Module 0 Vocabulary Flashcards
What is a Circular Flow Diagram?
A diagram that views the economy as consisting of households and firms interacting in a goods and services market and a labor market.
Households receive goods and services and pay firms for them.
In the labor market, households provide labor and receive payment from firms through wages, salaries, and benefits.
What is a Command Economy?
An economy where economic decisions are passed down from government authority and where the government owns the
resources.
Command economies have a very centralized structure for economic decisions.
This is in contrast to a market economy where decisions are decentralized
What is a Division of Labour?
The way in which different workers divide required tasks to produce a good or service.
Often, the greater the degree of labour
division, the higher the productivity of workers due to specialization, and economies of scale.
What is Economics?
The study of how humans make choices under conditions of scarcity.
For instance, we study how consumers spend their income, how workers allocate time between work and leisure, and how businesses choose what and how to produce.
What are Exports?
Products (goods and services) made domestically and sold abroad.
This include merchandise sales to other countries (e.g. cars, TV, cell phones), sale of commodities (e.g. grain, oil, gold) and sale of services (e.g. foreign tourism into the country, consulting by domestic firms in foreign countries).
What are Economies of Scale?
When the average cost of producing each individual unit declines as total output increases.
For instance, in auto making, companies can reduce the unit cost per car by making large quantities of a particular make of car. This partly explains why auto makers tend to be large firms with large factories.
What is a Fiscal Policy?
Economic policies that involve government spending and taxes.
It includes what governments spend resources on (health care, education, national defense, etc) and how they collect taxes (sales taxes like the GST, income taxes, corporate taxes, etc).
In Canada, the federal government and the provincial governments have fiscal authority to spend and to tax. Municipal governments also have authority but this is limited by provincial laws (for instance, cities typically cannot tax income but they can tax property).
What is Globalization?
The expanding cultural, political, and economic connections between people around the world.
We see globalization trends in which buying and selling in markets have increasingly crossed national borders.
What is a Goods and Services Market?
A market in which firms are sellers of what they produce and households are buyers.
We also include firms purchasing from other firms (for instance, farmers will
purchase equipment from manufacturers and financial services from Banks).
What is Gross Domestic Product (GDP)?
Measure of the size of total production in an economy.
It provides a measure of how much an economy can make to support local communities. GDP can refer to countries,
provinces, and cities.
What are Imports?
Products (goods and services) made abroad and then sold domestically.
This include merchandise sales into our
Canada (e.g. cars, TV, cell phones), purchase of commodities (e.g. grain, oil, gold) and purchase of services (e.g. Canadian tourism into other countries, consulting by foreign firms in to Canada).
What is a Labor Market?
The market in which households sell their labor as workers to business firms or other employers.
What is Macroeconomics?
The branch of economics that focuses on broad issues such as growth, unemployment, inflation, and trade balance.
What is a Market?
Interaction between potential buyers and sellers; a combination of demand and supply
What is a Market Economy?
An economy where economic decisions are decentralized, private individuals own resources, and businesses supply goods and services based on demand.
Canada would be considered a market economy despite the fact that some economic decisions are provided by governments.
