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
