Understanding Economics and How it Affects Business

These flashcards cover essential concepts in economics that are critical for understanding how different systems affect businesses and society.

What are the basic components of economics?

The study of how society uses resources to produce and distribute goods and services.

What is capitalism?

An economic system where most resources and businesses are privately owned and operated for profit.

What is the role of GDP in the U.S. economy?

GDP is a key economic indicator that measures the total value of all final goods and services produced within a country.

What distinguishes socialism from capitalism?

In socialism, basic businesses are owned by the government to distribute profits more evenly, whereas capitalism allows private ownership.

What are the four degrees of competition in economics?

Perfect competition, monopolistic competition, oligopoly, and monopoly.

What does the invisible hand theory refer to?

The idea that individuals pursuing their own self-interest can lead to economic benefits for society as a whole.

What are some benefits of free markets?

Open competition, opportunities for individuals to improve their economic status, and efficient resource allocation.

How does Kiva operate its microlending platform?

Users lend money to selected entrepreneurs, who repay the loans back to Kiva for lenders to receive their funds again.

What is the definition of structural unemployment?

Unemployment that occurs due to changes in the economy that create a mismatch between skills and job opportunities.

What are the key economic indicators?

Gross Domestic Product (GDP), unemployment rate, and price indexes.

What is the significance of fiscal policy?

The use of government spending and tax policies to influence economic conditions.

What is the primary goal of monetary policy?

To manage the money supply and interest rates to promote economic stability and growth.

What are the four basic rights of capitalism?

The right to own private property, the right to own a business and keep profits, the right to freedom of competition, and the right to freedom of choice.

Define communism.

An economic and political system where the government makes almost all economic decisions and owns the major factors of production.

What is the difference between macroeconomics and microeconomics?

Macroeconomics focuses on the economy as a whole, while microeconomics examines individual consumers and businesses.

What is a mixed economy?

An economic system that blends elements of both free-market and command economies.