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Economics Final May 2018 (Practical Personal Financial Info (Taxation,…

- - - - Anchoring Heuristic - Based on a preconceived idea of numbers in relation to a guess
      - Availability Heuristic - "The availability heuristic is a mental shortcut that relies on immediate examples that come to a given person's mind when evaluating a specific topic, concept, method or decision."
      - Loss aversion bias - when people associate not spending to gaining something
        
        Status Quo Bias - "Status quo bias is an emotional bias; a preference for the current state of affairs. The current baseline (or status quo) is taken as a reference point, and any change from that baseline is perceived as a loss."
        
        Overconfidence bias - "The overconfidence effect is a well-established bias in which a person's subjective confidence in his or her judgements is reliably greater than the objective accuracy of those judgements, especially when confidence is relatively high. Overconfidence is one example of a miscalibration of subjective probabilities."
- - - - Positive (EX) Money for doing something
        
        Negative (EX) Taking something for poor performance
        
        Perverse - "Negative unintended consequence"
      - Production Possibilities - Graph
        
        Factors of Production
        
        Land - Land resource used for a business or company
        
        Labor - workers, assembly, customer service etc.
        
        Capital - Money or funds accessable
        
        Microeconomics:"part of economics concerned with single factors and the effects of individual decisions".
        
        Macroeconomics - "the part of economics concerned with large-scale or general economic factors, such as interest rates and national productivity."
  - - - Opportunity cost - What you give up for doing a certain thing
- - - - Voluntary - dental etc.
- - - - Surplus - Fewer used than obtained, capital, materials etc.
      - Shortage - Too little capital, product etc. than needed.
      - Normal Goods - "Demand increases when income increases"
        
        Inferior Good - "Demand decreases when income increases"
        
        Price Elasticity of Demand - "when price is increases, revenue increases etc."
        
        Government price controls
        
        Price Ceilings - "Legal limit how high price can be"
        
        Price floor - "Legal limit how low price can be"
- - - - Human Development Index - Basically how well off you are based on where you live, includes life expectancy, years of education ETC. Better way of telling how a country is than the GDP, EX - China
      - GDP Equation = GDP = C+G+I+NX, C = private consumption G = government spending I = Country's investment NX = net exports
        
        Consumer Price Index - "The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them."
      - Unemployment Rate - "The unemployment rate is a measure of the prevalence of unemployment and it is calculated as a percentage by dividing the number of unemployed individuals by all individuals currently in the labor force. During periods of recession, an economy usually experiences a relatively high unemployment rate."
        
        Frictional Unemployment Rate - "the unemployment which exists in any economy due to people being in the process of moving from one job to another."
        
        Structural Unemployment - "unemployment resulting from industrial reorganization, typically due to technological change, rather than fluctuations in supply or demand."
        
        Cyclical Unemployment - "Cyclical unemployment is a factor of overall unemployment that relates to the cyclical trends in growth and production that occur within the business cycle. When business cycles are at their peak, cyclical unemployment will be low because total economic output is being maximized."
        
        Sectors of the Economy -
        
        Primary Sector - "from the earth, farming etc"
        
        Secondary Sector -"transforms raw materials into sale"
        
        Tertiary Sector - "Production of services"
        
        underground - Not approved by the government, doesn't calculate GDP, against the law
- - - - Fiscal Policy Approach - Adjusting the rates of taxes to benefit a country's economy.
        
        Keynes Vs. Hayek HAYEK - "limited knowledge" KEYNES - Total spending in order to raise the economy out of a recession/depression
        
        Monetary Policy - "process by which the monetary authority of a country, typically the central bank or currency board, controls either the cost of very short-term borrowing or the monetary base, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency."
        
        Confidence Fairy - People think everything is going to be fine Fear Fairy - People don't spend because they're afraid of a recession.
        
        Paradox of thrift - If you're being stingy with money you're just going to hurt the economy more.
        
        Fiat Money - Basically imaginary money printed by the government
        
        Gold Standard - Each dollar is worth its value in Gold.
        
        Fractional Reserve - "Fractional-reserve banking is the practice whereby a bank accepts deposits, makes loans or investments, but is required to hold reserves equal to only a fraction of its deposit liabilities. Reserves are held as currency in the bank, or as balances in the bank's accounts at the central bank."
        
        Federal Reserve - The fed is "In the U.S., the answer lies in the role of the Federal Reserve, or simply, the Fed. The Fed is the gatekeeper of the U.S. economy. It is the bank of the U.S. government and, as such, it regulates the nation's financial institutions." It is designed and organized to monitor the large banks
        
        Reserve Requirement - "Minimum amount of $ that must be held by banks"
        
        Discount Rate - The rate of interest set by the fed
        
        Open market operations - The people make money off of the government by buying from them.