C h.2

Question 1

laws of economics

Answer 1

general rules or principles guiding the production, distribution, and consumption of goods

Question 2

mercantilism

Answer 2

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

Question 3

trade balance

Answer 3

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

Question 4

tarifffs

Answer 4

a tax that a government applies only to foreign goods

Question 5

imperialism

Answer 5

the establishment of colonies and extensive territories created to benefit their mother countries

Question 6

physiocrats

Answer 6

a French group of economic critics known as some of the earliest advocates of laissez-faire economics

Question 7

laissez-faire

Answer 7

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”

Question 8

classical economics

Answer 8

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

Question 9

division of labor

Answer 9

the separation of work into individualized tasks

Question 10

general economic principles that hold true in every economy

Answer 10

1. everything must be worked for
2. value increases when a good is very scarce or useful
3. every society is limited to nature in its capacity to produce goods
4. increased capital efficiency -> increased production
5. division of labor and specialization usually result in increased production

Question 11

mercantilists

Answer 11

early 16th century to end of 18th

Question 12

mercantilism was

Answer 12

a plan intended to control a country’s economy in ways that would give the state greater tax revenues and power in the world

Question 13

mercantilists were

Answer 13

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

Question 14

physiocrats were

Answer 14

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.

Question 15

mercantilists vs physiocrats

Answer 15

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

Question 16

smith found that _____ and ______ were successful in a business

Answer 16

divison of labor; specialization

Question 17

wealth of nation

Answer 17

the accumulated capital made possible by much intelligent work and much saving

Question 18

smith decided that ____ was the most important factor to a nation’s wealth

Answer 18

labor- any work that contributes to the production of goods and services

Question 19

Adam Smith

Answer 19

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.

Question 20

economists aim to increase the ____ of a ______, _______, or ___ _____ _____ which increases the ______

Answer 20

prosperity; people, nation, or the whole world; wealth

Question 21

methods for satisfying economic needs

Answer 21

1. produce more goods from existing resources
2. increase the amount of resources available for the production of goods
3. find new resources to satisfy existing wants
4. make goods already being produced more effective in satisfying wants
5. reduce people’s wants
6. redistribute the goods that are already being produced among the population.

Question 22

the true source of prosperity

Answer 22

diligent work directed by ingenious intelligence allowed to develop under conditions of freedom.