Economic Part II Questions
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57 Terms
What to produce? How to produce? For whom to produce?
Name and explain the three basic economic questions
Entrepreneur profits and growing business
Workers get more and better paying jobs
Consumers get new and better products
Government gets higher paying taxes
Describe three results we discussed in class of entrepreneurship succeeding
Both the free market and capitalist economy are economic systems based on competition
What are the similarities between the free market economy and capitalist economy?
The free market economy has low government involvement and the capitalist economy is when private citizens own the factors of production
What are the differences between the free market and capitalist economy?
Nordic Model is called Social Democratic and has Capitalist ideas with a strong government role and a mixed economy
Explain the Nordic Model
The Nordic Model includes:
Free college
High taxes
Universal healthcare
Free college
Generous parent leave and benefits
Strong labor protections
What is included in the Nordic Model?
The Nordic Model doesn’t own businesses and is not a command economy
What is not included in the Nordic Model
Cultural relativism is the idea that a person’s beliefs, values, and practices should be understood within their own culture and not judged by the standards of others
Define Cultural Relativism
No Normal, Context is Everything and Suspending Judgement
Explain 3 rules for looking at other cultures
No Normal is what feel weird to you is normal to someone else
What is No Normal?
Context is Everything is when you can’t judge a tradition from the outside. Having to look at why it exists
What is Context is Everything?
Suspending Judgement is when you don’t have to agree with everything another culture does, but you have to stop judging them by your own cultures rule for a second so you can actually learn
What is Suspending Judgement?
It destroys the low cost survival system of the poor by eliminating dung for free fertilizer/fuel, and the ability to turn inedible waste into milk, causing mass bankruptcy and poverty
Why would slaughtering cows actually not boost the Indian economy, but potentially cause an economic crisis in India?
Edward Said
Who is the scholar who wrote about Orientalism as a critique?
He argued that Western scholars created a false image of the farmers to make it seem weird, which was used to justify Western power and colonial control over the culture
How does Edward Said critique the Mother Cow article?
Marvin Harris uses it to show that Westerners wrongly label Indian cattle worship as irrational while ignoring the actual practical economic benefits that keep the cattle alive
How did the author of the Mother Cow discuss or include the idea of Orientalism in the article?
Cows act as a living bank account for families by providing daily milk income, free fertilizer for crops and help with plowing, which keeps rural farms running without expensive machines or chemicals
How is cow worship in India tied to the country’s economics? What are the benefits of keeping your cow alive as long as possible?
GDP is the sum and prices of all final goods and services within a country
How to describe GDP?
Does not give a full picture of a nation’s standard of living
Does not include the value of work done at home or when volunteering
Does not account for negative externalities like pollution
Does not include the goods and services purchased on black market
Does not measure quality of life
Counts bad spending as positive
What are the six shortcomings of GDP?
The Human Development Index measures health and education by focusing on people and their capabilities rather than just economic growth
What would be a better measure of standard of living than GDP?
GDP is the gross domestic product
Gross = total
Domestic = within a country
Product = goods and services sold in an economy
What is GDP?
Structural unemployment is when people lose their job due to technology and are removed from the economy
What is structural unemployment?
Structural unemployment is difficult for people who experience it because their skill set is no longer in demand, needing new training or degrees
How does structural unemployment impact our economy?
Cyclical unemployment is when people lose their jobs due to a recession or a contracting economy
What is the definition of cyclical unemployment?
Cyclical unemployment might be indicative of a widespread decline of the economy and therefore can be destructive for people across an economy
How does cyclical unemployment impact our economy?
Seasonal unemployment is when people lose their jobs because the job is temporary due to a season
What is seasonal unemployment?
Structural unemployment is predictable for employees because they know at the end of the season their job will no longer exist
How does structural employment impact the economy?
Frictional unemployment is when people are entering the workforce for the first time or are between jobs because they’re looking for a better one
What is frictional unemployment?
This type of unemployment is unavoidable in a large country like the US
How does frictional unemployment impact the economy?
Frictional, season, cyclical and structural unemployment
What are 4 types of unemployment?
The business cycle is the growth and decline of an economy as economic activity increases and decreased
What is the business cycle?
A healthy economy in a business cycle shows steady expansion, while a struggling one faces struggles and high unemployment
What does the business cycle tell us about the health of our economy?
Free trade means there are no additional taxes (called tarrifs) or other trade restrictions placed on imports
What is free trade?
5 advantages are:
Lower prices for consumers
Greater variety of goods
Increased economic efficiency
Economic growth
Encourages innovation and competition
What are 5 advantages of free trade?
5 disadvantages are:
Job losses in some industries
Harm to infant industries
Trade inbalances
Exploitation of Labor
Environmental impact
What are the 5 disadvantages of free trade?
Inflation is responsible for our economic health and increases of prices across the world over time
What is Inflation?
CPI is the measure of the overall cost of goods and services bought by a typical consumer and calculated by the BLS
What is the Consumer Price Index?
CPI -= Consumer Price Index
What does CPI represent?
BLS represents= Bureau Labor of Statistics
What does BLS represent?
Creeping inflation: From year to year Americans expect inflation to rise at a slow rate, usually 1-2%, which is why most jobs will give you a COLA raise
What is the definition of creeping inflation?
COLA= Cost of Living Adjustment
What does COLA represent?
Hyperinflation: If a country suddenly experienced a sharp increase in inflation well above normal levels
What is the definition of hyperinflation?
Demand Pull Inflation: Sometimes consumer, businesses, government and other countries demand more goods than the economy can produce
What is the definition of Demand Pull Inflation?
Cost Push Inflation: When the factors of production for businesses raise in cost across the economy
What is the definition of Cost Push Inflation?
Deflation: When prices go down overtime, economics call it deflation
What is the definition of Deflation?
The Bureau Labor of Statistics measures inflation
What US government agency measures inflation?
How does the current war between the US and Iran have a global economic impact?
The US-Iran conflict has triggered the largest energy supply disruption in history by disrupting the Strait of Hormuz t
The conflict threatens roughly 20% of the world’s daily oil passing through Strait of Hormuz
Disruptions to oil and gas supplies have raised production costs globally
The war has reduced available maritime transport and raising shipping insurance
Rising costs and decreased economic activity could lower global GDP
Discuss four ways in which the global economy is affected from the US and Iran conflict
Software, Aerospace, Financial Services, Pharmaceuticals, Entertainment and Advanced Machinery dominate due to lower opportunity costs when producing goods
Name the 6 industries that the US has a comparative advantage?
Software is a comparative advantage because it is driven by innovation, top-tier engineering talent, and a high tech workforce
How is Software a comparative advantage?
Aerospace is a comparative advantage because specialized engineering and established supply chains for complex manufacturing
How is Aerospace a comparative advantage?
Pharmaceuticals: Massive investment in research and development and strong intellectual property protection for innovative research
How is pharmaceuticals a comparative advantage?
Financial services: Strong legal infrastructures, high skilled financial human capital and established institutions create a comparative advantage globally
How is financial services a comparative advantage?
The ability of a media to produce content at a lower opportunity cost than competitors, usually through economies of scale, specialized talent, and global distribution.
How is entertainment in media a comparative advantage?
China holds a strong comparative advantage in manufacturing clothes, shoes, appliances and toys. Ex) Made in China tags
What type of industry does China have the comparable advantage?
China is driven by its skilled workforce, efficient supply chains, and low production costs.
Why does China have a comparative advantage?
Adam Smith was a philosopher known as the father of economics and pioneer of the free market theory in the 18th century
Who is Adam Smith?