Economic Theory In Todays World Flashcards
Basic economic decisions would be made according to the concepts of supply and demand according to what?
A pure market system
In order for business to produce, business would have to go to other markets to secure what?
Resources
Resources would be allocated in a ___________ market and the good and services made with them would be allocated in a ___________ market.
Resource
Consumer
To produce a product a business need what three things?
Labor
Capital
Raw materials
Resources are drawn into production of products that are most in what by consumers?
Demand
An economy operating with a free market system has what sort of economy?
Classical economy
The economy in the US began in the ___________ tradition.
Classical
What is not a problem in a classical system?
Unemployment
A lower wage rate will not be a problem in a classical economy because price always ________ due to lower resource cost.
Fall
A persons purchasing power or real income, remains constant or may even __________ in a classical economy because of lower resource cost.
Increase
Inflation is also not a serious problem in a classical economy because as prices get too high, people stop what?
Buying products
The classical economic system finds a balance between lower ________ and lower ________.
Wages
Prices
The relatively free markets in the US greatly encouraged the ___________ of the country.
Development
The free markets in the US were not _____ ________ and could not solve all the problems a growing population faced
Fool proof
Some goods and services could ______ be provided through a free market system.
Not
Without profit there is no incentive to what?
Produce
The drawback to the classical economic system is that it cannot ________ problems on its own and must be modified.
Correct
No adjustments in a classical economic system happen ___________.
Immediately
Adjustments in a classical economic system don’t happen immediately leading to long period a of what two things?
Decline
Recovery
Fluctuations in economic activity are known as what?
Business cycles
What group tends to be hurt by both inflation and unemployment?
The poor
Periods of alternating inflation and unemployment are a clear violation of what standard since it only hurts the poor?
Equality standard
A second problem in a market system is that producers may be able to ______ some production costs in search of higher profits. (I.e. Water usage, clean air)
Ignore
When’s business is able to dump some of its costs of production on someone else or society it’s called what?
Externalizing costs
A third problem with a market system arises when people are drawn into the work force in __________ fashion.
Unequal
The free market system allows the freedom of people to perpetuate the problem of _____________ in the labor pool.
Discrimination
A fourth problem of a free market system is what?
Income distribution
As more and more income is ____________ in the hands of fewer and fewer people, there is less and less income for others.
Concentrated
In the US over half of all the income in the country goes to the top ______% of households.
20%
In the US about 22% of all income goes to the top _____% of households.
5%
Public school in the US isn’t equal and when compared to 74 other countries, is barely what?
Average
A free economy may not be equal because it depends on the family into which a person is _______ into.
Born
A market system that thrives on competition, also provides the freedom to do what?
Destroy it
Mergers of small companies into bigger ones eliminates price competition therefore not responding to what?
Market forces
Competition reduction shifts the control to the producer and takes away a buyers what?
Freedom
The combination of the free markets problems seems to have culminated during the what?
Great Depression of the 1930s
Pressure to modify the free market system was intense during the what?
Depression of the 1930s
Unemployment reach _____% in the economy of the 1930s.
25%
The economy in the __________ did not seem to be responding as it had in the past.
Depression
Who came up with “new” ideas and saw some of them put into action during the Franklin Roosevelt administration?
John Maynard Keynes
What is the idea that the size of the US Government is large and powerful enough to influence the direction of the economy?
The Keynesian Idea
Keynes argues in depressions that government can spend money creating _______, expanding _________, generating taxes from the income used to spend on the ______ from creating jobs in the first place.
Jobs
Income
Debt
What from individuals and corporations are the main source of revenue for the governments budget?
Taxes
The government sets a budget where tax receipts are less than expenditures. This is known as a what?
Budget deficit
When an economy is bidding up prices government will tax ________ and spend _______. This surplus is used to fund a deficit.
More
Less
During the depression of the 1930s ________ banks collapsed wiping out _______ bullion in deposits.
9,000
140
Who offers temporary public works jobs (sewer project, sidewalk project etc) while the overall economy recovers?
The Works Progress Administration (WPA)
Unemployment insurance and social security are programs designed to avoid problems created by what?
Too little spending
What tax takes a larger percent of a wealthier persons income and a smaller percent of a poorer persons income?
Progressive tax
Income taxes in the US today are what type?
Progressive taxes
Taxes that place a special burden on poorer people are what?
Regressive taxes
What is an example of a regressive tax?
Sales tax
What taxes apply the same tax percentage to all income groups?
Proportional taxes
Proportional tax is proportional mathematically but ____________ socially.
Regressive
The total demand in an economic system is what?
Aggregate demand
What is the term for manipulating taxes and spending to stabilize the economy?
Fiscal Policy
An economic philosophy which hold that an economy in which people and businesses are free to make their own decisions will result in the greatest satisfaction of the needs and wants of people is what?
Classical economics
An economic philosophy which holds that there are times when a free system will treat some people less fairly than others and these situations can be reduced through economic management is what?
Keynesian Economics
The use of government and banking tools to make the extremes of the economic cycle less severe is what?
Economic management
The use of taxes and government spending to stabilize the business cycles in an economy is known as?
Fiscal policy
A tax which collects a larger percent of a larger income and a smaller percent of a smaller income is what?
Progressive tax
A tax that collects a smaller percent of a larger income and a larger percent of a smaller income is what?
Regressive tax
A tax that collects the same percent of all incomes is what?
Proportional tax
