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Intro to Business > Economics > Flashcards

Economics Flashcards

1
Q

What is Economics?

A

The study of the allocation of resources (production, distribution, consumption of scarce goods and services)
-how business builds and distributes wealth

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2
Q

What is macroeconomics?

A

The study of the economy as a whole (nation’s economy)

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3
Q

What is microeconomics?

A

The study of the economic behavior of individual economic units, the operations of particular groups of people, businesses, organizations and markets.

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4
Q

Explain the concept of supply and demand.

A

Forces of supply and demand drive equilibrium prices, where they intersect.

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5
Q

Describe the free market economy?

A

Also called capitalism, the production and distribution of goods and services are controlled by private individuals rather than by the government.

  • prices are set by supply and demand
  • reduced governement role
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6
Q

What are the advantages of capitalism?

A
  • Efficient allocation of resources
  • Encourages innovation
  • Most have more than enough wealth
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7
Q

What are the disadvantages of capitalism?

A
  • income disparities
  • income distribution
  • labour can become a commodity
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8
Q

What are the basic rights under capitalism?

A
  1. Right to own property
  2. Right to own compete
  3. Right to free choice
  4. Right to make & keep profits
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9
Q

What are the restrictions under capitalism?

A
  • Zoning, environmental and antifraud laws and regulations
  • Competition can be limited by antitrust, fraud, licensing and consumer protection
  • Sale of certain item restricted by government regulations (drugs)
  • Revenues and profits subject to taxation
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10
Q

What are the main characteristic of communism?

A
  • Economic system in which all property is owned by the state
  • everyone works for the government
  • classless society
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11
Q

What are the main major drawbacks of communism?

A
  • Central planning is difficult
  • Lack of incentive for innovation
  • Tends toward totalitarianism
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12
Q

What are the main characteristics of socialism?

A
  • economic system in which major industries are owned by the government, but smaller businesses are owned by individuals
  • wealth or surplus of income is redistributed by the government through social programs
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13
Q

What are the main benefits of socialism?

A
  • More benefits to citizens

- Less social inequality and poverty

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14
Q

What are the main drawbacks of socialism?

A
  • Problems with central planning
  • High taxes
  • Possible brain drain
  • Less job and wealth creation
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15
Q

Describe a mix economy.

A

An economic system in which some resources are allocated by the free market and some resources are allocated by the government, resulting in a somewhat better balance between freedom and economic equality

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16
Q

What are the 2 main episodes of the business cycle?

A
  1. Recession

2. Depression

17
Q

Explain what a recession is.

A

2 quarters of GDP decline

18
Q

Explain what a recession is.

A

severe, long lasting depression accompanied with deflation

19
Q

What are the 4 phases of the business cycle?

A
  1. Expansion: pace of economic activity speeds up
  2. Peak: economic activity hits its high
  3. Contraction: Pace of economic activity slows down
  4. Trough: economic activity hits bottom
20
Q

What are the 3 main economic indicators and what do they represent?

A
  1. Gross domestic product: growth indicator–> The monetary value of all the finished goods and services produced within a country’s borders in a specific time period.
  2. Consumer price index and the producer price index: costs indicators
  3. Unemployment rate: resource allocations and jobs
21
Q

What is the GDP per capita?

A

A measure of the total output of a country that takes the gross domestic product (GDP) and divides it by the number of people in the country.

22
Q

What is the inflation rate?

A

The rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling.

23
Q

Name other smaller economic indicator?

A
  • exchange rate
  • business confidence
  • interest rate
  • consumer confidence
24
Q

What is productivity?

A
  • the amount of goods and services a person or organization produces given the resources needed to produce them
  • more is better
  • closely linked to growth and resource allocation
25
Q

Further explain the consequences of inflation and deflation.

A

inflation: prices rise = too many dollars trying to buy too few goods
deflation: prices fall= there are too few dollars chasing too many goods.

26
Q

Define fiscal policy.

A

Represents a government’s attempt to keep the economy stable by

  • raising or lowering taxes
  • through government borrowing

–> federal budget deficit = national debt

27
Q

Define monetary policy.

A

Represents a government’s attempt to influence economic activity by

  • raising or lowering interest rates
  • expanding or limiting the money supply

Intro to Business (13 decks)

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