Unit 8 vocab

Economics

• how nations make decisions about distributing limited resources to satisfy the unlimited wants and needs

Scarcity

• universal problem- can never be resolved

• unlimited wants and needs + limited resources = scarcity

Alternatives

• list of options or possible ways to allocate resources

Choice

• can’t have everything- MUST make a decision

• ONE option you pick

trade-off (verb)

• the act of getting something but giving up something else

• I chose ___ and gave up ____

oppurtunity cost (noun)

• the value of the runner-up, your second choice (NEXT best alternative)

• not money or cost of what you gave chose

Allocate

• to distribute or give away resources

limited resources

• land, labor, capital, entrepreneurship

• scarce

• factors necessary for the economy to produce goods and service

Economic systems

• how a nation is organized for production

• models in reality- no economic system completely fits

• Traditional, Market, Command, Mixed Market

Traditional economy

• tradition and customs(culture) decide what is produced

• people’s economic goals are the same as those of their parents and grandparents

• EX- Amish people and their continued use of no technology to make wooden furniture

Command

• government is in total control of the entire economy

• make all the decisions on what to do with resources

• EX- property ownership in North Korea

• EX- what goods and services will be produced

• CANNOT freely open or start businesses

Market

• NO government intervention

• prices for good and services are influenced by consumers

• NO country today has a complete market system

Mixed Market Economy

• SOME government intervention

• EX- social security, welfare, business safety inspectors

• decisions by consumers, businesses and government help determine economic activity

• US is an example

• MOST of today’s economies are mixed

Economic goals

• every country has all 6 goals

• how a country ranks the goals determines what economic system they have

  • efficiency- keeping track of all of a nation’s resources are being used to benefit the nation

  • equity- in a command economy, everyone has a job and is paid the same

    • USA= everyone has the same opportunity to get rich

  • growth- countries want to grow and make more money each year

  • stability- economy does not change day to day

  • security- protecting people from poverty due to unemployment, homelessness, and hunger

  • freedom- people decide how to spend their money, choose their career and create their own businesses

Macroeconomics

• the study of the economy as a whole

• every nation studies their economy= it affects the lives of EVERYONE in that nation

Economic indicators

• the various things we look at to show how the economy is doing is called/indicate how well the economy is doing well

• GDP

• Unemployment rate

• Consumer Price Index (CPI)

• Sales

• Stock market

GDP

• the DOLLAR amount of all NEW goods, services and structures produce within a country’s national borders in one year

• GOODS NOT IN GDP:

  • second-hand sales (already counted when new)

  • underground market (illegal drugs, gambling, gun sales, ANYTHING ILLEGAL)

  • intermediate products- parts of a whole (tires on a car, sugar on a cake)

  • non-market transactions (babysitting, lawn mowing)

• PROS:

  • best measure of economic health- most inclusive and most important statistic

• CONS:

  • does not consider QUALITY OF LIFE

  • more buildings DOES NOT EQUAL that people are happier

  • INFLATION!