Economics Chapters 1-14

Is there enough gold in the world to base each nation's currency on a gold standard? Explain

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Laissez-faire

'Let it alone'

Three characteristics of a monopoly

(a)The situation that arises when a single firm is the only supplier of a good or service (b)There must be no close substitutes for the firm's product (c)Entry into the market must be blocked

Three characteristics of an oligopoly

(a)There are only a few firms in the entire industry (b)Firms in an oligopoly may sell products that are either differentiated or virtually the same (c)Potential firms are able to easily enter or exit the market

Five Characteristics of perfect competition

(a)There must be a large number of independent sellers (b)There must be a large number of independent buyers (c)The industry must be one in which all firms produce a standardized product (d) Firms must have free access to the market (e) Relevant market information must be made available to all firms and buyers

Characteristics of pure competition

(a)There must be a large number of independent sellers (b)There must be a large number of independent buyers (c)The industry must be one in which all firms produce a standardized product (d) Firms must have free access to the market (e) Relevant market information must be made available to all firms and information

Where are state taxes spent?

- Education , Public Safety, Highway and Transportation, Public Welfare, Arts and Recreation, Administration

What is a large, complex organization composed of appointed officials and their numerous agencies called?

A bureacracy

Trust

A collusion of businesses which join together to restrict or eliminate competition

Durable Good

A good expected to last more than three years

Entrepreneur

A person who undertakes management of economic enterprises on a bold scale, with some danger of losing his investment of money and time.

Globalism

A philosophy which regards the entire world as one giant community that should be unified politically and economically.

Market

A place to buy and trade goods

Price Ceiling, Price Floor

A price ceiling is when governments place a limit on how much a producer may charge for his product. A price floor is a price level set above the equilibrium price

Substitute Good, Complimentary Good

A substitute good is a product many consumers buy when the price of another same good rises, a complimentary good is a good with negative cross elasticity of demand in contrast to a substitute good

Surplus, Shortage

A surplus is if the quantity of goods supplied is greater than the quantity demanded at a given price. A shortage is the situation in which the quantity exceeds the quantity supplied at a given price.

What is a traditional economy?

A system in which decisions involving the production, distribution, and consumption of goods are based upon custom, heredity, and caste.

State Capitalism

A system in which the owner of much of the nation's capital is a powerful, centralized apparatus called the collectivist state

Socialism

Any economic system based upon collective ownership and control of many or most national resources

Economy

Any system for the production,distribution, and consumption of goods.

Labor

Any work that contributes to the production of goods and services

Capitalist

Anyone who owns producer goods or owns a share of some business that produces goods

Money

Anything that is generally accepted as forms of payment

...

Disadvantages •Goods may not be readily divisible •Bartering often requires a lot of time and certain hassle

Specie

Coined metallic money

Economic system also called a planned or directed economy.

Command Economy

System in which people are assigned jobs by a centralized authority

Command Economy

Economic system that Governor Bradford found contrary to God's wisdom

Communal Economy

Define communisim

Communism is when a country is not allowed to determine their choice of jobs or choose to better their living circumstances

What is the ability to produce a good at a lower opportunity cost than another producer called?

Comparative advantage

Type of good produced to directly satisfy people's wants

Consumer goods

Consumer Price Index

Economist's index/record

Name given to authorities on the production, distribution, and consumption of goods.

Economists

Explain why a small-business owner whose only income is what economists call the wage of management is not making true profit.

Economists say that owners have not made true benefits they have simply paid themselves the wage or cost of managements. Most businesses simply get back their cost of doing businesses. They break even.

Examples of Discretionary Spending:

Education, Training, Scientific research, student loans, technology, national parks & monuments, law enforcement, environmental cleanup, housing

What are some of the primary advantages and disadvantages of bartering?

Bartering often takes large amounts of time and there may not be goods to trade. An advantage is that goods may be traded directly for other goods.

List four components of the business cycle

Peak Trough Expansion Recession

Capitalism's three basic components

Property Rights Freedom of enterprise Competition in a market environment

Bourgeois

Property owners

The theory that domestic manufacturers need government to guard against foreign competition

Protectionism

Perfect competition

Pure competition

Are selfishness and envy really done away with in command economies as their supporters claim? Explain

Selfishness and greed certainly seem stronger in Totalitarian economies, but that doesn't mean that they are nonexistent in command economies.

Price discrimination

Selling the same type of goods at different prices to different buyers.

What can Americans do to ensure their nation's continued prosperity and to regain national sovereignty?

Elect leaders and legislation whose intent is to restore our nation's sovereignty.

French entrepreneur who was the first to produce quality gunpowder in the United States

Eleuthere Irenne Du Pont

EU

European Union

Market Signals

Signs that are used by consumers and producers to determine how much of a good to buy or sell at a give price and time

Leading indicators

Similar to a depression- A time when things just kind of stay the way they are.

How has the UN encouraged totalitarian aggression and wars?

Since World War 11, the UN has overlooked and even aided the expansion and aggression of totalitarian regimes.

Why might a person hear more protest about the economy in a country with a free market than in one that is tightly regulated?

In a free market people have more freedom to complain.

The two methods by which a producer can improve his efficiency and profitability

Taking into consideration his input and output

Withholding

Taking tax payments out of an employee's pay before he or she receives it

Tariffs

Tax a government places on imported goods

Five factors that can increase or decrease the supply of a good.

Technology Resource Prices Prices of Related Goods Number of Sellers Producer Expectations Government Taxes, Subsidies, and Regulations

Public sector

That part of an economy that is controlled by national, state, and local governments

Private sector

That part of an economy that is controlled by private individuals, businesses, and organizations

Influential pamphlet published by London's economist league

The Communist Manifesto

Why are many European nations eager to join the EU? What roles do the EU have today in addition to promoting free trade?

The EU encourages free market and assures European influence around the world. Today the European Union has replaced its vision of just a free trade alliance with a vision of a unified economic power under a single authority.

Two of the most important acts under the antitrust laws

The Sherman Act of 1890 and the Clayton Act of 1914

multilateral

The United States has voluntarily surrendered much of its national soveriegnty through _____ agreements, which are those that involve more tan two nations.

The three original members of NAFTA

The United States, Canada, and Mexico

The three original members of NAFTA

The United States, Canada, and Mexico.

Name of Adam Smith's most famous book

The Wealth of Nations

The biggest defender of the American freedom from harmful monopolies

The free market itself

Why is it that governments cannot efficiently set prices that producers and consumers must follow?

The free market will fail.

Economic Law

The general rules or principles guiding the production, distribution, and consumption of goods.

What is the chief aim of the Federal Reserve? What are its three main tools, and how does the system use them in meeting its objectives?

The chief aim of the Federal Reserve System is to form America's monetary; policy and thereby control the money supply. It's three main tools are the Board of Governors, The Federal Open Market Committee, and The Federal Reserve Banks.

Proletariat

The common working class

Why are countries that let people respond to the inborn profit motive better off than those countries that do not

The consumer and everyone else who demands goods have a better knowledge of what goods are to be produced and in what quantity.

Opportunity costs

The cost of giving up one opportunity in order to pursue another.

Who is Keynesianism named for?

John Maynard Keynes

Man who is credited with formulation the basic ideas of communism

Karl Marx

Who is credited with formulating basic ideas of communism?

Karl Marx

The Communist Manifesto

Karl Marx's book published in 1848 which outlined classic communist philosophy

Founder of the Austrian School of economics

Karl Menger

Who founded the Austrian School of Economics

Karl Menger

Three main categories of United States money and what each one includes:

M1- Value of all the balances in various types of transaction accounts M2- non-checkable savings deposits, money market mutual funds, and time deposits M3-money counted in M2

List four terms used in the text that describe different types of socialism

Managed Capitalism Market Socialism Democratic Capitalism Welfare Capitalism

20th Century economist associated with . monetarism

Milton Friedman.

Is money moral or immoral? Explain your answer

Money is neither good nor evil. Everything relies on how we make use of the money.

How can the available supply of natural resources, such as timber, or copper, actually increase even while they are consumed?

New technologies being put into use have not only helped preserve natural resources, but have increased them.

Is the threat of world disapproval sufficient to keep nations in line? Explain.

No this threat has not kept nations in line. Nations will often act quickly, aggressively, and/or violently without regards to what the rest of the world will think of their actions.

Would everyone wish to adopt command economies if these systems were shown to be economically efficient? Explain.

No. Producers and consumers in these types of economies are still poorly treated and unprepared for emergencies.

Would the value of goods produced by an American manufacturer located in Mexico be counted in the U.S domestic product? How about the value Japanese products made in the United States?

No. The goods in Mexico would not be counted because they are not made in the U.S The Japanese products made in the U.S would be counted.

Do most businesses make a large profit under the free market system? Explain your answer.

No. There are two reasons why large profits from businesses are rare. The first is that even when the laws of supply and demand are allowed to work, interrupted by the government, businesses cannot raise the prices it charges for its products above that price which its competitors are charging.

Equilibrium

The place at which quantity demanded and quantity supplied are equal

Why are countries with free market economies better equipped to handle environmental concerns than are countries with command economics?

The private sectors within free market economies are better at identifying and handling environmental issues. They are also better at raising and setting the green standard for people around the world.

Geographic specialization

The production of goods in which a country or region has absolute or comparative advantage.

Nationalism

The promotion of one's own nation and government regardless of moral considerations.

Efficiency

The quality of producing effectively with a minimum of waste

Supply

The quantity of goods for sale at a certain price and under certain circumstances

Free Trade

The result of no restrictions or penalties placed upon the trading of goods.

Division of labor

The separation of work to be performed

Monoply

The situation that arises when a single firm is the only supplier of a good for which no substitute exists

Business cycle

The standard process in which every business goes through.

Economics

The study of choices that individuals and societies make in the production, distribution, and consumption of goods.

What is macroeconomics?

The study of economics on a national and international level.

Total Cost

The sum cost of all factors of all the factors of production used in

Private Capitalism

The system in which the majority of a nation's capital is owned and controlled by private individuals and businesses

Classical Economics

The theories developed in the 19th and 20th century that advocated the free market system

Monetarism

The theory that the variation in the money supply is the main source of economic fluctuations.

If the government were to impose a massive new tax on vehicle manufacturers, how might this affect the automotive industry?

There would be less people buying new cars.

Why are international aid organizations most effective when administered by the private sector?

These private organizations are much more effective. People should also be able to choose which agencies they support.

Four terms used in the text that describes different types of socialism

Welfare capitalism, managed capitalism, democratic socialism, and market socialism.

For what reason have many government officials been responsible for debasing their national currencies? How could this policy be called a form of taxation?

They have broken trade agreements, devalued and inflated currency, counterfeited money, illegally duplicated patented and/or copyrighted goods, seized American assets and other dishonest practices.

How do globalists use the need for free trade as an argument for a unified international economy?

They like to say stuff like "people who trade don't fight." Globalism at its core is really quite deceptive. After all who doesn't want world peace and prosperity?

Would the Fed likely pursue an easy money policy or tight money policy during a recession? Why?

They would pursue an easy money policy to encourage more spending.

Profit Motive

This urge to work at bettering one's economic situation

What is the chief aim of the Federal Reserve

To administer the supply of money

Motive upon which competition is based

To better one's economic situation

Economic goal of mercatilism

To build the state's treasury

Why was FDR's New Deal enacted?

To help stimulate the economy by providing temporary jobs

Motive upon which competition is based

To make possible a better standard of living for everyone in a prosperous society

The goal of economic competition

To prove the quality of goods and lower the prices

The goal of economic competition

To provide better goods at lower prices

Gresham's Law

To spend new and less trustworthy money

The practical purpose of economics

To understand the production, distribution, and consumption of goods

Economic system in which the choices of individuals are limited by the constraints of convention

Traditional Economy

Three main types of economics

Traditional Economy command Economy Free enterprise economy

Economic system in which the choices of individuals are limited by the constraints of convention.

Traditional economic system

WTO

World Trade Organization

The push for globalization in the 20th century became prominent around the time of which war?

World War 11

The push for globalization in the 20th century became prominent around the time of which war?

World War 2

Is a person's house usually considered capital? Why or why not?

Yes. Because it can be traded for goods or a place to produce goods.

Why is honesty necessary in a free market economy? Is this quality as vital in countries with command economies?

Yes. This value is vital in all sorts of economies.

Does every form of legal tender have intrinsic value? Why or why not?

Yes. When money is legal tender, it has been declared a valid means of payment

Why do economies pay close attention to leading indicators? Should people base their business choices base their business choices solely on on this economic tool? Why or why not?

Yes. When people are aware of where the economy is headed, steps may be taken to fix any dangerous trends.

price level

a composite measure reflecting the prices of all goods and services in the economy relative to prices in a base year

aggregate supply curve

a curve that shows the relationship between the output U.S. producers are willing and able to supply at each price level and reall GDP supplied per period

aggregate demand curve

a curve that shows the relationship between the price level in the economy and the real GDP demanded per period

recession

a decline in total production lasting at least two consecutive quarters, or at least six months

stagflation

a decline, or stagnaion, of a nation's output accompanied by a rise, or inflation, in the price level

deflation

a decrease in the general price level

normal good

a good whose demand is directly related to consumers' incomes; airline tickets; steak

demand curve

a graphic representation of the amount of goods purchased at different prices

supply curve

a graphic representation of the quantity of goods supplied at different prices

demand schedule

a list of numbers that compares price with quantity demanded

supply schedule

a list of numbers that compares price with quantity supplied

Medicare

a national health insurance program that helps pay for health care for people over age 65 or with certain disabilities

depression

a recession that is unusually severe and long-lasting

disinflation

a reduction in the rate of inflation

Tax

a required payment to local, state, or national government

Regressive tax

a tax for which the percentage of income paid in taxes decreases as income increases

Progressive tax

a tax for which the percentage of income paid in taxes increases as income increases

Proportional tax

a tax for which the percentage of income paid in taxes remains the same for all income levels

Individual income tax

a tax on a person's earnings

Tariff

a tax on imported goods

Gift tax

a tax on money or property that one living person gives to another

Sales tax

a tax on the dollar value of a good or service being sold

Estate tax

a tax on the estate, or total value of the money and property of a person who has died

Corporate income tax

a tax on the value of a company's profits

Property tax

a tax on the value of a property

CPI Consumer Price Index

a tool used to measure the growth of inflation, based on the average price consumers pay for specific goods and services

communism

an economic system based upon public ownership and governmental control of the production and distribution of nearly all national resources

socialism

any economic system based upon collective ownership and control of many or most national resources

diminishing marginal utility

as one's supply of a specific good or service increases, the satisfaction derived from each additional unit tends to decrease

law of supply

as the price of a good increases, the quantity supplied also increases in a free market economy

"Pay

as-You-Earn" Taxation - This means that individuals usually pay most of their income tax throughout the year as they earn income

Economic and Social Council

body within the UN that studies economic and social problems and makes recommendations to the General Assemby, individual nations, and the UN's specialized agencies

number of sellers

changes supply; depending on how many people are selling a good

producer expectations

changes supply; if producers hear the price will increase in the future, they will supply more

technology

changes supply; improvements in this area are the largest influence on the amount of goods that producers are able to supply

prices of related goods

changes supply; prices of other goods affect how much producers will supply

resource prices

changes supply; the amount producers have to pay for things they use

government taxes, subsidies, and regulations

changes supply; when gov't organizations' rules make things more expensive to make; or when the gov't helps businesses

public sector

controlled by national, state and local governments

population

demand changes when age structure changes

prices of related goods

demand changes when other goods' prices increase or decrease

consumer expectations

demand changes when people are influenced about what to buy when they hear about what will happen in the future

inferior goods

demand for these items falls as consumers' income rise, and vice versa

the law of demand

explains the inverse relationship between the price of a good and the amount that people choose to buy

hyperinflation

extremely high inflation

laissez

faire - the doctrine that the government should not intervene in a market economy beyond the minimum required to maintain peace and property rights

subsidies

government monies given to a business

GDP

gross domestic product is the value of all finished goods and services produced within a country during a year's time

price elasticity of demand

if prices go up, people will buy less

Tax base

income, property, good, or service that is subject to a tax

inelastic demand

if consumers will pay very high prices for a particular commodity and not buy substitute goods

leading economic indicators

measures that usually predict, or lead to, recessions or expansions

substitution effect

people tend to substitute less expensive goods for ones whose prices have risen

gross domestic product (GDP)

measures the market value of all final goods and services produced in the United States during a given period, usually a year

base period

period that serves as a reference point to which prices are compared

base period

period that serves as a reference point by which measurements are compared

Real property

physical property such as land and buildings

price floors

price levels set above the equilibrium prices; results in surplus

demand

pull inflation - inflation resulting from increases in aggregate demand; results from a rightward shift of the aggregate demand curve; greater demand pulls up the price level

cost

push inflation - inflation stemming from decreases in aggregate supply; results from a leftward shift of the aggregate supply curve; reduced supply pushes up the price level

Benefits

received principle - a person should pay taxes based on the level of benefits he or she expects to receive

Business cycle

recurrent fluctuations in the level of economic activity

market

referring to a means through which sellers and buyers exchange goods

General Agreement on Tariffs and Trade (GATT)

regulations that guided the world's international trade prior to the estabishment of the WTO

Kyoto Protocol

requires nations to buy allowances of carbon credits to decrease CO2 and reduced greenhouse emissions

demand curve

slope which goes downward and to the right

International Monetary Fund (IMF)

special agency linked to the UN that monitors the value and exchange of currencies and is involved in financing governments and providing funds for national development

Discretionary Spending

spending category about which government planners can make choices.

Mandatory Spending

spending on certain programs that is mandated, or required, by existing laws.

investment

spending on new capital goods and additions (new plants, new equipmet, new buildings, new residences, and net additions) to inventories

Trade balance

the difference in the value of goods that a country sells abroad compared to what it purchases in other countries

quantity

the horizontal axis

cyclical unemployment

the increase in unemployment caused by the recession phase of the business cycle; increases during recessions and decreases during expansions

nominal interest rate

the interest rate expressed in current dollars as a percentage of the amount loaned; the interest rate on the loan agreement

real interest rate

the interest rate expressed in dollars of constant purchasing power as a percentage of the amount loaned; the nominal interest rate minus the inflation rate

aggregate demand

the relationship between the average price of aggregate output and the quantity of aggregate output demanded

overproduction or underproduction

the result of price-fixing by government

economy

the structure of economic activity in a locality, a region, a country, a group of countries, or the world

Average Cost(of production)

the sum of all the factors of production used in producing on unit of a good.

aggregate income

the sum of all the income earned by resource suppliers in the economy during a given year

frictional unemployment

the time required to bring together labor suppliers and labor demanders creates frictional unemployment; does not usually last long and results in a better match-up between workers and jobs

aggregate output

the total amount of goods and services produced in the economy during a given period; real GDP

total utility

the total amount of satisfaction received from all marginal utility

aggregate expenditure

the total spending sum of consumption, investment, government purchases, and net exports produced in the economy during the year

equity

the total value of a business minus any liabilities

IBRD and IDA

the two institutions that make up the World Bank

Tax Incentives

the use of taxation to encourage or discourage certain behavior.

GDP gross domestic product

the value of all finished goods and services produced within a country during a year's time

GNP gross national product

the value of all finished goods and services produced by a nation's citizens during a year's time

index number

the value of a variable in a particular year to its value in a base year, or reference year

opportunity cost

the value of the best alternative that is foregone when a different alternative is taken

depreciation

the value of the capital stock that is used up or becomes obsolete in producing GDP during the year

value in use

the value that is directly related to the benefits their owners receive through their use

price

the vertical axis

negotiating with one nation at a time

the way that the United States should work to obtain free trade

European Union (UN)

the world's largest trade group, which calls for the integration of nations into a single financial entity that is capable of imposing sanctions on noncooperative nations

Bolshevik

this revolution began the rise of communism

labor force

those in the adult population who are either working or looking for work

Ability

to-pay Principle - people should pay taxes according to their ability to pay

North American Free Trade Agreement (NAFTA)

treaty that called for the elimination of tariffs and other trade restrictions that existed among the United States, Canada, and Mexico to encourage free trade

famous minister

turned-economists known for his gloomy prophecies - Thomas Robert Malthus

competition and costs

two things which make profits rare

Deductions

variable amounts that you can subtract, or deduct, from your gross income

Tax exempt

not subject to taxes

193

number of countries that belonged to the UN in 2011

private sector

part of an economy that is controlled by private individuals, businesses, and organizations

General Assembly

part of the UN that meets at least once a year to discuss and vote on international problems

International Bank for Reconstruction and Development (IBRD)

part of the World Bank which focuses on middle-income countries

International Development Association (IDA)

part of the World Bank which focuses on the world's poorest countries

value in exchange

what a particular good is worth in exchange for some other good

wage of management

what it would cost people who run their own establishments to hire managers to run their businesses for them

How is a government that controls the private sector too tightly similar to the couple in the tale "The Goose That Laid the Golden Eggs"?

when a government lets greed take over, the state loses its main sources of revenue all together.

price ceiling

when governments place a limit on how much a producer may charge for his product; results in shortage

structural unemployment

when job seekers do not have the skills demanded;

shortage

when suppliers of a good may not produce enough to satisfy consumer demand at the price for which the good is sold

income effect

when the price of a good falls, consumers tend to buy more of that good or of other items because they can do so without giving up anything; and vice versa

full employment

when there is no cyclical unemployment; relatively low unemployment

durable goods

which are expected to last at least three years

The system Henry Ford used to produce

"America Mass Production" via the assembly line

Economic system in which price is set at the equilibrium point where supply and demand come into balance.

Free Economy

Give three reasons why global aid organizations are ineffective

1) They fail to keep the peace 2) Restricts countries from making beneficial trades 3) Globalism requires major sacrifices on behalf of a single country and its people

Give three reasons why global aid organizations are ineffective.

1) They fail to keep the peace 2) Restricts countries from making beneficial trades 3) Globalism requires major sacrifices on behalf of a single country and its people

Define: Durable good Black Market Opportunity costs

1. A good expected to last at least three years 2. An alternative, illegal way for people to buy and exchange goods 3. The cost of foregoing one opportunity to take another.

What are the three main tools used by the Federal Reserve and what does it use them for?

1. Open Market operations 2. Reserve Ratios 3. Discount rates

List the three of the 5 harmful government practices discussed in the text

1. Excessive taxation 2. Debasement of money 3. Creation of bureacracy

Identify two effects used to explain why price changes influence the quantity demanded of a good.

1. Substitution 2. Income

Three functions of money

1. To be a medium of exchange 2. To provide a measure of value 3. To provide a store of value

List the three functions of money

1. To purchase 2. Measure value 3. Store/save wealth

Eight situations in which government may need to stop the abuse of the market

1. When a business compromises national security 2. When a business threatens the safety or health of consumers through fraud or deceit 3. When a company or group of companies conspires to hinder free competition in the marketplace. 4. When a national emergency, such as war, disrupts the normal market cycle. 5. When a labor organization breaks the law or uses intimidation tactics against workers. 6. When the public safety or national security is endangered by labor strikes or unrest 7. When the purchasing of private property is necessary for the public good or safety 8. When the industry is under a natural monopoly

Five specific situations in which it would not be beneficial for the United States to engage in free trade with another nation

1. When a nation is notorious for breaking trade agreements 2. When a nation devalues or inflates currency 3. A nation counterfeits money 4. A nation illegally duplicates patented or copyrighted goods 5. A nation seizes American assets or engages in other dishonest practices to damage our economic system

Limits on the Power to tax

1.) Purpose of tax must be for "common defense and general welfare" 2.) Fed taxes must be the same in every state

Characteristic of a Good Tax

1.) Simplicity, 2.) Efficiency, 3.) Certainty, 4.) Equity

Six ways given in the text that nations have used in their attempts to increase wealth

1.Produce more goods from existing resources 2. Increase the amount of resources available for the production of goods 3. Find new resources to satisfy existing wants 4. Make goods already being produced more effective in satisfying people's wants 5. Reduce people's wants 6. Redistribute the goods that are already being produced among the population

List the three components of mass production

1.Specialization 2. Distribution of labor 2. Automatic conveyance (the assembly line)

the presence of business fluctuations inflation selfishness & injustice

3 criticisms of the market economy

expansion peak recession trough

4 components of the business cycle

Define Complimentary good

A good that is sold with another

Oligopoly

A market that occurs when an industry is dominated by only a few firms

Good

A material thing that people want and for which they will pay

Mixed Economy

A mix of completely regulated system and a completely free system (neither of which exists)

Father of Economics

Adam Smith

What are some of the primary advantages and disadvantages of bartering

Advantages • Buyers need not have a money system • Provides convenient means for comparing the value of one good with another

The first thing to understand about economics

All goods have to be worked for.

Black Market

An alternative, illegal system in which one can exchange goods.

Communism

An economic system based upon public ownership and governmental control of the production and distribution of nearly all natural resources.

Subsistence Economy

An economic system that provides barely enought to keep a society alive

Physiocrats

French economists who favored a "natural" economy

Near money

Asset that can be easily converted into M1 because they are highly liquid

If thousands of workers were to demand wage raises at the same time, would the likely result be demand-pull or cost-push inflation?

Both

A group of firms that produces similar products or provide similar services is a(n)________

Blank: Industry

Each firm in a market that is perfectly competitive is known as a(n)______ taker.

Blank: Price

A firm that has a monopoly produces goods for which there are no close________

Blank: Substitutes

When firms in an industry that is perfectly competitive, they produce_______ products.

Blank: standardized

Three main components of the federal reserve

Board of Governors Federal Open Market Committee(FOMC) Federal Reserve Banks

According to Communist philosophers, the ________ must be overthrown before social and economic equality can be established

Bourgeois

The three criticisms of the market economy mentioned in the text

Business cycle Inflation of money and prices Hard, greedy, and selfish competitive economic system

Throughout history most people have been poor because they lacked what kind of goods?

Capital goods

Type of good that is also called an investment good

Capitol goods

Two effects used to explain why price changes influence the quantity demanded of a good

Change in supply and change in demand

Price discrimination

Charging more or less for the same products

Demand Curve, Supply Curve

Demand curve is a graphic representation of the amount of goods purchased at different prices, a supply curve is a graphic representation of the quality of goods supplied at different prices.

Difference between demand-pull and cost-push inflation

Demand-pull inflation is caused when the demand becomes greater than the supply. Cost-push inflation is triggered when businesses face rising production costs, forcing them to increase the prices they charge for their goods

E.I du Pont's powder mill made especially handsome profits in the year 1812. From your knowledge of history can you suggest a reason why?

Demand. (War of 1812)

What economic riddle did Karl Menger Solve?

Diamond-Water Paradox

True source of prosperity

Diligent work directed by ingenious intelligence allowed to develop under conditions of freedom

Why are many European nations eager to join the EU? What roles does the EU have today in addition to promoting free trade?

EU encourages free market and assures European influence around the world. Today the European Union has replaced its vision of just a free trade alliance with a vision of a unified economic power under a single authority

Monopolistic competition

Each firm promotes a differentiated product

Term used for an economist's prediction of what will happen to an economy

Economic Forecast

Four components of the business cycle

Expansion Peak Recession Trough

Law of Demand, Law of Supply

Explains the inverse relationship between the price of a good and the amount that people choose to buy, law of supply states the direct relationship between the price of a good and the amount that supplies will make available

Government agency whose purpose is to investigate trade practices

Federal trade commission

Industry

Firm that produces products and services similar to those of other industries

Explain how the fractional reserve system of banking was born and how this system.

Fractional reserve banking is a system which allows banks to hold less than 100 percent of deposits in reserve.

GATT

General Agreement in Tariffs and Trade

industrially advanced countries (IACS), less developed countries (LDCs)

Globalists say that the ______ ____ ____ have a moral obligation to provide financial aid for the ___ ____ ____.

Bullion

Gold, silver, or platinum, usually found in the form of bars, ingots, or plates

What is the economic philosophy of Keynesianism?

Government planning works better than the 'invisible hand.'

GDP

Gross Domestic Production- The total value of all products produced in the country each year

Explain the statement, "People who trade don't fight." Has this assertion proved true?

History has proved this statement entirely wrong. Countries who were once good trading partners with other countries went to war with those same countries. Trading does no guarantee peace

Five morals mentioned in the text that are needed for a successful economic system

Honesty, Industriousness, Charity, Fortitude, Generosity

Explain why the opportunity cost of buying a bicycle is normally much greater in command economics than in free market economics.

IT is not a necessity. A person would have to sacrifice legitimate needs to make this purchase.

Deflation

If prices decrease because money seems more valuable and stable

Perfect competition

Independent sellers

Type of work that creates the wealth of nations

Intelligent work

The formal name for the World Bank

International Bank for Reconstruction and Development (IBRD)

The formal name for the World Bank

International Bank for Reconstruction and Development(IBRD)

IMF

International Monetary Fund

Why is it beneficial for money to have intrinsic value?

It is easier to measure the value of a good

Why are credit cards not considered a form of money?

It is only a way of obtaining short term loans from the user's credit card company.

Fiat money

Legal tender that is backed by nothing but a government's promise

Means through which sellers and buyers exchange goods

Market

Term that refers to the amount of money that a buyer pays a seller for a good

Market Price

What are market signals?

Market signals are signs which consumers and producers use to determine the price of a good is sold for and in what quantity.

capitalism

Marx viewed what as the stepping stone between feudalism and socialist ideal

Das Kapital

Marx's book published in 1867 which included the statement "In order to establish equality, we must first establish inequality"

What is the difference between multilateral and bilateral trade agreements? Which kind would be better for the United States? Why?

Multilateral trade agreements require the participation of more than two nations and bilateral trade agreements only require two parties. It would be best for the United States to only accept bilateral trade agreements. These agreements allow us to consider our nations interests and needs.

The Four Factors of Production

Natural Resources Labor Capital Entrepreneurship

NAFTA

North American Trade Agreement

Social Security

Old-Age, Survivors, and Disability Insurance (OASDI)

How many suppliers of a good or service are there in an industry with a monopoly?

One

Why is economics inseparable from morality?

One cannot function without the other.

In a free market, how might a firm that does not make a true profit still stay in business?

Ordinarily these types of firms receive return from their invested capital and their wage of management

Price taker

The firm takes whatever price it can get

Consumer

Person purchasing the goods produced

Producer

Person working to produce goods

Famous book written by Pierre Samuel Du Pont

Physiocracy

Group that made the first attempt to create a science of the production, distribution, and consumption of goods.

Physiocrats

Type of money coined in the Massachusetts Bay Colony

Pine tree shilling

in what ways is the earth less polluted than it was 400 years ago?

Pollution 400 years ago was more common and more deadly. There were fewer ways to dispose of trash and sewage, increasing vermin and disease.

Six qualities that an ideal money possess

Portability Durability Homogeneity Divisibility Constancy Intrinsic Valuableness

Two entities that make the majority of economic decisions in the free market

Private Households Private Businesses

The old word for the bad habit of spending more than one can fford

Prodigality

Service

Produced by labor for which people expect to pay

What can happen to the economy when taxes are too high?

Production will go down, less capital will be bought, and not all needs will be met

Three types of property

Real Property Financial Property Intellectual Property

Why are recessions considered a normal and natural part of a business cycle?

Recessions are times of reduced production, reduced consumption, and reduced employment.

Explain how supply-side economics can reduce unemployment and increase overall productivity.

Reducing taxes allows for more private research and investment in capital.

Two components of the market in a free enterprise economy

Resource Market Product Market

Value

Scarcity

A demand ______ is a list of numbers that compares quantity demanded with price.

Schedule

Personal exemption

Set amount that you subtract from your gross income yourself, your spouse, and any dependents

Entitlement

Social welfare program that people are "entitled to" if they meet certain eligibility requirements.

Define Socialism

Socialism is a deceptive government in which people are often told they will get something for sacrificing something else

What is an inferior good?

Something of less value

Want

Something that a human desires to have

What is an economic system called that provides barely enough to keep a society alive?

Subsistent economy

The three main organs of the UN and their purposes

The General Assembly, the Security Council, and Economic and Social Council. The general assembly decides how much the UN may spend on its projects; the Security Council makes decisions concerning the UN's involvement in national and international conflicts. The Economic and Social Council study the economic and social problems so that they may advise the General Assembly and the UN's other specialized agencies.

The three main organs of the UN and their purposes

The General Assembly, the Security Council, and Economic and Social Council. The general assembly decides how much the UN may spend on its projects; the security COuncil makes decisions converning the UN's involvement in national and international conflicts. The Economic and Social Council study the economic and social problems so that thye may advise the General Assembly and the UN's other specialized agencies.

What are the differences between an accountant's and an economist's definition of profit?

The accountant's view of a business's profit is its total revenue excluding the cost of depreciation. To an economist, profit is the excess of total revenue paid by producers for goods over the seller's total expense of producing those goods.

Mercantilism

The aim of this economic system was to build up the state's treasury

Demand

The amount of goods bought for a certain price under certain circumstances

Marginal Utility, Total Utility

The amount of satisfaction that results from a one unit increase of a product, the total amount of satisfaction received from everything added together

Face value

The asserted value

Specialization

The best job someone can do

depreciation

The diminishing of the value of goods that is caused by wear and time

Barter

The direct exchange of one good for another good without a standard form passing from hand to hand

Imperialism

The establishment of colonies in other countries to benefit the mother country.

The EU's first official currency

The euro

Profit

The excess of the total revenue paid by buyers for goods over the seller's total expense of producing these goods

bilateral

The most effective approach to world trade that our country could take would be to pursue ______ trade agreements-- agreements that affect only the two parties taht make them.

how does the work of researchers and inventors make a nation more productive?

The nation knows the steps that need to be taken to act on their findings

Input

The total amount of a good that is produced

From you knowledge of recent history, can you suggest how wars tend to affect the American economy?

The wars have drained the economy because of the immense costs.

Many of the supporters of strong command economies claim to be atheistic, not believing there is a God. How is the belief that man is the highest being in the universe related to the philosophies promoted by Communism and socialism

There is no freedom of religion or free will.

Three characteristics of monopolistic competition

There must be a large number of firms in the market These firms provide differentiated products Firms are able to easily enter or exit the market

seasonal unemployment

Unemployment caused by seasonal changes in labor demand during the year

UN

United Nations

Department responsible for printing and coining U.S. money.

United States Department of the Treasury

Market Price

Value in Exchange

The difference between value in use and value in exchange

Value in use is the value that is directly related to the benefits their owners receive through their use. Value in exchange is what a particular good is worth in exchange for some other good

What is the difference between demand-pull and cost-push inflation?

When the demand is higher than the supply available. Cost-push inflation is when inflation is when the production costs and supply rises but demand is low.

Inflation

When the level of prices in the market rises because too much money is in circulation

Who makes the economic decisions in a command economy? In a free economy?

Why is this an important distinction between the two economic decisions. In a free economy, economic decisions are made by individuals. It shows why some economies are more successful than others or vice versa

How can an individual's basic instinct to improve his personal situation result in better conditions for others? How is a market economy harmed when this characteristic is carried too far?

Without motivation, little or no productive work would be done. However, if this 'motivation' is carried too far it turns into greed.

bourgeois

according to Marxist ideology, this group must be overthrown

bourgeois

according to Marxist philosophy, a member of the class of people who own capital or property

proletariat

according to Marxist philosophy, a member of the common working class

inflation

an increase in the economy's general price level

Tax Assessor

an official who determines the value of a property.

consumer price index

based upon the average price consumers have to pay to purchase a specific "market basket" of goods

Operating Budget

budget for day-to-day expenses

Capital Budget

budget for major capital, or investment, expenditures

Balanced Budget

budget in which revenues are equal to spending

unemployment benefits

cash transfers to unemployed workers who actively seek work and who meet other qualifications

tastes and preferences

causes shift in demand; caused by promotional marketing, etc.

income

causes shift in demand; people buy more and less as this increases and decreases

leading indicator

component of the economy that normally changes before the rest of the economy

Leading indicators

components of the economy that normally change before the rest of the economy

supply curve

curve which slopes upward and to the right

business cycle

cyclic fluctuation in the level of economic activity

stagflation

economic condition where high inflation is combined with high unemployment, resulting in stagnation of productivity.

supply-side economics

economic theory initiated by Ronald Reagan and applied in the 1980s to reduce the effects of stagflation

Medicaid

entitlement program that benefits low-income families, some people with disabilities, and elderly people in nursing homes.

labor force participation rate

equals the number in the labor force divided by the adult population

unemployment rate

equals the number unemployed divided by the number in the labor force

business cycle

fluctuations reflecting the rise and fall of economic activity relative to the long-term growth trend of the economy

tax return

form used to file income taxes

Karl Marx

formulated the basic ideas of Communism and advocated the overthrow of the free market

international trade, world peace, humanitarian aid, and environmentalism

four arguments given in favor of globalism

nondurable goods

goods that have a life expectancy of less than three years

consumption

household purchases of final goods and services during the year

Revenue

income received by a government from taxes and non-tax sources

surplus

if the quantity supplied of a good is greater than the quantity demanded at a given price

black markets

illegal systems for exchanging goods

consumers

in a free market economy, these people determine what goods are to be produced

Taxable income

income on which tax must be paid; total income minus exemptions and deductions

demand-pull inflation

inflation caused when the demand becomes greater than the supply, resulting in shortages; the high demand for goods forces up the prices that consumers must pay to satisfy their wants

cost-push inflation

inflation triggered when businesses face rising costs in producing goods, forcing them to increase the prices they charge for their goods

World Bank

international welfare agency that lends funds to some of the world's poorest governments; created by the UN at the end of World War II to lend money to Japan and the countries of Western Europe

consumer price index (CPI)

measures changes over time in the cost of buying a "market basket" of goods and services purchased by a typical family

United Nations (UN)

one of the most prominent global bodies

World Trade Organization (WTO)

organization which cooperates with the UN even though it is not a UN agency; hailed as the only global body dealing with the trade rules that have been established among the world's countries

Personal Property

possessions such as jewelry, furniture, and boats

Security Council

powerful body within the UN which makes decisions concering UN involvement in national and international conflicts

supply

side economics - macroeconomic policy that focuses on a rightward shift of the aggregate supply curve through tax cuts or other changes that increase production incentives

demand

side economics - macroeconomic policy that focuses on shifting the aggregate demand curve as a wat of promoting full employment and price stability

East Berlin

side of Berlin that was under the Communist rule of Soviet Russia during the Cold War

market signals

signs that are used by consumers and producers to determine how much of a good to buy or sell at a given price and time

quantity supplied

single point upon the supply curve

Economic theory applied in the 1980's to reduce the effects of stagflation

supply-side economics

FICA

taxes that fund Social Security and Medicare

globalism

term for a philosophy which regards the entire world as one giant community that should be unified politically and economically

national sovereignty

term for the exclusive power of an indepedent state to rule and regulate internal affairs without foreign interference

price

the amount of money that a buyer pays the seller for a particular item

marginal utility

the amount of satisfaction that result from a one-unit increase of a product, tends to become smaller with each additional unit

"global warming"

the belief that the general temperature of the eart and its oceans is being warmed due to pollution and greenhouse gases

supply

the relationship between a good's price and the amount that producers are willing to supply

stagflation

the economic condition in which high inflation is combined with high unemployment, resulting in stagnation of productivity

nominal GDP

the economy's aggregate output based on the prices at the time of the transaction; current-dollar GDP

real GDP

the economy's aggregate output measured in dollars of constant purchasing power; GDP measured in terms of the goods and services produced

profit

the excess of the total revenue paid by buyers for goods over the seller's total expense of producing those goods

Incidence of tax

the final burden of a tax

Bretton Woods Conference

the gathering of national leaders after World War II that resulted in the development of the World Bank and IMF

euro

the multinational currency used by the European Union

profit motive

the reason that a person is willing to trade certain goods for some other goods that have greater personal value to him

demand

the relationship between a good's price and the amount that people are willing to buy

expansion

the phase of economic activity during which the economy's total output increases

equilibrium

the place at which quantity demanded and quantity supplied are equal

market prices

the price for a good in a general market with many sellers and buyers

nationalism

the promotion of one's own nation and government regardless of moral considerations

underemployment

workers are overqualified for their jobs or work fewer hours than they would prefer