CH 1 Flashcards
a diagram that views the economy as consisting of households and firms interacting in a goods
and services market and a labor market
circular flow diagram
an economy where economic decisions are passed down from government authority and where
the government owns the resources
command economy
the way in which different workers divide required tasks to produce a good or service
division of labor
the study of how humans make choices under conditions of scarcity
economics
when the average cost of producing each individual unit declines as total output increases
economies of scale
products (goods and services) made domestically and sold abroad
exports
economic policies that involve government spending and taxes
fiscal policy
the trend in which buying and selling in markets have increasingly crossed national borders
globalization
a market in which firms are sellers of what they produce and households are buyers
goods and services market
measure of the size of total production in an economy
gross domestic product (GDP)
products (goods and services) made abroad and then sold domestically
imports
the market in which households sell their labor as workers to business firms or other employers
labor market
the branch of economics that focuses on broad issues such as growth, unemployment, inflation, and trade balance
macroeconomics
interaction between potential buyers and sellers; a combination of demand and supply
market
an economy where economic decisions are decentralized, private individuals own resources, and businesses supply goods and services based on demand
market economy
the branch of economics that focuses on actions of particular agents within the economy, like households, workers, and business firms
microeconomics
policy that involves altering the level of interest rates, the availability of credit in the economy, and the extent of borrowing
monetary policy
system where private individuals or groups of private individuals own and operate the means of production (resources and businesses)
private enterprise
when human wants for goods and services exceed the available supply
scarcity
when workers or firms focus on particular tasks for which they are well-suited within the overall
production process
specialization
a representation of an object or situation that is simplified while including enough of the key features to help us understand the object or situation
theory
typically an agricultural economy where things are done the same as they have always been done
traditional economy
a market where the buyers and sellers make transactions in violation of one or more
underground economy
a market where the buyers and sellers make transactions in violation of one or more government regulations
underground economy
