Chapter 2 Flashcards
Economics
The study of how a society uses its scarce resources to produce and distribute goods and services
Microeconomics
The sub-area of economics that focuses on individual parts of the economy, such as households or businesses
Macroeconomics
The sub-area of economics that focuses on the economy as a whole by looking at aggregate data for large groups of people, companies, or products
Factors of production
The resources used to create goods and services, including natural resources, capital, entrepreneurship, and knowledge
Labour
Economic contributions of people
Natural resources
Commodities that are useful inputs in their natural state
Capital
The inputs, such as tools, machinery, equipment, and buildings, used to produce goods and services and get them to the customer
Entrepreneurs
People who combine the inputs of natural resources, labour, and capital to produce goods and services with the intention of making a profit or accomplishing a not-for-profit goal
Entrepreneurial thinking
Thinking like an entrepreneur - even those who work in a company
Knowledge
The combined talents and skills of the workforce
Circular flow
The movement of inputs and outputs among households, businesses, and governments; a way of showing how the sectors of the economy interact (study diagram pg. 34)
Economic system
The combination of policies, laws, and choices made by a nation’s government to determine what goods and services are produced and how they are allocated
Market economy
An economic system based on competition in the marketplace and private ownership of the factors of production (resources); also known as the private enterprise system OR capitalism
Command economy
An economic system characterized by government ownership of virtually all resources and economic decision making by central-government planning; also known as planned economy OR central planning
Socialism
An economic system in which the basic industries are owned either by the government or by the private sector under strong government control
Mixed economies
Economies that combine several economic systems; for example, an economy in which the government owns certain industries but the private sector owns others
Market structure
the number of suppliers in a market
Perfect (pure) competition
A market structure in which a large number of small businesses sell similar products, buyers and sellers have good information, and businesses can be easily opened or closed
Monopolistic competition
A market structure in which many businesses offer products that are close substitutes, and in which entry is relatively easy
Oligopoly
A market structure in which a few companies produce most or all of the output, and in which large capital requirements or other factors limit the number of companies
Pure monopoly
A market structure in which a single company accounts for all industry sales and in which there are barriers to entry
Barriers to entry
Factors, such as technological or legal conditions, which prevent new companies from competing equally with a monopoly
Demand
The quantity of a good or service that people are willing to buy at various prices
Demand curve
A graph showing the quantity of a good or service that people are willing to buy at various prices
Supply
The quantity of a good or service that businesses will make available at various prices
Supply curve
A graph showing the quantity of a good or service that a business will make available at various prices
Equilibrium
The point at which quantity demanded equals quantity supplied
Economic growth
An increase in a nation’s output of goods and services
GDP
Gross domestic product:
The total market value of all final goods and services produced within a nation’s borders within a year
GNP
Gross national product:
The total market value of all final goods and services produced by a country regardless of where the factors of production are located
Business cycles
Upward and downward changes in the level of economic activity
Recession
A decline in GDP that lasts for at least two consecutive quarters
Full employment
The condition when all people who want to work and can have jobs
Unemployment rate
The percentage of total labour force that is actively looking for work but is not actually working
Frictional unemployment
Short-term unemployment that is not related to the business cycle (ex. those entering the job market for the first time i.e. university students)
Structural unemployment
Unemployment that is caused by a mismatch between available jobs and the skills of available workers in an industry or region; it is not related to the business cycle
Cyclical unemployment
Unemployment that occurs when a downturn in the business cycle reduces the demand for labour throughout the economy
Seasonal unemployment
Unemployment that occurs during specific seasons in certain industries
Inflation
The situation in which the average of all prices of goods and services is rising
Purchasing power
The value of what money can buy
Demand-pull inflation
Inflation that occurs when the demand for goods and services is greater than the supply
Cost-push inflation
Inflation that occurs when increases in production costs push up the prices of final goods and services
CPI
Consumer price index:
An index of the prices of a “shopping basket” of goods and services purchased by consumers
PPI
Producer price index:
An index of the prices paid by producers and wholesalers for various commodities such as raw materials, partially finished goods, and finished products
Bank of Canada
Canada’s central bank, whose objective is the economic and financial well-being of Canada by creating a sound balance of growth, employment, and price stability
Monetary policy
The measures taken by the Bank of Canada to regulate the amount of money in circulation in order to influence the economy
Contractionary policy
The use of monetary policy by the Bank of Canada to tighten the money supply by selling government securities or raising interest rates
Expansionary policy
The use of monetary policy by the Bank of Canada to increase the growth of the money supply
Fiscal policy
The government’s use of taxation and spending to affect the economy
Federal budget defecit
The condition that occurs when the federal government spends more for programs than it collects in taxes
National debt
The accumulated total of all of the federal government’s annual budget defecits
Crowding out
The situation that occurs when government spending replaces spending by the private sector
Bonds
Securities that represent long-term debt obligations (liabilities) issued by corporations and governments
Relationship management
The practice of building, maintaining, and enhancing interactions with customers and other parties to develop long-term satisfaction through mutually beneficial partnerships
Strategic alliance
A cooperative agreement between companies; sometimes called a strategic partnership
