Civics chapter 17 American economy

Capital

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entrepreneur

risk-taking individual who starts a new business, introduces a new product, or improves a management technique

Gross Domestic Product (GDP)

total market value of all final goods and services produced in a country during a single year

Natural resources

material found in nature that people can use

Standard of living

the material well-being of an individual, a group, or a nation as measured by how well their needs and wants are satisfied

division of labor

the breaking down of a job into separate, smaller tasks to be performed individually

factor market

a market where productive resources are bought and sold

Product market

a market where producers offer goods and services for sale

productivity

the degree to which resources are being used efficiently to produce goods and services

specialization

when people, businesses, regions, and/or nations concentrate on goods and services that they can produce better than anyone else

Two main participants in the circular flow of economic activity

households and corporations

Where do exchanges of goods/services take place in circular flow?

In product markets

Where do people sell their labor?

Resource markets

The primary way governments get the money they need to operate?

Individual Income Taxes

profit motive

 the driving force that encourages individuals and organizations to improve their material well-being

competition

efforts by different businesses to sell the same good or service; the struggle that goes on between buyers and sellers to get the best products at the lowest prices

private property rights

the freedom to own and use our own property as we choose as long as we do not interfere with the rights of others

Who makes most economic decisions in the U.S.?

buyers and sellers

voluntary exchange

 the act of buyers and sellers freely and willingly engaging in market transactions

Adam smith

Thought that the government should keep its hands out of the marketplace, it should only make sure competition was allowed.

How are prices established in the U.S.?

Consumers and how many people buy the product, and how much its worth

How is GDP per capita calculated?

the sum of gross value added by all resident producers in the economy plus any product taxes

Who has the world’s largest economy?

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free enterprise system 

 economic system in which individuals and businesses are allowed to compete for profit with a minimum of government interference

Which sector uses both taxes and borrowing to operate?

Government borrowing

government sector

examines the impacts of government revenue, expenditure, and investment decisions. 

business sector

an area of the economy in which businesses share the same or related business activity, product, or service

foreign sector

The part of a country's economy that is concerned with external trade (imports and exports) and capital flows (inward and outward).

product sector

 companies involved with food production, packaged goods, clothing, beverages, automobiles, and electronics.

capitalism

a system in which private citizens own most, if not all, of the means of production and decide how to use them within legislation

human capital

the sum of people’s knowledge and skills that can be used to create products

What happens when the same amount of input, used in the same amount of time, produces a more significant amount of output?

Productivity increases

What does GDP tell about a country?

it gives information about the size of the economy and how an economy is performing

Profit

 the money a business receives for its products or services over and above its costs

incentive

 reward offered to try to persuade people to take certain economic actions

laissez-faire economics

a belief that government should not interfere in the marketplace

The four Factors of Production & examples

The four Factors of Production are 

Land- water, oil, copper, natural gas, coal, and forests.

Labor- Waitress, bus driver, engineer

Capital- hammers, forklifts, conveyor belts, computers, and delivery vans.

Entrepreneurship- Uses all

product

anything that is produced; goods and services

Output

amount produced

Transfer

 to move ownership of something

circular flow model

Model of the economy in which the major exchanges are represented as flows of money, goods and services, etc.

sector

a category or a part of a whole

economic growth 

 the increase in a country’s total output of goods and services over time

Features of capitalism 

a two-class system, private ownership, a profit motive, minimal government intervention, and competition.

Rewards/risks of starting a small business

Rewards: Independence, Flexibility, Power and control, Passion and creativity, Financial gain, ex

Risks: founder risk, product risk, market risk, competition risk, and sales execution risk.