C h.2 Flashcards
laws of economics
general rules or principles guiding the production, distribution, and consumption of goods
mercantilism
an economic system that advocates the building up of the state’s treasury with the goal of accumulating as much bullion as possible; holds that a nation’s wealth lies in its stockpiles of precious metals
trade balance
the difference in value of the goods that a country sells abroad compared to those it purchases from other countries; a favorable balance exists when a country exports more than it imports
tarifffs
a tax that a government applies only to foreign goods
imperialism
the establishment of colonies and extensive territories created to benefit their mother countries
physiocrats
a French group of economic critics known as some of the earliest advocates of laissez-faire economics
laissez-faire
the economic doctrine that a nation’s economy is best left to itself, free from governmental regulation; a French phrase that means “let things alone”
classical economics
the theories developed by the economists of the 19th and early 20th centuries stating that the free market system facilitates the best possible balance between supply and demand
division of labor
the separation of work into individualized tasks
general economic principles that hold true in every economy
- everything must be worked for
- value increases when a good is very scarce or useful
- every society is limited to nature in its capacity to produce goods
- increased capital efficiency -> increased production
- division of labor and specialization usually result in increased production
mercantilists
early 16th century to end of 18th
mercantilism was
a plan intended to control a country’s economy in ways that would give the state greater tax revenues and power in the world
mercantilists were
concerned with trade balance, supported population growth, and worked to establish people in large manufacturing towns to contributed to producing goods for exportation, encouraged domestic manufacturing, discouraged free comp and foreign comp, enforced import restriction and high tariffs, advocated for imperialism
physiocrats were
around middle of 18th century and tried to create a science of the production, distribution, and consumption of goods. classical economics originated from their ideas. they advocated for laissez-faire, unrestricted trade, abolition of special privileges granted to industries by the government, and international trade without heavy taxes. though societies real wealth came from the land not intelligent labor and manufacturing.
mercantilists vs physiocrats
M: restrictions and hi8gh tariffs on importation of foreign goods. P: free trade though no excessive laws.
M:industries need governmental regu7lation, special privileges, and protection. P: industries flourish best when allowed to make their own choices free of governmental regulation
smith found that _____ and ______ were successful in a business
divison of labor; specialization
wealth of nation
the accumulated capital made possible by much intelligent work and much saving
smith decided that ____ was the most important factor to a nation’s wealth
labor- any work that contributes to the production of goods and services
Adam Smith
Lived: 1723-1790
Publication: The Theory of Moral Statements and the Wealth of Nations
Contributions: in Wealth of Nations he emphasized importance of division of labor and a free market to an economy. Invisible hand theory- when individual producers and consumers are left alone to pursue their own interests, they are bought together by an invisible hand to make mutually beneficial choices that are best for both the individual and the society.
economists aim to increase the ____ of a ______, _______, or ___ _____ _____ which increases the ______
prosperity; people, nation, or the whole world; wealth
methods for satisfying economic needs
- produce more goods from existing resources
- increase the amount of resources available for the production of goods
- find new resources to satisfy existing wants
- make goods already being produced more effective in satisfying wants
- reduce people’s wants
- redistribute the goods that are already being produced among the population.
the true source of prosperity
diligent work directed by ingenious intelligence allowed to develop under conditions of freedom.
