1139 Definitions + accidental extras Flashcards
method by which economic problems are solved in a society
economic system
system by which economic decisions are made in a government
command system
system by which decisions are made by historical tradition
traditional system
system in which decisions are made in response to supply and demand
market system
systematic study of the production, distribution, and consumption of goods and services
economics
Biblical term for contract
covenant
quantity of goods or services available for sale
supply
desire of potential buyers for goods and services
demand
a single business that is the only source for a product or service
monopoly
union of several corporations who unite to eliminate competition and regulate prices
trust
type of socialism that involves government ownership of businesses and industries
ownership socialism
type of socialism that involves government control of wages and prices
control socialism
excess of total revenue over total cost
profit
excess of total cost over total revenue
loss
means by which value is determined
economic calculation
developed from the writings of Karl Marx
attempts to end capitalism through revolution
has failed in most nations where it has been tried
advocates expropriation of private property without compensation
Communism
advocates a gradual transfer of the means of production to public ownership
developed from the writings of Karl Marx
may allow political freedom and free elections
continues to exist in many nations
Socialism
author of ‘The Wealth of Nations’
Adam Smith
author of Das Kapital and Communist Manifesto
Karl Marx
a small capitalist
petty bourgeois
practice that leads to economic collapse
overexpanded credit
a socialist
Karl Marx
a capitalist
Adam Smith
economic system with a highly controlled market and many government regulations
mercantilism
strongest motivation in trade
self-interest
real price for a good or service
labor
nominal price of a good or service
money
the cost of production
natural price
material used in production
stock
tools or equipment used in production
capital
price at which the product is sold
market price
desire for a product
demand
demand without ability to pay
absolute demand
demand of those willing and able to pay
effectual demand
lack of all types of restraints on trade
laissez-faire
prevents limiting of production to raise prices
competition
According to Adam Smith, government’s only functions are
justice, public works, defense
Karl Marx’s economic model
Capitalism will eventually collapse
Capitalism has an inherent tendency to overproduce
Capitalism has an inherent tendency to expand credit continuously.
Capitalism inevitably produces business cycles.
Eventually a major depression destroys capitalism.
At that point, the proletariat takes over and a new communist society is established.
The new, utopian society had no need for government or money
Because government did not vanish in communist nations, leaders modified Marxism and claimed that a transition stage was necessary
study of individual units of an economy
microeconomics
study of the economy as a whole
macroeconomics
a stable economy
equilibrium
value of income in terms of purchasing power
real wage
value of income in monetary terms
money wage
market value of all final goods and services produced within a nation during one year
gross domestic product
wearing down of buildings, tools, and machines
capital depreciation
continuous increase in average prices of goods and services
inflation
market value of all final goods and services produced by the citizens and businesses of a nation during one yeat
gross national product
income to those who loan money
interest
measure of the change in average prices of common goods and services
consumer price index
payment for the risk factor inherent in any loan
pure profit
payment without regard to variations in interest rates
pure interest
payment for an expected decrease in the purchasing power of money
inflation premium
payment to induce a lender to part with present purchasing power
originary interest
Government _____________ that affect a nation’s economy are an indirect method of attaining _______________ that politicians consider desirable
fiscal policies
macroeconomic goals
These fiscal policies also affect ____________ of businesses and individuals
microeconomic decisions
Macroeconomics focuses of the _________, the _______, and the ___________ and/or ___________
employment level
production level
economic growth
stability of a national economy
The Great Depression was a ___________ caused partly by ____________ and partly by the ____________.
worldwide event
high import tariffs
overpricing of labor
The solution of governments to the Depression was to
inflate the currency
When a currency is inflated, the ________________
real wage drops and the money wage remains the same
The CPI is a measurement of _________, and the cost of the market basket is the gauge of the ___________
inflation
cost of living
Jean Baptiste Say’s law states that ______________________
economy tends toward equilibrium
A ____________ exists among consumers, businesses, governments, and financial institutions
circular flow
J.M. Keynes theory included the idea that _______
a depression occurs because of overproduction
a depression is an example of capitalism’s failure to operate
government spending and inflation stimulate consumption and investment
government should institute deficit spending on public works
credit spending is a virtue
Gross domestic product is
the sum of an economy’s outputs
expressed in units of value
a report of total production for a period of one year
a measurement of final output
The gross domestic product is limited because
it deals with money values as opposed to real values
it does not measure unpaid production
it may reflect an increase in government spending
it does not measure quality
The rate of inflation may be measured as
an annual rate of increase in the average price level
a decrease in the value of money
Methods suggested for reducing inflation
increasing the output of goods and services
eliminating excessive money growth
simply accepting, constant, gradual inflation
Interest rates vary because
loans are for varying lengths of time lenders may search for the best rate the supply of funds and the demand for loans vary there are differing amounts of risks the cost of administering loans varies
