Economics

Question 1

Laissez fair

Answer 1

• Little to no government interference
  the market, when left to its own devices is more efficient at establishing price, production levels, and distributing goods and services

Question 2

Revenue

Answer 2

income (in this case from the gov’t) generated from public expenses

Question 3

Expenditures

Answer 3

Money that is spent on improvements on equipment, property, hiring more staff etc…

Question 4

Budget

Answer 4

A plan which accounts for spending for a given period of time

Question 5

Balanced Budget

Answer 5

How much you make =‘s how much you spend
Revenue =‘s expenditure

Question 6

Deficit

Answer 6

When expenditures > revenue
The difference = debt

Question 7

Currency

Answer 7

The kind of money used in a country
Varies in value: $1 Cnd = $ 0.82 US

Question 8

Market Economy

Answer 8

There are 2 roles:
Producer ( the business)
Consumer ( the buyer)

Supply and demand curve
Producers & consumers determine what kinds of goods & services are produced and for how much

Question 9

Supply theory

Answer 9

Supply Theory: as supply increases, so does price.
Producers supply more at a higher price because selling a higher quantity at a higher price increases revenue ($$$$$$).

Question 10

Demand theory

Answer 10

as prices increase, demand decreases
Why? people will naturally avoid buying a product they deem expensive.

Question 11

Equilibrium

Answer 11

(where S & D intersect) is where the price is set.

Question 12

Recession

Answer 12

A recession can be defined as a sustained period of weak or negative growth in real GDP (output) that is accompanied by a significant rise in the unemployment rate. Long period of recession = depression

Question 13

Causes of the great depression (overproduction)

Answer 13

a) Overproduction During the 1920s, many industries were expanding, and profits were spent on adding to factories or building new ones. Huge supplies of manufactured goods were simply stockpiled. Eventually all of these unsold goods caused factory owners to panic, so they slowed down their production and laid off workers. Now these workers had even less money to spend on buying goods, so sales slowed down even more. Basically, the industrial capacity of both the U.S.A. and Canada had expanded beyond the ability of the consumer to consume.

Question 14

Causes of the great depression (reliance)

Answer 14

b) Canada’s Reliance on Exporting Staple Products Canada’s economy depended heavily on a few basic products known as staples (like crops, timber, and minerals). These staples were Canada’s most important exports; as long as other countries kept buying them, Canada’s economy would be strong. From 1925 to the end of the decade, Canadian wheat farmers grew record quantities of crops and sold them for record prices. However, in 1 929, the United States, Australia, and Argentina also had record numbers of crops, and thus competition for sales was extreme. Canadian farmers were left with large quantities of unsold wheat, and prices dropped dramatically. To add to the problem, prairie farmers were faced with terrible droughts over several summers in a row. People often refer to this time in history as the Dust Bowl of the 1 930s.” Without adequate rainfall, crops died. With no wheat to be 11 shipped, and no flour to be ground, railways and flour mills lost business. This caused a chain reaction in many parts of the Canadian economy.

Question 15

Causes of the great depression (USA)

Answer 15

c) Canada’s Dependence on the United States Because the Canadian economy depended so much on exporting staples, any decline in foreign economies also hurt Canada’s economy. The most important foreign economy for Canada was the United States, where 40% of our exports were sold. Therefore, when the American economy failed, the Canadian economy was soon to follow.

Question 16

Causes of the great depression (stocks)

Answer 16

When the stock market crashed on Black Tuesday, October 29, 1929, an indicator that something was already terribly wrong with the system. In the 1920s, many investors bought their stock shares on margin. Buying on margin meant that investors were essentially buying stocks with borrowed money, with the hope that in a short time the stock would rise significantly. In Canada, bank presidents and business leaders strongly believed that the Canadian economy depended upon international trade, particularly with the strong wheat crops. Despite indications that the price of wheat was falling, investors and speculators contin-ued to pour money into the stock market. As stocks began to decrease in value, investors began to worry, losing confidence in the companies whose shares they had purchased. Many investors wanted to sell their stocks quickly before prices fell even further, and therefore, investors began to sell large volumes of stocks. As more investors panicked and began to sell their stocks, the prices of stocks continued to drop dramatically. The downward spiral had begun. Many stocks became worthless, as more and more investors began to panic. On October 29, 1 929, the value of several key shares on the Toronto Stock Exchange dropped by $1 million per minute! Although very few Canadians actually owned stocks, millions of Canadians were affected by the stock market crash, mostly through loss of jobs and falling prices for their products.