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What are the characteristics of a free enterprise system?
Consumers and businesses make the FOR WHOM, WHAT and HOW decisions
What is a multinational corporation?
Corporation that has manufacturing or service operations in a number of different countries
What is Microeconomics?
Deals with behavior and decision making by small units such as individuals and firms.
What is Macroeconomics?
Deals with the economy as a whole and decision making by large units such as government or unions.
What does the demand curve illustrate?
The quantity demanded at each and every possible price that might prevail in the market at a given time.
What is inelastic?
Percentage change in the independent variable causes a less than proportionate change in the dependent variable
What is elastic?
Percentage change in the independent variable causes a more than proportionate change in the dependent variable
What is unit elastic demand?
Change in the independent variable causes a proportional change of the dependent variable
In a market economy a low price signals what to producers?
Low prices are bad for the producers because they are seeking a profit
In a market economy a low price signals what to consumers?
Low prices are good for the consumers, who are seeking good deals to save money.
What is perfect competition?
Large number of well informed independent buyers and sellers who exchange identical products
What is monopolistic competition?
Market structure having all conditions of pure competition except for identical products
What is an oligopoly?
A few large sellers dominate and have the ability to affect prices in the industry.
What happens when labor and management decides to go into arbitration?
They agree to place a dispute before a 3rd party. Whatever decision is decided has already been accepted by the 2 parties (binding settlement)
What does the traditional theory of wages state?
Supply and demand for a workers skills and services determine the wage or salary.
What is factors of production?
Productive resources that make up the four categories of land, capital, labor, and entrepreneurship.
What is corporation?
Businesses organization recognized by law as a separate by law as a separate legal entity with all the responsibilities of an individual.
What is the substitution effect?
Portion of a change in the quantity demanded due to a change in relative price of the product.
What is opportunity cost?
Cost of the next best alternative use of money, time, or resources when one choice is made rather than another.
What is an oligopoly?
Market structure in which a few large sellers dominate and have the ability to affect prices in the industry
What is a command economy?
Economic system characterized by a central authority that makes most of the major economical decisions.
What are the benefits of a flat tax?
Simplicity it offers to the taxpayers.
Flat tax closes or minimizes most tax loopholes
Reduce the need for tax accountants, tax preparers, and even large portions of the IRS
What is the advantage of buying a mutual fund for a small investor?
Mutual funds all people to play the market without risking all they have in one or few companies
What does the foreign sector of the economy represent?
The difference between the dollar value of goods sent abroad and the dollar value of goods purchased from abroad (x-m)
What are the economic characteristics of a depression?
Large number of people out of work
Excess capacity in manufacturing plants.
What are some examples of automatic stabilizers in our country?
Federal Entitlement Programs
Progressive Income Tax
Why is a market basket used in the economy?
Representative selection of commonly purchased goods and services
What does does the Fed use to conduct monetary policy in the U.S.?
Open market operations
Selective credit controls
What is Fiscal Policy?
Use of government spending and revenue collection measures to influence the economy
What reasons do protectionists cite to justify high tariffs?
Promoting Infant Industries
Protecting Domestic Jobs
Keeping money at home
Helping the balance of payments
What are the characteristics of communism?
Central planning authority sets prices
Movement of resources and labor is strictly controlled
Central planning authority makes all decisions
States own most major factors of production.
No private property rights
Individual risk taking is forbidden
State officials answer the WHAT, HOW, and FOR WHOM to produce
What is trust funds?
Special account used to hold revenues designated for a specific expenditure such as social security, Medicare, or highways.
What is municipal bond?
Bond, often tax exempt, issued by state and local governments known as munis.
What is crowding out effect?
Higher than normal interest rates and diminished access to financial capital faced by private investors when government increases its borrowing in financial markets
What is benefit principle of taxation?
Belief that taxes should be paid according to benefits received regardless of income.
What is signaling theory?
Theory that employers are willing to pay more for people with certificates, diplomas, degrees, and other indicates of superior ability
What is real GDP?
Gross domestic product after adjustments for inflation. Same as GDP in constant dollars.
What is wage-price controls?
Policies and regulations making it illegal for firms to give raises or raise prices
What is aggregate demand?
The total quantity of goods and services demanded at different price levels
What is aggregate supply?
The total value of goods and services that all firms would produce in a specified period of time at various price levels
What is supply-side economics?
Policies designed to increase aggregate supply or shift the aggregate supply curve to the right
What is free trade area?
Group of countries that have agreed to reduce trade barriers among themselves, but lack a common tariff barrier for nonmembers
What is protective tariff?
Tax on an imported product designed to protect less efficient domestic producers
What is developing country?
Country whose average per capita income if only a fraction of that in more industrialized countries.
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