Chapter2 Flashcards
study of how society chooses to employ resources to produce goods and services and distribute them for consumption among various competing groups and individuals.
Economics
Looks at the operation of a nation’s economy as a whole (the whole United States
Macroeconomics
looks at the behavior of people and organizations in markets for particular products or services.
Microeconomics
study of how to increase resources
Resource development
process that turns self-directed gain into social and economic benefits for all.
“Invisible hand”
The economic system that has led to wealth creation in much of the world
Capitalism
combination of freer markets and some government control.
State capitalism
Basic rights of capitalism
Own property
Own a business
Freedom of competition
Freedom of choice
buyers and sellers negotiating prices for goods and services.
Free market
quantities of products manufacturers or owners are willing to sell at different prices at a specific time.
Supply
quantity of products that people are willing to buy at different prices at a specific time.
Demand
where quantity demanded and quantity supplied meet
equilibrium point
exists when there are many sellers in a market and none is large enough to dictate the price of a product.
Perfect competition
large number of sellers produce very similar products that buyers nevertheless perceive as different, such as hot dogs, sodas, personal computers, and T-shirts.
Monopolistic competition
degree of competition in which just a few sellers dominate a market, as we see in tobacco, gasoline, automobiles, aluminum, and aircraft.
oligopoly
occurs when one seller controls the total supply of a product or service, and sets the price.
Monopoly
economic system based on the premise that some, if not most, basic businesses (e.g., steel mills, coal mines, and utilities) should be owned by the government so that profits can be more evenly distributed among the people.
Socialism
loss of the best and brightest people to other countries
Brain drain
an economic and political system in which the government makes almost all economic decisions and owns almost all the major factors of production.
Communism
when the market largely determines what goods and services get produced, who gets them, and how the economy grows. (Capitalism)
Free market
when the government largely decides what goods and services will be produced, who gets them, and how the economy will grow. Socialism and communism are variations on this economic system.
Command economies
exist where some allocation of resources is made by the market and some by the government
Mixed economies
the total value of final goods and services produced in a country in a given year.
Gross domestic product
a measure of total sales volume at all stages of production.
Gross output
refers to the percentage of civilians at least 16 years old who are unemployed and tried to find a job within the prior four weeks.
Unemployment rate
general rise in the prices of goods and services over time.
Inflation
when price increases are slowing
Disinflation
prices are declining.
Deflation
occurs when the economy is slowing but prices are going up anyhow. Some economists fear the United States may face stagflation in the near future.
Stagflation
consists of monthly statistics that measure the pace of inflation or deflation.
Consumer price index
measures prices at the wholesale level.
Producer price index
means the CPI minus food and energy costs.
Core inflation
periodic rises and falls that occur in economies over time.
Business cycles
two or more consecutive quarters of decline in the GDP.
Recession
severe recession, usually accompanied by deflation.
Depression
occurs when the economy stabilizes and starts to grow.
Recovery
to the federal government’s efforts to keep the economy stable by increasing or decreasing taxes or government spending. The first fiscal policy tool is taxation.
Fiscal policy
sum of government deficits over time.
National debt
theory that a government policy of increasing spending could stimulate the economy in a recession.
Keynesian economic theory
the management of the money supply and interest rates by the Federal Reserve Bank.
Monetary policy
