economy (unit 8) Flashcards
Define the term economy.
The term economy refers to the wealth and resources of a country or region.
Explain the three economic resources we need for our economy to function (Natural Resources,
Human Resources, and Capital Resources).
Natural Resources - Natural resources are materials that come from the earth, water, or air.
Human Resources - Human resources are the people who work to create the goods and services.
Capital Resources - Capital resources include buildings, equipment, tools, trucks, and factories.
List the three fundamental questions every economic model must answer.
What will be produced?
How will it be produced?
Who will consume what’s produced?
Canada’s economy and Manitoba’s economy are both considered “diverse”. What does this mean? Why is this considered an advantage?
This means our economy isn’t just based on one industry but rather a variety of industry sectors. This diversity can be seen as an advantage because if one specific industry is in trouble the whole province won’t be hit as hard all at the same time.
Explain how Canada is part of the global economy. Define the terms exports and imports.
Canada’s economic is reliant on other countries as well and is part of a global economy.
Exports are goods and services that are sent OUT to other countries.
Imports are goods and services that we bring IN from other countries
List and briefly explain the characteristics, advantages, and disadvantages of Capitalism.
An economic and political system in which a country’s trade and industry are controlled by private owners for profit.
Advantages: Economic growth, Competition and Freedom
Disadvantages: Inequalities in income, fails to pay a living wage to billions of workers, leads to an erosion of human rights
List and briefly explain the characteristics, advantages, and disadvantages of Socialism.
a political and economic system in which the means of production and property have public ownership and are not controlled by the government.
Advantages: More equal society, Reduced hidden taxes, Reduction of relative poverty
Disadvantages: Has negative social and political effects, government failure, rationing of healthcare
List and briefly explain the characteristics, advantages, and disadvantages of Communism.
Communism is in which individual people do not own land, factories, or machinery. Instead, the government or the whole community owns these things. Everyone is supposed to share the wealth that they create.
Advantages: People are equal, Every citizen can keep a job, Strong social communities are established
Disadvantages: Poor economic performance, Consumers needs are not taken into consideration, Productivity and efficiency are difficult to achieve without profit motive for the workers.
Explain why Canada is considered a “mixed” economy.
Our economic system demonstrates some very capitalistic ideals including the fact that individuals can own their own property and businesses are motivated by profit, On the other hand, our government demonstrates some socialist ideals.
What is GDP? What does it measure?
GDP stands for Gross Domestic Product and it measures the total value of economic activity within a country by using monetary value.
Define the term Inflation. Explain what CPI stands for and how this is used to measure inflation.
Inflation is defined as “the persistent rise over time in the average price of goods and services.” CPI, which stands for Consumer Price Index measures how consumer prices change over time by calculating the cost of a fixed shopping basket of goods and services that a typical Canadian household might consume.
What is the average inflation rate? How is this used as an economic indicator?
When inflation is at an average rate (0-3%), prices
are stable. High inflation leads to high interest rates. This makes
borrowing money expensive, and prices rise faster than
wages.
What is the average unemployment rate? How is this used as an economic indicator?
An unemployment rate of about 4-5% indicates a healthy
economy. Higher unemployment rates cause consumer spending to
weaken, which then reduces the rate of economic growth
Explain the four stages in the Economic Life Cycle. What occurs during each stage? How might
each stage affect you and your financial situation?
Expansion: Our economy is growing, and GDP is rising.
Unemployment levels are low; therefore, employment is high. Businesses grow and production increases.
Contraction: Consumers begin to spend less and save more. Businesses cut back on production. Businesses may have to lay off workers. Wage growth tends to slow or stop.
Recession: Unemployment levels are high. A lot of workers are laid off. Consumer spending drops significantly. The majority of people are not comfortable with their financial well-being.
Recovery: This marks the end of the lowest stage in the cycle, such as the end of a recession or depression. The economy begins to grow again. Consumers begin to spend more on products and services.
