Chapter 17

Adam Smith

-"wealth of nations" advocated the idea of laissez faire; or government not involving themselves in the economy. ~Adam Smith=laissez faire

Monetary policy

-a form of government regulation in which the nation's money supply and interest rates are controlled. ~monetary=money & interest rates are controlled

Antitrust policy

-a policy designed to ensure competition & prevent monopoly, which is the control of a market by one company. ~don't TRUST monopolies

Right-to-work laws

-a state law forbidding requirements that workers must join a union to hold their jobs. -state right-to-work laws were specifically permitted by the Taft-Hartley Act of 1947. ~workers DON'T have to join a union to have jobs

Capitalism (market economy)

-an economic system in which individuals & corporations, not the government, own principal means of production & seek profits. -pure capitalism means the strict noninterference of the government in business affairs ~government is NOT involved in business

Mixed economy

-an economic system in which the government is deeply involved in economic decisions through its role as regulator, consumer, subsidizer, racer, employer, and borrower. -the U.S can be considered a mixed economy. ~government IS involved in the economy

Monetarism

-an economic theory holding that the supply of money is key to a nation's economic health. -they believe that too much cash & credit in circulation produces inflation. ~cash & credit causes inflation

Unemployment rate

-as measured by the Bureau of Labor Statistics (BLS), the proportion of the labor force actively seeking work but unable to find jobs. ~people looking for work who CAN'T find jobs

Keynesian economic theory

-emphasizes that government spending & deficits can help the economy whether its normal ups and downs. -proponents of this theory advocate using the power of government to stimulate the economy when it is lagging. ~government has power to stimulate economy; spending & deficits help the economy

Multinational corporation

-large businesses with vast holdings in many countries. -many of these companies are larger than most governments. ~multinational=companies all over the world, they're HUGE

Labor unions & collective bargaining

-negotiations between representatives of labor unions & management to determine acceptable working conditions. ~determines working conditions

Fiscal policy

-the policy that describes the impact of the federal budget (taxes, spending, & borrowing) on the economy. -it's almost entirely determined by Congress and the president, who are the budget makers. ~how the federal budget impacts the economy

Laissez-faire

-the principle that government should not meddle in the economy. ~government should NOT be involved in the economy

Inflation

-the rise in prices for consumer goods. -it hurts some but actually benefits other. -groups such as those who live on fixed incomes are particularly hard hit, while people whose salary increases are tied to the consumer price index but those load rates are fixed may enjoy increased buying power. ~prices on consumer goods INCREASE

Socialism (command economy)

-says means of production, distribution, and exchange should be owned or regulated by the community as a whole ~business should be regulated by the COMMUNITY

Federal Reserve System

-the main instrument for making monetary policy in the U.S. -created by Congress to regulate the lending practices of banks & thus the money supply. ~federal Reserve system Regulates $ supply

Supply-side economics

-too much income goes to taxes & too little money is available for purchasing & that the solution is to cut taxes & return purchasing power to consumers. ~Reagan supports this (Republican), CUT TAXES

Wealth of Nations (1776)

-written by Adam Smith, it argues that the best way to encourage economic growth was to allow individuals to pursue their own selfish economic interests. ~economic growth=selfish economic interests