D089 Principles of Economics Practice Updated Exam 2025

Absolute advantage - Correct Answer-The capability to produce more of a given product using less of a given resource than a competing entity absolute quota - Correct Answer-Strictly limiting the quantity of goods that may enter a country accounting profit - Correct Answer-Total revenues minus explicit costs, including depreciation acquisition - Correct Answer-When one firm purchases another Ad valorem tariffs - Correct Answer-Import tax based on a fixed percentage of the assessed commercial value of imported goods adjustable-rate mortgage (ARM) - Correct Answer-A loan a borrower uses to purchase a home in which the interest rate varies with market interest rates adverse selection - Correct Answer-A process in which markets deteriorate when buyers and sellers have access to different or imperfect information; also known as asymmetric information aggregate demand - Correct Answer-An economic measurement of the total amount of demand for all finished goods and services produced in an economy aggregate demand curve - Correct Answer-Shows the total spending on domestic goods and services at each price level aggregate demand-aggregate supply (AD-AS) model - Correct Answer-A model that shows what determines total supply or total demand for the economy and how total demand and total supply interact at the macroeconomic level balanced budget - Correct Answer-When the government spends exactly the same amount as it receives in a given year. bank runs - Correct Answer-When a large number of customers of a bank or other financial institution withdraw their deposits simultaneously over concerns of the bank's solvency barriers to entry - Correct Answer-The legal, technological, or market forces that may discourage or prevent potential competitors from entering a market barter - Correct Answer-Trading one good or service for another without using money base year - Correct Answer-Starting point from which changes in prices are measured basket of goods and services - Correct Answer-A fixed set of consumer products and services valued on an annual basis broadly defined - Correct Answer-Markets that tend to be fairly inelastic and have no good substitutes budget constraint - Correct Answer-Represents all the combinations of goods and services that a consumer may purchase given current prices within his or her given income budget deficit - Correct Answer-When the federal government spends more money than it receives in taxes in a given year budget surplus - Correct Answer-When the government receives more money in taxes than it spends in a year capital goods - Correct Answer-Goods that are used in producing other goods rather than being bought by consumers cartels - Correct Answer-A group of firms that collude to produce the monopoly output and sell at the monopoly price central bank - Correct Answer-The principal monetary authority of a country or monetary union; it normally regulates the supply of money, issues currency, and controls interest rates circular flow model - Correct Answer-An economic model that shows the flow of money and goods through the economy. The most common form of this model shows the circular flow of income between the household sector and the business sector coins and currency in circulation - Correct Answer-The coins and bills that circulate in an economy that are not held by the U.S Treasury, at the Federal Reserve Bank, or in bank vaults collude - Correct Answer-When firms act together to reduce output and keep prices high Command economy - Correct Answer-An economic system in which production, investment, prices, and incomes are determined centrally by a government commodity money - Correct Answer-An item that is used as money, but which also has value from its use as something other than money Commodity-backed currencies - Correct Answer-Dollar bills or other currencies with values backed up by gold or another commodity comparative advantage - Correct Answer-The ability of a party to produce a particular good or service at a lower opportunity cost versus another debit card - Correct Answer-Like a check, it is an instruction to the user's bank to transfer money directly and immediately from your bank account to the seller deficit - Correct Answer-An excess of expenditure or liabilities over income or assets in a given period deficit spending - Correct Answer-A government practice of spending more than revenue collected in a given budget year demand - Correct Answer-Consumers' willingness and ability to consume a given good demand elasticity - Correct Answer-How responsive the quantity demanded is to a change in price in percentage terms demand schedule - Correct Answer-A chart that shows the number of goods or services demanded at specific prices depression - Correct Answer-An especially lengthy and deep decline in output differentiated - Correct Answer-A product that is different from similar ones discount rate - Correct Answer-The minimum interest rate set by the Federal Reserve for lending to other banks Discouraged workers - Correct Answer-Those who have stopped looking for employment due to the lack of suitable positions available Economic indicators - Correct Answer-A statistic about an economic activity economic inefficiency - Correct Answer-When all goods and factors of production are not allocated to serve their highest and best use, minimizing waste and inefficiency