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Economics Unit Test Review

Terms in this set (56)

Traditional Economy
Economic decisions are based on custom and historical precedent
Traditional Economy Jobs
People often perform the same type of work as their parents and grandparents, regardless of ability or potential.
Free market economy
Minimal government involvement in the economy, private ownership of property/resources, consumer sovereignty
Command economy
Central ownership (usually by government) of property/resources, lack of consumer choice
Mixed economy
Individuals and businesses are owners and decision makers for the private sector, Government is owner and decision maker for the public sector
Most economies today
Mixed Economies
Government Intervention in Market
when the perceived benefits of a government policy outweigh the anticipated costs
U.S. Markets
generally allowed to operate without undue interference from the government
U.S. Private property
Individuals and businesses have the right to own real and personal property as well as the means of production without undue interference from the government.
Profit
earnings after all expenses have been paid.
Competition
Rivalry between producers and/or between sellers of a good or service usually results in better quality goods and services at lower prices
Consumer sovereignty
Consumers determine through purchases what goods and services will be produced. Government involvement in the economy is limited
Proprietorship:
business organization with one owner who takes all the risks and all the profits
Partnership
business organization with two or more owners who share the risks and the profits
Corporation
business organization that is authorized by law to act as a legal entity regardless of the number of owners. Owners share the profits
Owner liability
risk proportional to the amount invested
Entrepreneur
A person who takes a risk to produce and sell goods and services in search of profit
Questions of Economics
What will be produced? By whom? For Whom?
Scarcity
the inability to satisfy all wants at the same time. All resources and goods are limited. This requires that choices be made
Resources
factors of production that are used in the production of goods and services
Types of resources
natural, human, capital, entrepreneurship
Choice
selection of an item or action from a set of possible alternatives
Opportunity cost
what is given up when a choice is made—i.e., the highest valued alternative is forgone
Price
the amount of money exchanged for a good or service. Interaction of supply and demand determines price.
What price determines
who acquires goods and services
Incentives
things that incite or motivate, to change economic behavior
Supply and demand
Interaction of supply and demand determines price
Demand
the amount of a good or service that consumers are willing and able to buy at a certain price
Supply
the amount of a good or service that producers are willing and able to sell at a certain price
Production
the combining of human, natural, capital, and entrepreneurship resources to make goods or provide services
Resources available and consumer preferences
they determine what is produced
Consumption
is the using of goods and services. Consumer preferences and price determine what is purchased and consumed
Limited Liability
Owner(s) is/are protected from some of the risk of owning a business. They are not personally responsible for all of the company's debts.
Unlimited Liability
Owner(s) take all of the risk associated with owning the business. They are personally responsible for any and all debts the company has.
What flows continuously among households, businesses, and markets in the U.S. economy?
Resources, goods, and services
What provides financial capital that can be borrowed for what?
Individuals and businesses saving and investing provides financial capital that can be borrowed for business expansion and increased consumption.
What do individuals/households do?
-Own the resources used in production
-Sell the resources
-Use the income to purchase products
What do businesses/producers do?
-Buy resources
-makes products that are sold to individuals, other businesses, and the government
-Use the products to buy more resources
What does the government do?
-Use tax revenue from individuals and businesses to provide public goods and services.
What do private financial institutions act as?
They act as intermediaries (links) between private financial institutions that include households and business investors.
Saving
Pays interest on Deposits
Investing
Grows money that is saved
Global Economy
Global markets that buy and sell goods/services to all nations.
Global Trade Reasons
To get goods/services they cannot produce themselves, To buy goods/services at a lower opportunity cost, To sell goods/services to other countries, To create jobs.
Federal Communications Commission (F.C.C.)
Controls Television, Radio, and Internet Communication
Environmental Protection Agency (E.P.A.)
Keeps the environment clean and safe.
Federal Trade Commission (F.T.C.)
Keeps consumers safe and prevents monopolies.
Credit Unions, Savings & Loans, Banks
Three types of private financial institutions
Private Financial Institutions
Receive deposits and make loans, thus acting as a link between savers and borrowers
Encourage saving and investing
By paying interest on deposits
An increase in Gov't spending...
...increases demand, which may increase employment and production.
An decrease in gov't spending...
...reduces demand, which may slow the economy.
The 16th amendment allows...
...taxing of every person and business incomes.
When the United States government issues coins and currency, people accept it in...
...exchange for goods and services because they have confidence in the government.
The 3 types of money used in the United States...
...coins, Federal Reserve Notes, deposits in bank accounts that can be accessed by checks and debit cards
How does the gov't influence economic activity...
...by increasing and decreasing taxes, borrowing, and spending
THIS SET IS OFTEN IN FOLDERS WITH...