US Economy (Economics and Science, Technology and Society)

Adam Smith

The father of capitalism. Wrote "An Inquiry into the Nature and Causes of the Wealth of Nations." Argued that an invisible hand guides the economy to its greatest productivity.

Treasury Securities / Bonds

purchasing government debt

Economic Freedom

the ability to pick what business to start and how to run that business

Monetary Policy

Laws and regulations affecting the value and cost of money

Profit Motive

a business's motivation to keep costs low and profits high

The Federal Reserve (The Fed)

The central bank of the United States; responsible for setting interest rates, other monetary policy and regulating private banks and financial institutions

Scarcity

In Economics, the fact that there are not enough resources to fulfill all human needs and desires

Tax

contribution to federal or state funds required for individuals or businesses (Income Tax)

Invisible Hand

the theory that the economy is not led by an entity, but is the result of individuals acting in their own self-interests

Sole Proprietorships

a business where a single person acts as the owner and operator of the business with no distinction between the person and the business

Voluntary Exchange

Goods are produced and consumed without government intervention

Partnerships

a business run by at least two people, who may then employ others to assist in the operation of the business

Subsidies

Government payments to an industry to reduce costs or create false demand (Farm Subsidies)

Barrier To Entry

when obstacles prevent new companies from entering the market

Capitalism

An economic system characterized by private, rather than government, ownership of industry. Prices, production, and distribution of goods are determined by competition in a free market.

Surplus Spending

A budget situation where expenditure is less than revenue

Monopoly

market where one firm controls the price, production, and supply of a good. (Until 1982, AT&T managed ALL phone service in the United States)

Price Ceiling

the maximum price that can be charged for a good as determined by a government or other entity responsible for economic regulation

Specialization of Labor / Division of Labor

A tendency for groups to focus and work on (specialize) wherever they can make the best product at the highest revenue (comparative advantage) and use trade to acquire other products

Private Property Rights

the legally guaranteed right to buy and sell private property

Price Control

a maximum or minimum limit on the price of a good instituted by the government

National Debt

the amount of money a government owes

Market Economy

An economic system where decisions about production, consumption and investment are guided by the price of goods and services, which are determined by the laws of supply and demand.

Competition (Economics)

companies will strive for a greater share of the market by producing higher quality and more cheaply priced goods Example. Apple and Microsoft competing over laptop share

Fiscal Policy

The use of revenue collection (taxes) and expenditure to influence the economy

Deficit Spending

A budget situation where expenditure is greater than revenue

Factor Market

a market in which the factors of production are bought and sold Example. The labor market

Inflation

rate at which the general level of prices for goods and services rises, reducing the purchasing power of money over time

Factors of Production

The determinants of when and where economic activity can and most likely will occur: land, labor, capital, and entrepreneurship

Corporations

a business operated by multiple parties that are legally entitled to operate as a single entity for the purpose of doing business; usually run by a board of directors

Balanced Budget

A budget situation where expenditure is equal to revenue