basic economy Flashcards
business
an activity that provides goods or services with the purpose of making profit
communism
system with high government control but also high level of services
capitalism
system with low government control but also low level of services
socialism
a free market system with limited government control, average services
perfect competition
small business selling same products, no one controls the price besides supply and demand
demand
the amount ppl are able and willing to buy
supply
the amount of products the producer is willing to produce and sell
how does supply and demand depend on each other and prices?
prices up - supply up (more profit) - demand down (higher prices) - supply down (to avoid surplus)
prices down - supply down (less profit) - demand up (lower prices) - supply up (to avoid shortage)
demand up - supply up and vise versa
demand down - supply down
supply up - demand down
supply down - demand up
equilibrium
a perfect price for both seller and buyer
monopolistic competition
many sellers with slightly different products or seem different
oligopoly
few business selling similar products or services
monopoly
only one seller, can be natural and legal
natural - reasonable
legal - patented
economic goals
growth, price stability, high employment
what is gdp?
gross domestic production, the amount of products produced domestically a year (excluding imported goods or materials, only the final product)
business cycle and definitions
prosperity - economy growth, high employment, more money to spend
recession - economy slowdown, more unemployment, less money
depression (opt.) - massive fall of economy, almost no money, severe recession
recovery - slowly going back to prosperity
full employment
95-85% of the population is employed
unemployment rate
rate of ppl who are able to work and looking for a job but don’t work
price stability
average prices of goods and services stay the same or change a little over a period of time
inflation- when overall price goes up
deflation-when overall price goes down
what is cpi
consumer price index, showing rate of inflation by determining price for a regular basket of goods and comparing the change
economic indicators
statistics that provide valuable information about economy
what are the indicators?
lagging - looking a few months in the past: avg. length of unemployment
leading - predicting 3-12 months in the future based on the data: building permits, manufacturing hours, unemployment insurance
cci
consumer confidence index, people’s opinion on economy, plans for purchases
monetary policy
actions that are taken to decrease or increase money supply/ raise or lower short term interest rates, making it easier or harder to borrow money
contractionary policy- decreasing supply, increasing interest rates = making it harder to borrow money = less money = prices go down
expansionary policy - increasing supply, decreasing interest rates = cheaper to borrow money = more business/people borrowing money = better economy
fiscal policy
powers of spending and taxation
recession - increase spending, lower taxation = more money on ppl’s and businesses’ hands
inflation- vise versa
