Circular Flow of Economic Activity and Economic Systems

These flashcards cover key vocabulary and definitions related to the Circular Flow of Economic Activity and varying economic systems, helping to reinforce understanding for exam preparation.

Circular Flow of Economic Activity

A model that illustrates how money, goods, and services move through the economy among households, businesses, and government.

Macroeconomics

A branch of economics dealing with broad issues affecting the economy as a whole, such as inflation and economic growth.

Microeconomics

The study of individual choices or decisions made by smaller units such as households and firms.

Opportunity Cost

The most desirable alternative given up when making a choice.

Production Possibilities Curve (PPC)

A graphical representation that illustrates the various combinations of output that can be produced with a fixed amount of resources.

Economic Growth

An increase in the production of goods and services in an economy over a period of time.

Capitalism

An economic system where private individuals own and control the means of production.

Free Enterprise System

An economic system characterized by private ownership of resources and minimal government intervention.

Command Economy

An economic system where a central government makes all decisions regarding production and distribution.

Scarcity

The condition arising from limited resources and unlimited wants, forcing choices to be made.

Factors of Production

The inputs used to produce goods and services, including land, labor, capital, and entrepreneurship.

Consumer Sovereignty

The idea that consumers ultimately dictate what is produced in the market based on their preferences.

Economic Incentives

Factors that motivate individuals or organizations to make decisions or engage in specific behaviors.

Transfer Payments

Payments made by the government to individuals without any goods or services being received in return.

Public Goods

Goods that are non-excludable and non-rivalrous, provided by the government for the benefit of all.

Private Property Rights

Legal rights to use, manage, and dispose of property owned by individuals.