Econ. Chapter 3 Vocab.

Economic freedom

________ -the ability to make our own economic decisions without interference from the government.

Full employment

________, which exists when all who want to work can find jobs.

(before word)

Because unemployed workers are a wasted resource, an efficient economy strives for ________.

Economic equity

________ involves the fair and just distribution of a society's wealth.

The fairness with which an economy distributes its resources and wealth.

Economic growth

________ is desirable because over time it leads to an improved standard of living.

Economic security

_________ seeks to provide its less fortunate members with the support they need in terms of food, shelter, and health care to live decently.

Economic stability

________ means that the goods and services we count on-electricity on demand, food and clothing in the stores-are there when we want them.

Economic system

________ is the way a society coordinates the production and consumption of goods and services.

A society's way of coordinating the production and consumption of goods and services.

Traditional economy

________, custom and tradition dictate what to produce, how to produce it, and for whom.

An economic system in which decisions about production and consumption are based on custom and tradition.

Command economy

________, decisions about what, how, and for whom to produce are made by a powerful ruler or some other authority.

An economic system in which decisions about production and consumption are made by a powerful ruler or government.

Market economy

________ depends not on tradition or command to coordinate its activities but on the decisions of individual producers and consumers.

An economic system in which economic decisions are left up to individual producers and consumers.

Free market economy

________, the workings of the market are not planned or directed.

No one tells producers or consumers what to do. Decisions are made voluntarily, one at a time, by millions of individuals guided by self-interest.

Circular flow model

Money comes in and goes out. This flow keeps the economy running. Economists use the ________ to illustrate these interactions.

Household

________ is made up of a person or of a group of people living together.

Firm

________ is an organization that uses these factors to make and sell goods or services.

Product market

________, in which goods and services are sold by firms and purchased by households.

EX: Your local supermarket.

Factor market

_________, in which households sell their land, labor, and capital to firms.

EX: A household might rent land to a firm.

Factor payments

The funds paid to households-whether in the form of rent, wages, interest, or dividends-are known as ________.

Income earned when an individual sells or rents a factor of production that he or she owns. Wages are ________ made to workers in exchange for their labor.

Industrial revolution

Market economies emerged in Europe in the 1700s and began to grow rapidly in the 1800s. This economic growth was a direct result of the ________.

New inventions and manufacturing processes spurred the growth of industry.

Capitalists

________, grew wealthy by accumulating capital, including machinery, factories, railroads, and the like. (another term for "individual investors")

Capitalism

________ came to be synonymous with the free market economic system.

Socialism

________ is a political and economic philosophy that calls for property to be owned by society as a whole, rather than by individuals, for the equal benefit of all.

Communism

________, a political and economic system in which all property and wealth are owned by all members of society.

Economic planning

________ was done by government committees of economists, production experts, and political officials.

Mixed economy

________, both the government and individuals play important roles with regard to production and consumption.

An economic system in which both the government and individuals play important roles in production and consumption. Most modern economies are ________.

Public works

________, or government financed projects such as dams, highways, and sewer systems.

Transfer payments

Social security checks, welfare payments, and unemployment benefits are examples of _________.

Free enterprise system

_______, individuals own the factors of production and make decisions about how to use those factors within the framework of the law.

An economic system in which the means of production are mostly privately owned and operated for profit.

Laissez-faire

Because our economic system allows individuals and businesses so much freedom, it is often referred to as a ________ economy.

Economists use the term to describe a market economy that is relatively free of government intervention.

Contract

________ is an agreement between a buyer and a seller.

Property rights

________ are the rights of those who own land, buildings, or other goods to use or dispose of them as they choose.

Intellectual property

________ refers to creations of the mind that have commercial value.

Patent

________ gives an inventor the sole right to make, use, or sell his or her invention for 20 years.

Copyright

________ similarly gives the creator of a literacy or artistic work the sole right to reproduce, distribute, perform, or display the copyrighted work.

Profit

________ is the money earned by a business after subtracting its costs of operation.

Profit motive

The desire to make profit is known as the ________.

The ________ is closely ties to the incentives-matter-principle.