Chapter 2-The U.S. and Global Economies

In 2010 the U.S. produced about __________ of the global output.

20%

State and local governments spend about __________ of their funds on education.

34%

Consumption goods and services comprise about __________ of total production.

61%

Approximately __________ of the world's energy is used to produce electricity with the remainder used for transportation.

80%

Markets

A market is any arrangement that brings buyers and sellers together Goods markets - goods and services are bought and sold. Factor markets - factors of production are bought and sold.

__________ goods and services are those bought by businesses to be used to increase efficiency or enhance production.

Capital

Entrepreneurship

Entrepreneurship is the human resource that organizes labor, land, and capital. Entrepreneurs come up with new ideas about what and how to produce, make business decisions, and bear the risks that arise from these decisions. Income Source: Profit (or loss)

<How Do We Produce?

Factors of production are the productive resources used to produce goods and services. There are four categories of Factors of Production. Land, Labor, Capital, and Entrepreneurship

In the circular flow model, who supplies factors of production in exchange for income?

Households

What is the name given to the accumulated training and skills that workers possess?

Human capital

Labor

Labor is the work time and work effort that people devote to producing goods and services. Income Source: Wages

Assumptions

Only two types of individuals. Households are individuals or people living together as decision-making units. Firms are business that organize the production of goods and services. Every dollar earned by a household, must be spent and received by the firm. -No savings and no taxes (no government)

Capital

Physical Capital is all manufactured resources. Human Capital is the knowledge and skill that people obtain from education, on-the-job training, and work experience.

The stock of computers, factory buildings, and machine tools used to produce goods is known as

Physical capital

Which of these is an example of profit?

The net income from a small restaurant.

What is the definition of economic rent?

The price received by a factor of production that is in fixed supply.

What Do We Produce?

We divide the array of goods and services produced into four different categories.

Export goods and services

are goods and services produced in one country and sold in other countries.

Government goods and services

are goods and services that are bought by governments.

Consumption goods and services

are goods and services that are used to provide personal enjoyment.

Capital goods

are goods that are bought by businesses to be used in the production process.

The factors of production include land, entrepreneurship, labor and

capital

The largest category of total production is

health services

The flow of funds from __________ into the financial system makes it possible for government and firms to borrow.

households

Goods and services purchased from businesses in other countries are known as

imports

The resources provided by nature and used to produce goods and services are also known as

natural resources

The two largest sources of revenue for the U.S. government are

personal income taxes and social security taxes

The U.S. government's national debt is

the total amount borrowed and still owed to creditors over its history

Federal expenditures as a percentage of the gross domestic product

were at the highest level during World War II

According to World Bank data, the lowest paid 20% of the global population receives about __________ of the world's income.

2%

Land

Land includes all the non-human "gifts of nature" that we use to produce goods and services. Land includes all the things we call natural resources. Income Source: Rent

Income paid for the use of capital is called

interest

When you think of an arrangement or institution that brings buyers and sellers of a good or service together, what are you thinking of?

A market

The largest component of U.S. government spending is

Medicare and Medicaid

A person can increase their stock of human capital by

getting a college degree

Circular flow model

is a model of the economy that shows: The cycle of spending and incomes that result from individual choices and The way those choices interact.