Economics
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23 terms
Terms | Definitions |
|---|---|
 Adam Smith | Scottish economist who advocated private enterprise and free trade, considered to be the \\\"founder\\\" of economics |
| Economics | social science that examines how people choose to use limited or scarce resources to obtain maximum satisfaction of unlimited wants |
| Scarcity | a good must be limited AND people have to want it. |
| Scarcity- 3 decisions | which and how many goods & services to produce; how it should produce these goods & services; how the goods & services should then be distributed among the people. |
| The 4 E\\\'s- Universal Economic Golas | Allocative Efficiency, Productive Efficiency, Full Employment, Equity |
| Traditional Economics | are economic decisions that are based on customs handed down from generation to generation. ill equipped to propel society into sustained growth & usually found in poor third world countries |
| Command | rely on central authority to make decisions( dictator/ democratically constituted gov.) |
| Market | pure market. no central authority, buyers and sellers decide what will be produced. self interest rules $$$ |
| Mixed | mixes traditional, command, and market. Us uses high market and low command, soviets used high command little market. |
| Capitalism | productive resources are owned by private individuals |
| Socialism | mixed economic system, productive resources owned by society & allocation is determined by gov. markets used to determine price. |
| Planned | production publicly owned little/no private ownership. central planning > market makes decisions |
| Macroeconomics focus on 3 things: | national output (measured by GNP), role of inflation, unemployment |
| GDP | Gross Domestic Product- the total market value of all final goods and services produced annually in an economy; measure of a country\\\'s income. |
| 4 phases to economic cycle | Boom, Recession, Trough, Recovery |
| Governments efforts to stabilize economics | Fiscal policies: Contractionary & Expansionary |
| Expansionary | raises gov. spending and/or decreases taxes in order to increase spending. |
| Contractionary | decrease gov. spending and increase taxes in order to decrease spending in the economy |
| Federal Reserve Policy | the central banking organization of the US; THE FED |
| FED uses 3 monetary policy tools: | open market operations, reserve requirements, discount rate. |
| Principle of comparative advantage | Trade between two countries can benefit both countries if each country exports the goods in which it has a comparative advantage |
| International Monetary Fund (IMF) | made to supervise the exchange rate and to lend $ to nations in need (Bailouts) |
| The World Bank | provides loans & economic assistance to nations |
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