Chapter 2

Question 1

Is the study of how society chooses to employ resources to produce goods and services and distribute them for consumption among competing groups and individuals.

Answer 1

Economics

Question 2

Name and describe the two types of economics

Answer 2

Macro economics looks at the operation of a nations economy as a whole

Micro economics looks at the behavior of people and organizations in markets for particular products and services.

Question 3

Define resource development

Answer 3

The study of how ti increase resources and make better use of them.

Question 4

This is the process that turns self directed gain into social and economic benefit for all.

Answer 4

The invisible hand

Question 5

What was the major flaw in Adam Smiths thinking?

Answer 5

That those who generated large amounts of wealth would naturally reach out to those less fortunate.

He underestimated greed.

Question 6

Define capitalism

Answer 6

the economic system where much or most of the factors of production are privately owned.

Question 7

What is State Capitalism

Answer 7

A combination of capitalism with state controls

Question 8

what are the four rights under fire market capitalism

Answer 8

1. Right to own property
2. Right to own a business and keep profits
3. Right to freedom of competition
4. Tight to freedom of choice.

Question 9

What is a free market

Answer 9

One where decisions are based on market demands

Question 10

define Supply

Answer 10

The quantity of products businesses are willing to sell at different prices at a specific time.

Question 11

Define Demand

Answer 11

the quantity people are willing to buy at different prices at a specific time

Question 12

What is the equilibrium point

Answer 12

Is the the supply curve and demand curve meet, this becomes the market price

Question 13

What is Perfect Competition

Answer 13

Enough sellers that no-one controls price and products are similar.

Question 14

What is Monopolistic Competition

Answer 14

Large number of sellers with similar products that are perceived as different through branding and marketing.

Question 15

What is Oligopoly competition

Answer 15

When a few sellers dominate the market with similar products at similar prices.

Question 16

What is a Monopoly

Answer 16

When one seller controls the supply and demand

Question 17

What is Socialism

Answer 17

an economic system where the government should won most basic businesses and distribute profits back to citizens.

Question 18

What is Communism

Answer 18

a political system where the government makes almost all economic decisions and owns most factors of production.

Question 19

What are some drawbacks to Socialism and Communism

Answer 19

1. Fewer freedoms
2. Less incentive for entrepreneurs
3. Higher Taxes
4. Less innovation

Question 20

What is brain drain

Answer 20

When a societies brightest and most capable leave the country because of high taxes and limited freedoms.

Question 21

What’s the difference between free market and command market

Answer 21

Free market allows the market to make decisions about S&D, profits, etc,
Command markets are controlled more by government.

Question 22

what is GDP

Answer 22

Gross Domestic Product, total value of final G&S produced in a country

Question 23

This is considered a better economic health measurement than GDP

Answer 23

Gross Output measures total sales at all stages of production

Question 24

What does the unemployment rate measure

Answer 24

People 16 and up who are actively looking for a job

Question 25

What does the “real unemployment rate” measure

Answer 25

combines unemployment rate with number of under employed, and those who have quit looking

Question 26

What are three economic indicators in the US

Answer 26

The GDP, Unemployment Rate, and Consumer Price Index

Question 27

What is fiscal policy

Answer 27

government efforts to keep a stable economy by raising/lowering taxes and increasing/decreasing gov spending.

Question 28

What is monetary policy

Answer 28

government efforts to keep a stable economy by raising/lowering interest rates and controlling amount of money in circulation.