Unit 1: The Capitalist Revolution Flashcards
What is the main focus of economics?
Understanding how people interact and make choices in an economy.
What are the three core elements of capitalism?
Private property, markets, and firms.
What is GDP?
Gross Domestic Product – the market value of final goods and services produced in an economy.
What is disposable income?
Income after taxes and government transfers.
Why is real GDP preferred over nominal GDP?
Because it adjusts for inflation and reflects actual output changes.
What triggered the ‘take-off’ in living standards?
Technological progress and its adoption.
What is technological progress?
A change that reduces the resources needed to produce a given output.
Why did different countries grow at different times?
Because they adopted technologies at different points in history.
What is the capitalist revolution?
The global spread of capitalism and the rise in living standards it brought.
How can capitalism fail?
Due to weak institutions, lack of competition, or elite control of firms.
What are some consequences of GDP growth?
Improved living standards but also environmental degradation and inequality.
What does the GDP deflator measure?
The change in prices of all new, domestically produced, final goods and services.
Why does inequality matter in economic development?
Because it affects access to opportunities and social stability.
What is the ‘veil of ignorance’ used for in economics?
To evaluate fairness without knowing your social position.
What does real GDP per capita measure?
Average income per person adjusted for inflation.
Why is income not a perfect measure of well-being?
It doesn’t capture leisure, health, environmental quality, or inequality.
How does capitalism influence innovation?
It provides incentives through competition and profit motives.
What was a major side effect of industrial growth?
Climate change due to increased carbon emissions.
Why do economists study history?
To understand how past institutions and innovations shaped present outcomes.
How do economists separate price and quantity effects?
By using real GDP, which holds prices constant.
