Name __________________________
Date __________
Economics - 10 wk review
I. Economic Systems
 function of economic system - to produce and distribute goods and services
 Centrally planned - economic system in which the government makes all decisions
 Market - economic system in which individuals make decisions and control the factors of
production
 Traditional - economic system that relies on habit, custom ritual -- children tend to have
the same jobs as parents
 Mixed - combines elements of capitalism and socialism
 China’s economy -- mixed but on the side of centrally planned
 North Korea’s economy -- centrally planned
 guns or butter issue -- gov’t must make decisions about spending money on military or
subsidizing farmers
 opportunity cost - the most desirable alternative given up for a decision
 free-market economy needs govt intervention - to protect consumers and workers
 supply and demand - the driving force in a market economy and determines the price
and quantity of most goods and services produced
 competition - the struggle among producers for the consumers’ business
II. Credit and Loans
 principal - the amount borrowed
 interest - money paid to use credit or borrow money
 term - the length of time to repay a loan
 credit card - revolving access to a fixed sum of money
 loan - borrowing a lump sum of money
 grace period - the time between when you are billed and when you have to pay
 secured loan - borrower must put down collateral -- example house, car
 unsecured loan - no collateral is necessary -- example student loan
 fixed rate - interest rate stays the same throughout term of loan
 adjustable rate - interest rate may change -- may need to adjust household budget
 revolving credit - person can spend up to credit line, and what gets paid off is available
again
 finance charge - interest charged on the amount owed
 benefit of credit – buy things needed now & pay later
 danger of credit – debt!!
 paying only minimum payment - pay more interest and in debt for longer time
III. Investing
 stocks - ownership shares in a company
 bonds - loans investors make to corporations or government
 liquidity - how easily an investment can be converted to cash --- ex high –savings
account, ex low – stock, real estate
 bear market – sluggish market
 bull market – growing market
 blue chip stock – large, well-established US company
 market capitalization - total dollar market value of all of a company’s shares
 diversification - to make up for losses in one area with gains in another
 dividends - what you earn on some stock while you own it
 capital gains - profit made when stock is sold
 capital loss - when you sell stock for less than you bought it for
 stock split - may occur when the price of stock gets too high to make shares more
available/affordable
 Mutual funds – pools investors money together in a variety of investments
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Diversifies investments
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Varying degrees of risk
 Life cycle funds – invest more aggressively early, more conservatively later
 Higher risk = higher potential return
 Investing for growth – over time for growth in market value
 Starting early - can have great effect on money earned
 Higher risk = new companies