Economics test 1 part 1

economy

means scarcity (military vs consumer goods, spend vs save for later, unemployment vs inflation, equality vs health)

free market

allocates resources through the decisions of households and firms 

unregulated markets

markets are usually a good way to organize economic activity. To determine how many goods to produce, how to produce, and (perhaps) who gets them 

central planning

(like socialism) typically fails 

capitalism

can fail

markets

may not materialize or work if government institutions are not established (can fail under specific decisions)

capitalism

may generate excessive inequality

congress

can pass tax cuts or spending increases

President can veto 

the federal reserve

The central banking system of the United States regulates monetary policy. ( can increase the money supply and control inflation)

politicians

tend to overspend and under tax 

sum of deficits

over time = national debt 

Protechunits

policies such as import tariffs or quotes 

central planning

determines, how what, and for whom. 

goods and services

(the output) are produced using the factors of production(the inputs or resources) 

labor

factor of production, is the mental physical ability of the workforce 

physical capitol

factor of production, manufactured items used to produce other goods and services 

national recourse

factor of production, including mineral deposits oil, natural gas 

PPF

is a diagram that shows the combination of two goods that are possible for a society to produce at full employment

opportunity cost

is what you give up when you make a choice

economic growth

An increase in factors of production: resources, such as labor and capital, used to produce goods and services.  An increase in the productivity of the factors of production: through better tech, education, health care, trade. The government spends more than its taxes, it is a budget deficit