lecture #2

Question 1

what is economics

Answer 1

Economics studies how societies produce and distribute their goods and services amongst various segments of their population

Question 2

The four whats of an economic system

Answer 2

1) what determines what and how much is produced
2) what determines how it is produced
3) What determines how the economic output is divided amongst its people
4) what determines the rate of growth the economy is expected to achieve

Question 3

3 components if economic philosophy

Answer 3

1) market economy
2) command economy
3) Mixed economy

Question 4

characteristics of market economy

Answer 4

not planned

• The goods and services produced and the quantity are not planned
• Price and quantity are determined by supply and demand

Question 5

characteristics of command economy

Answer 5

planned by the government

• The government determines what goods and services are being sold the quantity in which they are produced, and the price they are sold at
• Example. North Korea

Question 6

characteristics of

Answer 6

planned and not planned

Some elements of each
**Price controls:
price is set + same all around - minimum wage, gas in Nova Scotia

Question 7

what is Capitalism

Answer 7

simple terms:
In a capitalist country, citizens, not governments, own and run companies

more..
private actors own and control property in accord with their interests, and demand and supply freely set prices in markets in a way that can serve the best interests of society

Question 8

who defined capitalism and wrote “Wealth of Nations”

Answer 8

Adam Smith 1776

Question 9

how did adam smith define capitalism

Answer 9

Capitalism is a system of rights and freedoms

Right to make a profit, right to private property, right to buy or sell

Question 10

The foundations of capitalism

Answer 10

• Many buyers and sellers trading freely determine prices at which they will exchange goods and services
• The constant interplay between supply and demand determines an equilibrium price at which a transaction will occur.

Question 11

Limitations of free market

Answer 11

• Inequaliy of wealth
• Potential environmental damage
• Limittions push country towards increases governement regulations

Question 12

what is command economies

Answer 12

The goods and services that a country produces and the quantity in which they are produced and the price at which they are sold are all planned by the governement

Question 13

whats communism VS socialism

Answer 13

1) communism:
the government decides what till be produced and who will consume that production

2) socialism:
some free market and some government allocations

Question 14

what is mixed econmics

Answer 14

The state manages enterprises if they benefit society as a whole rathe than individual capitalists.

Question 15

what did John Maynard Kayes advocate

Answer 15

• John Maynard Kaynes advocated government spending to stimulate the economy.
• He proposed that the government should borrow in bad times and spend to help the economy.
• He stated that government should pay off debt

Question 16

Economic indicators

Answer 16

• Gross domestic profit (GDP)
• Productivity
• Unemployment rates
• Inflation
• The national debt
• Economic trends

Question 17

what is Gross domestic profit (GDP) -

Answer 17

the total of goods and services produced by the economy - pre dominant indicator of economic well being.

Question 18

what deifines productivyity and its GAINS

Answer 18

Productivity is the total output of goods and services divided by the total labour hours.

Productivity gains:
- Producing a great quantity of goods and services with the same amount of labour hours
- Producing the same amount of goods and services with less labour hours

Question 19

3 types of Unemployment rates

Answer 19

1) Cyclical
2) Seasonal
3) structural

Recession, globalization and technological change have contributed to the unemployment problem

Question 20

what is inflation & the rule if inflation

Answer 20

Rise in the price level of goods and services overtime

The rule of 72
- 72 divided by the rate of inflation equals the number of years that inflation prices will double

Question 21

how did The national debt
deplove

Answer 21

1. The government adopted Keynesian economics and deficit spending
2. The government forgot the second part, which is not paying down debt in a good time
3. By 1990, many governments had accumulated large amounts of national debt
4. Recently, we have budgeted toward surpluses and deficits

Question 22

3 types of economic trends

Answer 22

1) mixed economy - move to purer forms of capitalism
2) command counties - move to mixed economics to improve their standard of living
3) socialist countries - reduce government roles in their economies