BUS151 Chapter 2

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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


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