Domain 6 020

Question 1

Scarcity

Answer 1

is one of the key concepts of economics. It means that the demand for a good or service is greater than the availability of the good or service.

Question 2

Opportunity costs

Answer 2

the loss of potential gain from other alternatives when one alternative is chosen.

Question 3

The Circular Flow Model of Economics

Answer 3

can best be described as how resources, money, goods and services flows through an economy.

The circular flow of money moves from households, goods and services, households

Question 4

Capitalism

Answer 4

an economic and political system in which a country’s trade and industry are controlled by private owners for profit.

Question 5

Socialism

Answer 5

a political and economic theory of social organization which advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole

Question 6

Communism

Answer 6

is an economic ideology that advocates for a classless society in which all property and wealth are communally owned instead of being owned by individuals.

Question 7

John Maynard Keynes

Answer 7

British economist born in 1883
Father of macroeconomics

Question 8

Karl Marx

Answer 8

Born in 1818 in Germany
Believed that capitalism provided an advantage to those who are already wealthy because these individuals are able to own the means of production, or the facilities or resources required to produce goods. Poorer members of society don’t have the resources to make a living in this way, so they’re forced to sell their labor to the owning class. (facts)

Question 9

Adam Smith

Answer 9

Considered the father of modern economics
Among the most influential of the Enlightenment economists
Published the Wealth of Nations, in which he argued that economics functioned best when it was free from government interference and regulation.

Question 10

Pure competition

Answer 10

is a marketing situation where many sellers offer similar products for similar prices. In pure competition markets, corporations have little control of a product’s price

Question 11

Trickle down effect

Answer 11

The benefits of the economy will spread out to all members of society. Trickle-down theory states that tax breaks and benefits for corporations and the wealthy will trickle down to everyone else.

Question 12

Absolute advantage

Answer 12

is the ability of an individual or entity to produce a good or service more efficiently than its competitors.

Question 13

Comparative advantage

Answer 13

is an economy’s ability to produce a particular good or service at a lower opportunity cost than its trading partners.

Question 14

Effects of changes in the exchange rate

Answer 14

A lower, or weak, currency value or exchange rate can lead to increased inflation. This results because the lower exchange rate causes higher import prices.
Strong domestic currencies lead to cheaper imports, and a country tends to import more than they export.
When the dollar’s value drops, it costs more to buy goods from abroad, causing import prices to rise. These higher costs can lead businesses to increase prices domestically, contributing to inflation. Essentially, a weaker dollar makes foreign goods more expensive, which can push up overall price levels.