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Intro to Business > PF Intro to Business Ch2 Vocab > Flashcards

PF Intro to Business Ch2 Vocab Flashcards

1
Q

Economics

A

study of how society chooses to employ resources (5 factors of production) to produce goods and services and distribute them for consumption among various competing groups and individuals

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2
Q

Two types of economic study

A

macroeconomics & microeconomics

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3
Q

Macroeconomics

A

study of the operation of a nation’s economy as a whole

looks at how many jobs exist in the whole economy

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4
Q

Microeconomics

A

study of the behavior of people and organizations in particular markets
looks at how many people will be hired in a particular industry or region of a country

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5
Q

Resource Development

A

study of how to increase resources and to create the conditions that will make better use of those resources

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6
Q

Economic Theorists

A

Thomas Malthus, Adam Smith

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7
Q

Thomas Malthus

A

theorized that there are too many people in the world and that the solution to poverty is birth control, which includes measures as limits on the number of children people can have

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8
Q

Adam Smith

A

one of the first people to imagine a system of creating wealth and improving the lives of everyone

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9
Q

Invisible Hand

A

theory developed by Adam Smith that says self-directed gain turns into social and economic benefits for all

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10
Q

Supply

A
  • refers to qty of products that manufacturers or owners are willing to sell at different prices at a specific time
  • amount will increase as the price increases because sellers can make more money with a higher price
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11
Q

Demand

A
  • refers to qty of products that people are willing and able to buy at different prices at a specific time
  • qty demanded will increase as the price decreases - or as price increases the demand for the product decreases

if the does not go up and the demand is still high, the process will then increase because there isn’t enough of the product to meet the need of the customers

oil industry is an example of supply and demand - more and more people purchase cars there is a greater need for fuel - because demand has increased gas prices continue to rise

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12
Q

Equilibrium Point

A

place where qty demanded and supplied meet…market price will tend toward this

ideal economic situation is amount of goods sought by buyers is equal to the amount of goods produced by suppliers

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13
Q

Business Cycle

A

denotes a common pattern where there is a period of rapid growth (recovery & prosperity) in the economy when supply and demand stimulate each other - alternating with a period of decline with diminishing demand and supply - also called economic cycle

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14
Q

Free Market

A

where decisions about what to produce and in what quantities are made by the market, by buyers and sellers negotiating prices for goods and services

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15
Q

4 Types of Competition

A

Perfect Competition, Monopolistic Competition, Oligopoly, Monopoly

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16
Q

Perfect Competition

A

xists when there are many sellers in a market, no seller is larger enough to dictate the price of a product, and the products are similar
no true examples of perfect competition

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17
Q

Monopolistic Competition

A

exists when a large number of sellers product products that are very similar but are perceived by buyers as different

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18
Q

Oligopoly

A

a form of competition where just a few sellers dominate the market

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19
Q

Monopoly

A

occurs when there is only one seller for a product or service

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20
Q

Socialism

A

an economic system based on the premise that some, if not most, basic businesses such as steel mills, coal mines, and utilities should be owned by the government so that profits can be evenly distributed among all the people.

socialist countries charge a value-added tax - like a sales tax on most goods purchased

socialists acknowledge the major benefit of capitalism - wealth creation

21
Q

Benefits of Socialism

A
  • Social equality because income is taken from the wealthier people in the form of taxes and redistributed to the poorer members of the population through various government programs
  • Workers in socialist countries usually get longer vacations than those in capitalist countries
  • Tend to work fewer hours per week
  • More employee benefits - such as sick leave
22
Q

Negative Consequences of Socialism

A
  • takes away from businesspeople’s incentives and enthusiasm to start work early and leave late
  • takes away incentives to start new businesses or market new ideas
  • often many leave socialist countries for more capitalistic ones with lower taxes
  • generally discourages the best from working as hard as they can
23
Q

Brain Drain

A

loss of best and brightest people to other countries

24
Q

Communism

A

an economic and political system in which the state (government) makes almost all economic decision and owns almost all the major factors of production

Karl Marx - wrote the communist manifesto, founder of communism

Negative of communism is that the gov’t has no way of knowing what to produce because prices don’t reflect supply and demand as they do in free markets. Gov’t must guess what the economic needs of the people are.

25
Q

Mixed Economics

A

Nations of the world are divided between those that have followed concepts of capitalism and those that have followed or adopted concepts of communism or socialism

economies where some allocation of resources is made by the market and some by the government
US is a mixed economy

26
Q

Free Market Economies

A

market largely determines what goods and services get produced who gets them and how the economy grows

27
Q

Command Economies

A

government largely decides what goods and services get produced, who gets them and how the economy grow

28
Q

Economic Indicators (3 major indicators)

A
  1. gross domestic product (GDP)
  2. unemployment rate
  3. price indexes
29
Q

Gross Domestic Product (GDP)

A

total value of final goods and services produced in a country in a given year

either a foreign or domestic may produce the goods and services included in the GDP as long as the companies are located within the country’s boundaries

one way to measure GDP is per capita - GDP number divided by population

30
Q

Gross National Product (GNP)

A

similar to GDP, but only counts americans producing products in the country not other foreign nationals

major influence on growth of GDP is how productive the workforce is - how much output workers create with a given amount of input

31
Q

Unemployment Rate

A

number of civilians at least 16 years old who are unemployed and who have tried to find a ob within the prior four weeks

32
Q

Types of unemployment

A

frictional
structural
cyclical
season

33
Q

frictional unemployment

A

occurs when people are between jobs

34
Q

structural unemployment

A

something within industries has changed that results in unemployment

35
Q

cyclical unemployment

A

not enough jobs for people who want to work and is usually a result of political or economic forces

36
Q

seasonal unemployment

A

might occur in construction jobs for example

37
Q

Price Indexes

A

indexes of the changes in goods and prices of goods and services based on the prices of the same goods and services from a previous period

they help to measure the health of the economy by measuring the levels of inflation, deflation and stagflation

38
Q

Consumer Price Index (CPI)

A

measures the prices of products from month to month so economists can measure inflation
measures price change from the purchaser’s perspective

39
Q

Inflation

A

refers to general rise in prices of goods and services over time

40
Q

Hyperinflation

A

phenomenon where the cost of goods is rising so quickly that it renders the currency virtually worthless

many believe that inflation of over 50% is hyperinflation

41
Q

Stagflation

A

occurs when both inflation and unemployment are high and occurring at the same time

cause may be misguided fiscal and monetary policy

harmful to a country because it means prices are rising while people are losing their jobs or don’t have jobs

42
Q

Deflation

A

prices are actually declining
occurs when countries produce so many goods that people cannot afford to buy them all - means that demand and supply are out of balance

43
Q

Producer Price Index (PPI)

A

measures prices at the wholesale level

measures price change from the perspective of the seller

44
Q

Fiscal Policy

A

federal gov’t efforts to keep the economy stable by increasing or decreasing taxes or gov’t spending

  • first half of fiscal policy involves taxation
    high taxation tends to slow economy because it draws money away from the private sector and puts it into the gov’t
  • second half of fiscal policy involves gov’t spending
45
Q

National Debt

A

sum of gov’t deficits over time

46
Q

Recession

A

when GDP falls for two consecutive quarters

prices fall, people purchase fewer products and businesses fail

47
Q

Depression

A

is a severe recession
A depression usually occurs during times of deflation and A depression usually occurs during times of deflation and unemployment and is extremely serious.

48
Q

Recovery

A

occurs when the economy stabilizes and starts to grow again

49
Q

Monetary Policy

A

ultimately what adds or subtracts money from the economy

is the management of the money supply and interest rates and this is what helps control the growth or slowing of the economy

Monetary policy is controlled by the federal Reserve system

most obvious role of the federal Reserve is the raising and lowering of interest rates.

When the economy is booming, the fed tends to raise interest rates, which makes money more expensive to borrow.

The opposite is true when the fed lowers interest rates. Businesses tend to borrow more, and the economy takes off

Intro to Business (4 decks)

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