American Economic System Flashcards
command economy
economic system wherein the government makes all economic decisions
commonly associated with communist countries
characteristics of command economy
means of production controlled by government
prices set by government
job security ensured by government
less freedom for individuals
problems with command economy
less incentive
quality problems
less choice for consumers
market economy
capitalism
free-enterprise system
economic system wherein individual consumers and producers make basic economic decisions based upon principles of supply and demand
commonly associated with democracy
characteristics of market economy
private property is essential
entrepreneurs are encouraged
capital is necessary
dependent on competition
means of production is controlled by individuals
globalization
growing integration of national economies that is leading to a more interdependent global economy
causes of globalization
human nature drives people to want to work together
improved technology
end of Cold War
policy changes by governments
costs of globalization
corporatization
offshoring
outsourcing
offshoring
pulling people from other places to do jobs in a country
outsourcing
moving jobs to people of another country to do it in their country
macroeconomics
study of economics that is concerned with economics as a whole with basic subdivisions
microeconomics
study of economics that is concerned with specific economic units and detailed consideration of the behavior of these units
standard of living
measurement of how effective an economy meets needs by looking at purchasing power and quality of life (based on leisure time)
full employment
maximum number of those willing to work in suitable jobs
inflation
general rise in price of goods and services
determination of needs
comparison of countries
comparison of classes
needs change over time
production possibilities curve
shows possible combinations of 2 types of goods that can be produced when available resources are employed fully and efficiently
efficiency
production of maximum possible output from available resources
opportunity cost
value of best alternative that must be passed up
measurement of opportunity cost
dollars
personal choice based on preference
problems with opportunity cost
humans defy logic
humans can make decisions based on incorrect or misleading information
variance of opportunity cost
based on person
based on options
sunk cost
expense that has already been incurred and cannot be recovered
demand
amount of goods or services that consumers are willing and able to buy at specific prices
law of demand
states that the proportion of price and demand is inverse
factors which influence demand
tastes and preferences of consumers
number of consumers
income of consumers
price of related goods
consumer expectations for future price and income
supply
amount of goods or services that producers are willing and able to sell at specific prices
law of supply
states that the proportion of price and supply is direct
factors which influence supply
number of sellers
advancement of technology
change in resource prices
change in expectations for future prices
change taxes or subsidies
change in prices of other goods
equilibrium of supply and demand
point of price and quantity at which supply and demand are in balance
importance of equilibrium of supply and demand
no resources are wasted at equilibrium of supply and demand
location of shortage on graph of supply and demand
location of surplus on graph of supply and demand
gross domestic product (GDP)
measurement of amount of goods and services that an economy produces within a year
John Maynard Keynes
provided basis of fiscal policy
Jerome Powell
current chairman of Federal Reserve System
Adam Smith
author of The Wealth of Nations
ideas gave basis of capitalism
Karl Marx
author of Das Kapital
focused on role of worker in economy
ideas gave basis of communism
