4 A distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders Dividend
#5 Appropriately define Deadweight loss. You may draw on the board if it helps your answer. I am the judge and Jury on this answer: See https://www.google.com/imgres?imgurl=https://upload.wikimedia.org/wikipedia/commons/thumb/f/fb/Deadweight-loss-price-ceiling.svg/2000px-Deadweight-loss-price-ceiling.svg.png&imgrefurl=https://en.wikipedia.org/wiki/Deadweight_loss&h=2000&w=2000&tbnid=yMhkmCtX7BpqHM:&tbnh=160&tbnw=160&docid=lsemGwPf_cjPyM&usg=__BiaXhiINEZnis4GhrgjL31szvBc=&sa=X&sqi=2&pjf=1&ved=0ahUKEwiCtqLgt_PPAhUC0iYKHeayDlsQ9QEIHzAA
Final Question