Economics Notes Part 2
Why are services excluded from the measurement of wealth?
Because they are intangible and it is difficult to measure their value accurately
Describe the relationship between goods, services, and consumers.
Consumers use goods and services to satisfy their wants and needs.
List the major weaknesses of the command economy.
-Does not meet needs and wants of consumers -Lacks effective incentives for people to work hard -Requires large bureaucracy that consumer resources -Has little flexibility -New ideas and individuality is discouraged
The United States federal government regulates private enterprise in numerous ways. Regulations fall into two general categories.
-Economic regulation: prevents monopolies, uses antitrust laws, and has bank regulation -Social regulations: government agencies such as Occupational Safety and Health Administration (OHSA), Environmental Protection Agency (EPA), and the U.S. Food and Drugs Administration
Name the direct services of the federal, state, and local governments.
-Federal: provides for the national defense; provides research of new products; space exploration; helps people develop skills and finds jobs -State: maintains highways and operates public schools -Local: provides for the fire and police department
Give examples of how the government acts in each
-Protector: enforces laws against false advertising -Provider and Consumer of goods and services: provides highways and uses productive resource -Regulator: oversees interstate commerce -Promoter of goals: minimum wage promotes equity
Describe the main strength and weakness of a traditional economy
-Strength: Everyone knows which role to play -Weakness: Discourages new ideas and new ways
Describe how a market economy, a traditional economy, and a command economy adapt to changes.
-Traditional: often punishes those who attempt to change the way things are done. -Command: Problems adjusting to changes because of inflexibility -Market: flexible and can adjust to change
Explain the importance of entrepreneur in a free enterprise economy.
-When entrepreneurs succeed, they benefit by gaining profits -Workers benefit through jobs and high wages -Consumers benefit by having more and better products to buy -Government benefits through greater tax revenue
What are the seven economic goals that most Americans agree on?
1. Economic Freedom: freedom to make your own economic decisions 2. Economic Efficiency: recognition that resources are scarce and need to be used wisely 3. Economic Equity: Belief that the economy should be managed justly. impartially, and fairly 4. Economic Security: protection from effects of adverse economic events 5. Full Employment: desire for the economic system to provide as may jobs as possible 6. Price Stability: 7. Economic Growth: production of more and better goods and services
Explain why economic education is important.
It helps people become better decision makers
How do people and businesses benefit from economic freedom?
People can choose their employer, where and when they work, how they spend their money. Businesses hire the best workers, decide what and how to produce, and what prices to charge.
How does the government help individuals and businesses?
They offer low interest business loans. They provide Medicare and Medicaid, food stamps and welfare grants.
What are the three basic economic questions that every society must face?
What to produce? How to produce? For whom to produce?
