Economics Flashcards
What is capitalism?
A structure of economic configuration which allocates private individuals with the authority to privately own the means of production and operate businesses for a profit. Capitalism relies upon the laws of supply and demand to adjudicate prices and believes that market competition is responsible for achieving innovation and the efficient production of the most qualitative goods for the lowest possible cost.
What is a market?
any structure that allows buyers and sellers to exchange any type of goods, services and information
What are market participants?
all the buyers and sellers of a good who influence its price, which is a major topic of study of economics and has given rise to several theories and models concerning the basic market forces of supply and demand.
What is competition?
when more than one producer is trying to sell the same or similar products to the same buyers. Adherents of the capitalist theory believe that competition leads to innovation and more affordable prices.
What is wage labor?
paid work or paid labor, refers to the socioeconomic relationship that exists between a worker and an employer in which the worker sells their labor power under a formal or informal employment contract. These transactions usually occur in a labor market where wages or salaries are determined by the market. A wage laborer is a person whose primary means of income is from the selling of their labor in this way.
What is the profit motive?
the incentive or explanation for a large majority of activity in a capitalist economy. most activity from the supply side of the equation (business establishment and investment) is explicated by the motivation to extract profit.
What is private property?
the legal designation for the ownership of property by non-governmental legal entities. Private property is seen to be a foundational characteristic of capitalistic societies.
What is the capitalist mode of production?
the private ownership of the means of production, extraction of surplus value by the owning class for the purpose of capital accumulation, wage-based labor and, at least as far as commodities are concerned, being market-based.
What are the means of production
the facilities and resources effectuated in order to product a product, good or service. land, labor and capital are the primary means of production.
What is supply and demand?
the two primary axiomatic variables and factors that establish an adjudication and determination of the price of a commodity or product. supply representing the quantity of products available and demand representing the desire for the consumers to purchase the product.
What is the market equilibrium?
a state where the quantity demanded and the quantity supplied are equal.
What is deficit spending?
the act of spending government outlays that surpasses the quantity of revenue collected from taxation.
What is fiscal policy?
any use of the government deficit to steer the macroeconomy. the utilization of spending and taxation to influence the economy.
What is fiat money?
a government issued currency that is not backed by a physical commodity, such as silver or gold, but rather by the government that issued it.
What is interest?
a payment from a borrower or some alternative financial institution to a lender or depositor of an amount above repayment of the principal sum, at a particular rate.
What is a recession?
the reduction and attenuation of economic activity as a ramification of the depreciation of the GDP over two consecutive quarters.
Causes of recessions
1.) the reduction in consumer confidence; this results in spending patterns experiencing an alteration and people only consuming necessities. 2.) High levels of unemployment. These contribute to the reduction of consumption which in turn leads to a drop in sales. Employers are hence forced to cut costs; some positions may become redundant, only resulting in the amplification of unemployment. 3.) High interest rates limit liquidity, lowering the number of investments in an economy. (Investments add to the stock of capital, granting businesses and corporations accessibility to a larger array of financial resources to increase the quantity of productivity.) High interest rates contribute to the expansion of the motivation for the business owner and consumer to cut back on spending, contributing to stock prices attenuation. 4.) A deduction in housing prices and sales; homeowners are forced to cut back on spending as a consequence of lost equity. 5.) Some government regulations may lead to recessions.
What is inflation?
the increase and expansionism in the prices of goods and services over time in an economy, usually occurring as a reverberation of demand overpowering supply. inflation is measured by CPI (Consumer Price Index)
Causes of inflation.
1.) Demand-pull inflation; this is inflation caused by an enlargement of demand for products and services higher than an economy can produce, hence creating a demand-supply gap. 2.) Cost-push inflation; this is inflation that is the manifestation and culmination of the appreciation of the cost of production causing a price increase in the final products.
What are investments?
the allocation of your monetary capital towards a particular entity with the hopes of achieving a profitable return of capital that’s higher than the amount initially invested.
Types of investments
stocks, bonds, mutual funds, ETFs
What is a stock?
a partial share of a publicly traded company. purchasing a stock grants you partial ownership of the company. the worth of a stock is determined by the laws of supply and demand.
What is a bond?
bonds are a debt instrument that represents a loan given by an investor to a company, government or individual. when you purchase a bond, you allow the bond issuer to issue you a fixed rate in exchange for using your capital. examples of bonds include treasury bills, municipal bonds, corporate bonds, government securities etc
What are ETFs (Exchange Traded Funds)?
a collection of investments such as shares, bonds, money-market instruments, etc that track an underlying index.
What is real estate investment?
purchasing and investing in commercial or residential properties is the act of buying property with the desire of experiencing an appreciation of equity that characterizes the property that you have invested in.
What is liquidity?
the capability of an individual or firm quickly purchasing or selling an asset without causing a drastic change in the asset’s price.
What is insurance?
a type of investment that is oriented towards accumulating protection against a possible eventuality. examples of insurance would be health insurance, car insurance, life insurance, etc.
What is the business cycle?
an alteration of phases of the economy through expansions and contractions. business cycles are intervals of expansion followed by recession in economic activity.
What is demand side economics?
the belief that most market failures are the culmination of problems that reside within the demand side of the supply-demand equation. keynesian economics, aka demand side economics, advertise the distribution of wealth towards individuals and business to stimulate the economy
What is supply side economics?
the belief that market failures usually occur from problems from the supply side of the supply-demand equation. proponents advocate for the reductionism of taxation, government intervention and the promotion of free trade to eradicate the impediments placed upon productivity.
What is the federal budget?
the financial, government arrangement that determines the quantity of federal expenditures that shall be spent annually.
What is the budgetary process?
the procedure that is oriented towards establish a discretionary adjudication to determine what the budget shall be and what programs and operations shall be designated.
What is productivity?
is the calculation of how productive a labor market is by performing a mathematical calculation that divides the output (products, goods and services) against that of the input (the quantity of labor it requires to produce the goods). In other words, it’s the rate of output per unit of input.
What is a budget surplus?
A budget surplus occurs when income exceeds expenditures. The term often refers to a government’s financial state, as individuals have “savings” rather than a “budget surplus.” A surplus is an indication that a government’s finances are being effectively managed.
What are some forms of government intervention in the economy?
Minimum wage laws, fiscal policy, antitrust laws, taxes, tariffs, trade union legislation, legislation governing hiring and firing, environmental protection, construction regulation, FDA necessitating enumeration of ingredients for drugs and food, FHA insuring mortgages
What are some forms of government intervention in the economy?
Minimum wage laws, fiscal policy, antitrust laws, taxes, tariffs, trade union legislation, legislation governing hiring and firing, environmental protection, construction regulation, FDA necessitating enumeration of ingredients for drugs and food, FHA insuring mortgages
What are some forms of government intervention in the economy?
Minimum wage laws, fiscal policy, antitrust laws, taxes, tariffs, trade union legislation, legislation governing hiring and firing, environmental protection, construction regulation, FDA necessitating enumeration of ingredients for drugs and food, FHA insuring mortgages
What are antitrust laws?
Antitrust laws are regulations that encourage competition by limiting the market power of any particular firm. This often involves ensuring that mergers and acquisitions don’t overly concentrate market power or form monopolies, as well as breaking up firms that have become monopolies.
What is market power?
Market power refers to a company’s relative ability to manipulate the price of an item in the marketplace by manipulating the level of supply, demand or both.
A company with substantial market power has the ability to manipulate the market price and thereby control its profit margin, and possibly the ability to increase obstacles to potential new entrants into the market. Firms that have market power are often described as “price makers” because they can establish or adjust the marketplace price of an item without relinquishing market share.
What is market power?
Market power refers to a company’s relative ability to manipulate the price of an item in the marketplace by manipulating the level of supply, demand or both.
A company with substantial market power has the ability to manipulate the market price and thereby control its profit margin, and possibly the ability to increase obstacles to potential new entrants into the market. Firms that have market power are often described as “price makers” because they can establish or adjust the marketplace price of an item without relinquishing market share.
What is a flat tax rate?
a tax system that applies a single tax rate to all levels of income.
What is a progressive tax system?
A progressive tax is a tax system that increases rates as the taxable income goes up.
What is socialism?
A mode of economic organization which calls for the collective ownership of the means of production, the eradication of the profit motive, the termination of markets and the abolition of the commodity form.
What is socialism?
A mode of economic organization which calls for the collective ownership of the means of production, the eradication of the profit motive, the termination of markets and the abolition of the commodity form.
What is communism?
Communism is an economic ideology that advocates for a classless society in which all property and wealth are communally-owned, instead of by individuals.
What is the labor theory of value?
The labor theory of value is a theory of value that argues that the economic value of a good or service is determined by the total amount of “socially necessary labor” required to produce it.
What is socialized medicine?
Socialized medicine is, by definition, a healthcare system in which the government owns and operates healthcare facilities and employs the healthcare professionals, thus also paying for all healthcare services.
What is single-payer healthcare?
What is Single Payer? Single payer—or Medicare for All—is simply a streamlined financing mechanism where one entity administers the health care funding and payments. It expands the cost-effective and administratively efficient Medicare program to cover everyone in the United States.
What is single-payer healthcare?
What is Single Payer? Single payer—or Medicare for All—is simply a streamlined financing mechanism where one entity administers the health care funding and payments. It expands the cost-effective and administratively efficient Medicare program to cover everyone in the United States.
What is universal healthcare?
Universal health coverage means that all people have access to the health services they need, when and where they need them, without financial hardship. It includes the full range of essential health services, from health promotion to prevention, treatment, rehabilitation, and palliative care.
What is universal healthcare?
Universal health coverage means that all people have access to the health services they need, when and where they need them, without financial hardship. It includes the full range of essential health services, from health promotion to prevention, treatment, rehabilitation, and palliative care.
What is a security?
The term “security” refers to a fungible, negotiable financial instrument that holds some type of monetary value.
What is an insurance company?
This term is used to describe a single entity that writes insurance policies, pays claims and carries all the risk associated with the policies it writes. Consequently, these entities (also called insurers) are tightly regulated by the government to ensure they have the financial resources to cover their risk.
How do insurance companies make money?
Most insurance companies generate revenue in two ways: Charging premiums in exchange for insurance coverage, then reinvesting those premiums into other interest-generating assets. Like all private businesses, insurance companies try to market effectively and minimize administrative costs.
What is a bank?
A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets.
How do banks make money?
Commercial banks make money by providing and earning interest from loans such as mortgages, auto loans, business loans, and personal loans. Customer deposits provide banks with the capital to make these loans.
How do banks make money?
Commercial banks make money by providing and earning interest from loans such as mortgages, auto loans, business loans, and personal loans. Customer deposits provide banks with the capital to make these loans.
What is a hedge fund?
a limited partnership of investors that uses high risk methods, such as investing with borrowed money, in hopes of realizing large capital gains.
What is a hedge fund?
a limited partnership of investors that uses high risk methods, such as investing with borrowed money, in hopes of realizing large capital gains.
What is a stock market?
Stock markets are venues where buyers and sellers meet to exchange equity shares of public corporations. Stock markets are vital components of a free-market economy because they enable democratized access to trading and exchange of capital for investors of all kinds.
