Chapter 2: Economics Flashcards
macroeconomics
study of a country’s overall economic dynamics, such as the employment rate, the gross domestic product, and taxation policies
microeconomics
study of smaller economic units such as individual consumers, families, and individual businesses
fiscal policy
government efforts to influence the economy through taxation and spending
budget surplus
overage that occurs when revenue is higher than expenses over a given period of time
budget deficit
shortfall that occurs when expenses are higher than revenue
monetary policy
federal reserve decisions that shape the economy by influencing interest rates and the supply of money
What are the responsibilities of the Federal Reserve
-bailing out shaky firms during a financial crisis
-providing banking services for member banks and the federal government
-managing the US monetary policy
open market operations
the FR function of buying and selling government securities, which include treasury bonds, notes, and bills
discount rates
rate of interest that the FR charges when it loans funds to banks
reserve requirement
rule set by the Fed, which specifies the minimum amount of funds a bank must hold, % of the banks deposits
capitalism
private enterprise or free market system-based on private ownership, economic freedom, and fair competition
what are the freedoms of capitalism?
-own a business and keep after tac profits
-own private property
-free choice
-fair competition
Socialism
government should own and operate key enterprises that directly affect public welfare
Communism
economic and political system that calls for public ownership of virtually all enterprises, under the direction of a strong central government
Gross Domestic Product (GDP)
total value of all final goods and services produced within a nations physical boundaries over a given period of time
contraction
period of economic downturn
