BUS151 Chapter 2
What nation is the poster child for communism?
China
List the 5 remaining communist countries.++
China North Korea Cuba Vietnam Laos
Closed Market are the same as...
Command/Centrally Planned Economies
Open Markets are the same as...
Free-Market Economies
What are the two major economic systems?
Free-Market Economies (open market) Command/Centrally Planned Economies (closed market)
Why is competition so important?**
It fosters efficiency, competition is the reason why capitalism produces the highest level quality products and services at the lowest possible cost
What are the major branches of economics?**
Macroeconomics Microeconomics
What type of economy is the most common?
Mixed economies
Is there such thing as a pure capitalist economic system?
NO
What allows American's to live at such a high standard of living?
The US's high GDP
What was the name of Adam Smith's published book?++
Wealth of Nations
Depression
a severe recession
What is the World's GDP?
about 65 trillion
Capitalism**
all or most of the land, factories, and stores are owned by individuals, not the government, and operated for profit
Communism
an economic and political system in which the government makes almost all economic decisions and owns almost all of the major factors of production
Socialism**
an economic system based on the premise that some basic businesses, like utilities, should be owned by the government in order to more evenly distribute profits among the people
How is the Market Price (Equilibrium Point) determined?**
by supply and demand
What is an example of the way we have modified capitalism?
collecting taxes
Microeconomics
concentrates on the behavior of people and organizations in markets for particular products and services
Macroeconomics**
concentrates on the operation of a nation's economy as a whole
Do the Feds increase or decrease interest rates when the economy is in a recession?
decrease
List the 4 phases of long term business cycles
economic boom recession depression recovery
Stagflation
economy is slowing but prices are going up
Market Price is also known as the...
equilibrium point
What is vital to an economy's survival?
freedom
An educated population is of ____ value.
high
In a free market economy what does the price tell a company?
how much of a product they should produce
Do the Feds increase or decrease interest rates when the economy is booming?
increase
What is the Feds most visible role?
increasing and lowering interest rates
Consumer Price Index (CPI)
monthly statistics that measure the pace of inflation or deflation
Describe the government in the Socialism environment
more involved in protecting the environment and the poor
What was Adam Smith's theory?
people will work hard if they believe they will be rewarded
List the 4 degrees of competition
perfect competition monopolistic competition oligopoly monopoly
Business Cycles
periodic rises and falls that occur in economies over time
Deflation
prices are declining because too few dollars are chasing too many goods
Mixed Economy
some allocations made by the market and some regulated by the government
Brain Drain**
some of a country's best and brightest workers (doctors, lawyers, business owners) move to capitalistic countries
what are the 2 tools of the fiscal policy?
taxation government spending
Other than the father of economics, what else was Adam Smith often referred to as?
the Father of Capitalism
National Deficit**
the amount of money the federal government spends beyond what it gathers in taxes
Fiscal Policy**
the federal government's effort to keep the economy stable by decreasing or increasing taxes and government spending
Inflation
the general rise in goods and services over time
Command/Centrally Planned Economies
the government largely determines what goods and services are produced, who gets them, and how the economy grows
Monetary Policy**
the management of money supply and interest rates by the Federal Reserve Bank (Feds)
Free-Market Economies
the market largely determines what goods and services are produced, who gets them, and how the economy grows
Supply
the quantities of products businesses are willing to sell at different prices
Demand
the quantities of products consumers are willing to buy at different prices
What are the 4 basic right of capitalism?
the right to own private property the right to own a business and keep all that business' profits the right to freedom of competition the right to freedom of choice
Economics**
the study of how society employs resources to produce goods and services for consumption among various groups and individuals
National Debt**
the sum of government deficits over time
What all is based upon CPI?
the wages rent/leases tax brackets government benefits interest rates
Gross Domestic Product (GDP)**
total value of final goods and services produced in a country in a given year. as long as a company is within a country's border, their numbers go into a country's GDP
Recession
two or more consecutive quarters of decline in GDP
Recovery
when the economy stabilizes and starts to grow (leads to economic boom)
National Surplus**
when the government takes in more than it spends
Disinflation
when the price increases are slowing (inflation rate declining)
What phrase did Adam Smith coin?
"The invisible hand of competition"
Who is the father of economics?++
Adam Smith