economics chapter 5
the Communist Manifesto
'from each according to his ability, to each according to his need'
Winston Churchill
'the inherent vice of capitalism is the unequal sharing of blessings; the inherent virtues of socialism is the equal sharing of miseries'
market economy
Economic decisions are made by individuals or the open market.
Economic Problem
How may a society achieve its economic goals?
gleaning
Old Testament provision for poor people who were willing to work to obtain food
Objectivism
The ideal man, the producer who lives by his own effort and does not give or receive the undeserved, who honors achievement and rejects envy (Ann Rand)
command solution to the output question
a central committee determines output choices
market solution to the distribution question
a nation should distribute its wealth solely to those who successfully satisfy the needs of others
Intensive Growth
a nation's business firms increase their production of goods and services by using their existing factors of production with greater efficiency
economic leveling
a policy of equal distribution of the nation's income
market solution to the output question
allow the interest rate to find its own free-market level
economic growth
an increase in the quantity of goods and services a nation can produce
Economic Darwinism
another name for the libertarian view of economic fairness allowing for a "survival of the fittest" in the accumulation of wealth
spending/saving
consumer goods/capital goods payoff
command solution to the input question
desire their business firms to be primarily labor intensive
libertarian fairness
distribution of the nation's income based on each individual's productivity
egalitarian fairness
distribution of the nations income based on the equality of each individual
market solution to the input question
each business firm decides for themselves
capital goods
equipment used to produce consumer goods
Karl Marx
father of communism
three advantages of the market solution to the three economic questions
freedom: everyone has the freedom to produce and purchase what they wish efficiency: products are produced at the lowest cost with the maximum efficiency stability: the market constantly adjusts to reach equilibrium
input
how will the nation's goods be produced
input question
how will the nation's goods be produced
Three Economic Questions
input, output, distribution
National Economic Goals
low level of unemployment, stable price level, healthy rate of economic growth, fair distribution of income
workfare
modern program governments arrange for poor people who are willing to work to receive financial assistance
labor intensive
relies more on human workers than equipment
Truth in Lending Act
requires creditors to inform consumers of all charges and conditions involved in borrowing money
command solution to the distribution question
seek to close the gap between the richest and the poorest
consumer goods
shoes, coffee, tablets, books etc...
unemployment
someone who wishes to work who cannot find a job
savings
source of funds for businesses to purchase more-productive equipment
extensive growth
the production of more goods and services because business firms are using more land, labor, or financial capital
capital intensive
the source of funds for businesses to purchase more productive equipment
current consumption/investment purchases
two main reasons Americans borrow money
command economy
type of economy in which an individual or committee answers the three basic economic questions
investment borrowing
use of debt to purchase goods that will increase in value
safety net egalitarianism
view of economics that leads nations to introduce economic assistance programs such as food stamps and social security
output
what will be produced?
distribution
who receives what the nation produces