economics cram kit

Download Economics Cram Kit

Post on 10-Apr-2015

2.168 views

Category:

Documents

2 download

Embed Size (px)

TRANSCRIPT

the World

Scholars Cup

ECONOMICSCRAM KITI. II. III. V.

WHAT IS A CRAM KIT?................................................................. 2 CRAMMING FOR SUCCESS 2 CURRICULUM OVERVIEW............................................................ 2 MICROECONOMICS....................................................... 8

IV. FUNDAMENTAL ECONOMIC CONCEPTS................................ 3 VI. MACROECONOMICS........................................................ 16 VII. INTERNATIONAL ECONOMICS.................................................. 28 VIII. CRUNCH KIT.....................................................................................31 IX. ABOUT THE AUTHOR.................................................................... 35 BY EDITED BY

DEAN SCHAFFERSTANFORD UNIVERSITY TAFT HIGH SCHOOL

SOPHY LEEHARVARD UNIVERSITY PEARLAND HIGH SCHOOL

DEDICATED TO ALPACAS

2009 DEMIDECDemiDec, The World Scholars Cup, Power Guide, and Cram Kit are registered trademarks of the DemiDec Corporation. Academic Decathlon and USAD are registered trademarks of the United States Academic Decathlon Association. DemiDec is not affiliated with the United States Academic Decathlon.

Economics Cram Kit | 2

WHAT IS A CRAM KIT?A Word from the EditorCOMPETITION IS NEARINGThe handful of days before competition can be the most overwhelming. You dont have enough time to review everything, so a strategic allocation of your resources is crucial. Cram Kits are designed with one goal in mind----to provide you with the most testable and most easily forgotten facts. Economics is, in a word, applicableonce you learn to think like an economist, the world will never look the same. On a small scale, everyday actions like deciding whether to eat another slice of pizza stem from economic analysis. On a grand scale, making sense of the current economic crisis requires a firm foundation in basic economics. Dean Schaffer, a legendary Decathlete in his time, will provide you with the last-minute facts and theories that youll need for the economics exam. By the end of this Cram Kit, youll be able to analyze supply and demand to a tee, weigh the pros and cons of fiscal and monetary policy, and ponder big-name organizations like the World Bank.

STRUCTURE OF A CRAM KITThe main body of the Cram Kit is filled with charts and diagrams for efficient studying. Youll also find helpful quizzes to reinforce the information as you review. The Crunch Kit condenses the entire subject into five pages or less of must-know facts. At the very end of the Crunch Kit, youll find a series of glossary-like lists to help you distinguish among different names and terms. Last, but not least, remember to relax. In the final moments before you open your test booklet, confidence is your most important asset. Good luck and happy cramming!

Sophy Lee

CRAMMING FOR SUCCESSA Word from the AuthorOVERVIEWSUMMARY The very nature of the economics event makes this guide a little different from the others. Since theres no given curriculum for 85% of the event, earning a high score is dependent on learning a broad swath of economic knowledge. Thats where this guide comes in. The USAD Economics Basics Guide is a pretty pathetic excuse for a study tool, which is probably why this Cram Kit is now sitting in front of you. Studying economics certainly requires more discipline and willpower than studying the other subjects because you quite simply have to do most (if not all) of the work on your own. That being said, I commend you for picking up this guide. Since economics can certainly be difficult, Ive included a large number of examples and graphs to make key concepts and ideas as clear as possible. Unlike in other events, concepts are just as important as terms in economics. As you prepare for competition, try to gain an understanding of the terms youre trying to memorize. Youll need this comprehension to conquer the inevitable question that comes out of nowhere. So, study hard and good luck! May you have a perfect competition! -- Dean 15% 10% 30% 30% 15% Fundamental Concepts Microeconomics Macroeconomics International Economics French Economics

PIECES OF THE ECON PIE

TIME IS TICKING!If you have one day left, read the whole guide. * If you have one hour left, read the Crunch Kit. * If you have one minute left, scan the List of Lists * If you have one second left, good luck.

Economics Cram Kit | 3

FUNDAMENTAL ECONOMIC CONCEPTSScarcity and Factors of ProductionINTRODUCING ECONOMICS AND COSTSWHAT IS ECONOMICS? A social science that attempts to determine the optimal way to satisfy unlimited wants with scarce resources. THE BASIC ECONOMIC PROBLEMChoices and TradeOffs

FACTORS OF PRODUCTIONSUMMARY Factors of production are used to produce goods and services to satisfy wants. They are also called productive resources and inputs. THE FOUR FACTORS 1. Land: land and natural resources extracted from the land 2. Labor: the human effort required to produce a good or service 3. Capital: final goods used to produce other goods 4. Entrepreneurship: the combination of the other three factors of production to produce a good or service Factor Land Labor Capital Payment Rent Wages Interest Profit Examples Coal, oil, trees Writing this Cram Kit Industrial machinery DemiDec Dan

Unlimited Wants

Scarce Resources

To decide which wants to satisfy with scarceresources, individuals ultimately try to maximize utility, or satisfaction

COSTS OF ECONOMIC DECISIONS Any decision that we make entails a sacrifice. These sacrifices can come in the form of time, money, or both; in economics, they are known as costs. TYPES OF COSTS Name Accounting cost Opportunity cost Total economic cost;

Explanation Monetary cost incurred Value of the next-best alternative to the chosen decision Accounting cost + opportunity cost

A.K.A. Explicit cost Implicit cost N/A

Entrepreneurship

MISCELLANEOUS NOTES

The productivity of labor can be increased byinvesting in human capital through education or training

Entrepreneurship involves risk-taking, sincebusinesses may fail

POP QUIZCosts in Action! The next time you head to the movies, think about these costs: Accounting Cost The price of the movie ticket Opportunity Cost The benefit of studying economics instead Economic Cost The sum of these two costs QUESTIONS 1. The value of the next-best alternative to a given course of action is called its __________ cost. 2. What is the most fundamental problem of economics? 3. The $20,000 Steve paid for his new car is an example of a(n) _________ cost. 4. The factor payment for capital is known as ________. ANSWERS 5. opportunity 6. scarcity 7. accounting 8. interest

Economics Cram Kit | 4

FUNDAMENTAL ECONOMIC CONCEPTSProduction Possibilities FrontierEXPLAINING THE PPFSCARCITY AND PRODUCTION Because resources are scarce, producers face trade-offs in deciding what to produce. The production possibilities frontier helps us visualize these trade-offs graphically. THE PRODUCTION POSSIBLITIES FRONTIERA Guns E C Butter

APPLICATION: A NATIONS PPFAlpacracyD B

The basic concept: when an agent chooses toproduce more of Good A, he must produce less of Good B Illustrates opportunity costs Graphs different quantities of two goods that an agent can produce with fixed resources Usually bowed outward Can also be linear (see below) PPF (Production Possibilities Frontier) PPC (Production Possibilities Curve)

Points A, B, and C all represent outputs that are100% productively efficient: they are on the PPF itself

Purpose

Point D is unattainable through productionbecause it is outside the production possibilities frontier; Alpacracy can attain this combination through trade

Shape

Common Names

Production at Point E (inside the PPF) indicates arecession in Alpacracy: productive resources are not being utilized as efficiently as possible

PPFs can also shift inward or outwardWhats in a Shape? Curved PPFs are bowed outward due to the law of increasing opportunity costs. Some resources are better suited to producing one good than another. So when a producer begins to focus extensively on capital goods (guns), he starts to use resources which typically make consumer goods (butter). As a result, the producer must expend increasing quantities of resources to produce even smaller amounts of output. PPFs, however, are occasionally linear (straight lines). A linear PPF shows that the two goods use identical resources in production, so the law of increasing opportunity costs doesnt apply. THE GRAPHS Curved PPFGood A Apples

Direction Outward

Meaning Economic growth Reduction in productive capacity

Possible Reasons Discovery of resources; new technology Devastating war; natural disaster

Inward.

READING REVIEWQUESTIONS 1. The production possibilities frontier illustrates the concept of ____________. 2. An economic agent producing at a point on its production possibilities frontier is experiencing _________. 3. In terms of its production possibilities frontier, a nation experiencing high unemployment is ______. ANSWERS 1. opportunity cost 2. 100% productive efficiency 3. producing at a point inside its PPF

Linear PPF

Good B

Oranges

Economics Cram Kit | 5

FUNDAMENTAL ECONOMIC CONCEPTSDecision-MakingDECISIONS ON THE MARGINASSUMPTIONS A central assumption of economics is that economic agents are rational. Rational actors make decisions through cost-benefit analysis and will choose to produce or consume a good when the benefits of doing so exceed the costs. WHAT IS MARGINAL ANALYSIS?

POSITIVE VS. NORMATIVE ECONOMICSD

POSITIVE Concerned with what is Does not involve opinions Can be true or fa