Economy 1 Flashcards
What is the primary objective of economics?
Economics examines the problems and decisions of economic agents (like individuals, businesses, and governments) from a social perspective.
Why is knowledge of economics important?
It helps people understand how economies function, evaluate policy proposals, and think critically about issues like taxes, budgets, and environmental concerns.
What are the two main branches of economics?
- Microeconomics ( individual decisions )
- macroeconomics ( whole economy ).
Which branch deals with “what is produced and how”?
Microeconomics
Which branch focuses on unemployment and economic growth?
Macroeconomics
What does microeconomics study?
Decision-making by individuals (consumers) and firms (producers), focusing on satisfaction and profit maximization.
Name the three major goals of microeconomic policy.
- Efficiency (avoiding waste).
- Equity (reducing inequality).
- Freedom of choice (maximizing options).
What is macroeconomics concerned with?
Aggregates like consumption, investment, government spending, and trade
(e.g., imports/exports).
Why are some economic functions only entrusted to governments?
Certain functions—like issuing currency, maintaining national defense, and providing public goods (roads, education)—require centralized authority and cannot be efficiently managed by private entities.
What does macroeconomics seek to explain?
Macroeconomics studies the causes and effects of changes in economic aggregates (e.g., GDP, inflation, unemployment) and how governments can support microeconomic actors (like businesses and households) in achieving their goals.
How does government policy help microeconomic actors?
- Stabilizing the economy (e.g., reducing inflation or unemployment).
- Providing infrastructure (roads, schools) that businesses and workers rely on.
- Regulating markets to ensure fair competition and protect consumers.
What are the three key economic functions that only governments can perform, and what policies are associated with each?
- Issuing a national currency → Requires Monetary Policy (e.g., controlling money supply, interest rates).
- Providing public goods (security, defense, infrastructure, education, healthcare) → Requires Fiscal Policy (funded by taxation).
- Managing international trade and finance → Requires Exchange Rate Policy and Trade Policy (e.g., tariffs, trade agreements).
Key Idea: Governments handle these functions because they require centralized authority and benefit society as a whole.
Think of it like this:
Microeconomics = How a single business sets prices.
- Macroeconomics = How government interest rates affect all businesses.
- Government’s role = Ensuring the whole system works smoothly (e.g., preventing crises).
List three macroeconomic goals.
- High employment.
- Price stability (low inflation).
- Economic growth.
What did Beckford argue about plantation economies?
They are extensions of colonial capitalism, with rigid social hierarchies and dependency on foreign markets.
How did plantations limit development in the Caribbean?
By centralizing power, isolating communities, and blocking local reinvestment.
What are the three types of hinterlands in Best-Levitt’s model?
- Conquest (e.g., Spanish colonies).
- Settlement (e.g., U.S. Middle Colonies).
- Exploitation (e.g., Caribbean plantations).
What is the “Muscovado Bias”?
A rule forcing colonies to export raw materials (like sugar) instead of processing them locally.
Name three positives of modern Caribbean economies.
- Political freedom.
- Democracy.
- High Human Development rankings in some countries (e.g., Barbados).
What are three economic challenges in the Caribbean today?
- High crime rates.
- Unemployment/underemployment.
- Declining voter turnout.
Key Terms to Remember:
- Microeconomics: Individual choices.
- Macroeconomics: National policies (e.g., inflation, growth).
- Plantation Economy: Colonial dependency, export-focused.
- CARICOM: Caribbean economic/political alliance.
Contemporary Caribbean Politics and its effect on Caribbean Economies
Positives:
- Freedom
- Democracy
- Some CARICOM members have high Human Development rankings (Barbados, the Bahamas, Antigua and Barbuda, St. Kitts and Nevis, Trinidad and Tobago)
Contemporary Caribbean Politics and its effect on Caribbean Economies
Negatives:
- Issues in the democratic system: crime
- Unemployment and underemployment rates remain high
- Electoral turnouts have been declining over time
What is Beckford’s main argument about plantation economies?
Plantation economies were extensions of colonial capitalism, designed to serve foreign (metropolitan) interests rather than local development. They created rigid social hierarchies and dependency.
