Economics

Trade Agreement

An agreement to trade with another country.

Trade Agreement Example

The US and UK have a trade agreement to exchange goods between countries.

Free trade Agreement

Trade agreement between countries that eliminates tariffs on imported goods.

Free Trade Agreement Example

The US, Canada, and Mexico are part of the USMCA, a free-trade agreement that eliminates tariffs between goods traded between these countries.

Tariff

A tax on an import imposed by a

government on the importer.

Personal Finance

budgeting, investing, loans

Microeconomics

Individual decision making: fast food, airlines

Macroeconomics

unemployment rate and inflation

Supply and Demand

literally everything about econ

Incentives

rewards and costs

Resources

materials that producers use to make products

Consumers

people who buy products

PACE

P- State the Problem

A- List possible alternatives

C-Determine the criteria

E- Evaluate the alternatives and choose

Private Property

items you can carry with you—cell phone, laptop

Intellectual Property

intellectual property is expressed through creations (photos or songs)

Profit

Earnings, calculated by cost-value

Public Property

Property owned by the community (parks)

Marginal Cost

Total cost- Cost of 1

Marginal Utility

Satisfaction someone gets from a prodcut

TANSTAAFL

There Ain’t No Such Thing As A Free Lunch (everything free has hidden costs)

Scarcity

Not having enough for your needs and wants

Demand

desire, willingness ability to pay and taste

Supply

Goods and services available for sale at all prices

Law of Demand

Prices and quantity move inversely

Law of Supply

prices and quantity have a direct relationship

Equilibrium

where price and quantity meet on a graph

Price Elasticity of Demand

measures how much consumer buying habits change when the price of a product or service goes up or down

Inelastic supply

a change in price causes only a small change in the quantity of a good or service that producers supply (flowers)

Price Floor

minimum

Price Ceiling

maximum

Gift Economy

Earliest form—giving without expecting

Barter Economy

Trading goods

Command Economy

an economic system where a central government makes all decisions about the production, pricing, and distribution of goods

Communism

Cuba, Russia

Market Economy

an economic system where private individuals and businesses make decisions about production, distribution, and pricing based on the forces of supply and demand, with minimal government intervention. 

Capitalism

South Korea, USA

Mixed

Some government intervention, but still follows supply and demand

Socialism

France,

Capital

Goods, equipment, and other assets

US Currency

Government decree

Problems with the AOC

• Inability to levy taxes

• Inability to regulate commerce and trade

• Inability to print unified currency

Creating Currecny

power of federal government

16th Amendment

gave power to implement income tax

The graduated income tax system in place in the U.S. is based on..?

Taxable income

Federal Reserve

• 1913

• Created to stabilize the economy

1920s Crash Causes

borrowing on margain

Economic Depression

An economic depression is an extreme and long-lasting form of a recession, defined as a decline in real Gross Domestic Product (GDP) exceeding 10% or an economic contraction lasting three or more years

Oligopoly

market structure is characterized by a few large producers?

Monopoly

a market structure where a single company or seller controls the entire supply of a good or service with no close substitutes

Competition

Encourages innovation

Public Sector

• Government Revenue: Studying taxation, fees, and public debt.

• Public Expenditure: Analyzing spending on infrastructure, defense, and social programs.

• Market Failures: Intervening when free markets fail to allocate resources efficiently.

• Income Redistribution: Using policies to reduce economic inequality.

Private Sector

• Profit Motive: Businesses operate primarily to generate revenue and financial returns for owners or shareholders.

• Private Ownership: Enterprises range from small sole proprietorships and partnerships to massive multinational corporations.

• Market Competition: Companies compete for customers by lowering prices, improving quality, and introducing new ideas.

• Funding: Operations rely on private capital, sales, loans, and investments rather than tax dollars

Primary Sector

Extracts raw materials: Farming, fishing, mining, forestry, and agriculture.

Secondary Sector

Processing raw materials: Car manufacturing, building construction, textile production, and food processing.

Tertiary Sector

services like time, skills, expertise, and experiences rather than physical items.

Quaternary Sector

Non-profit, research, intellectual development

Fiscal policy

Taxing and spending decisions by the government

The Federal Reserve

• Sets Monetary Policy: The Fed controls interest rates and the money supply. It aims for a "dual mandate" of maximum employment and stable prices (low inflation).

• Supervises Banks: The Fed watches over banks to make sure they are safe, strong, and fair to consumers. [

• Maintains Financial Stability: The Fed works to stop major financial panics. It acts as a "lender of last resort" to loan money to banks during big crises.

• Runs Payment Systems: The Fed helps process checks, electronic money transfers, and digital payments safely between banks.

• Provides Financial Services: The Fed acts as the bank for the U.S. government. It holds government accounts and issues U.S. paper currency.

US Treasury

manages federal money, collects taxes, and pays the nation's bills

US Department of Labor

• Enforces rules on minimum wage, overtime pay, and child labor.

• Workplace Safety: Sets and checks safety rules to prevent injuries and illnesses on the job.

• Worker Benefits: Oversees unemployment insurance, workers' compensation, and retirement plans.

• Economic Data: Tracks national statistics on prices, inflation, employment, and productivity.

Office of Management and Budget

• Budget Development and Execution: The OMB designs and produces the President's annual federal budget proposal to Congress and oversees how executive agencies spend allocated funds. [1]

• Regulatory Review: It coordinates and reviews all significant federal regulations proposed by executive agencies to ensure alignment with presidential priorities and cost efficiency. [1, 2]

• Management and Performance: The office oversees agency performance, federal procurement, financial management, and information technology (IT) policies. [1]

• Legislative Clearance: It reviews all agency communications, testimonies, and draft bills sent to Congress to guarantee they match administration policies. [1, 2]

Fiscal Policy is Managed By

• Congress

Monetary Policy Management

Federal Reserve

Monetary Policy

• The target overnight interest rate that commercial banks charge each other for loans.

• Open Market Operations: The buying and selling of government securities to adjust the amount of money in the banking system.

• Reserve Requirements: Rules on the minimum amount of cash banks must hold relative to their deposits. [1, 2, 3]

Human Capital

education, training, and skills a person acquires over their lifetime

Social Responsibility

Responsibility of individuals, businesses and the government to protect the economy, environment, and community

Tax Base

The total value of assets or income subject to taxation by the federal government

Gross Income

the total amount of money earned by an individual or a business before any taxes, deductions, or expenses are removed.

Net Income

Net income is the total profit left over after subtracting all expenses, taxes, and costs from total revenue

Income Tax

Progressive

W-4 Form

Document you fill out when starting a new job to tell your employer how much federal income tax to withhold from your paycheck

• Dependents

• Spousal status

• Deductions

W-2

• Annual Earnings

• One per job

• Yearly

Theory of Wage Determination

explain how the price of labor is set in an economy through different economic, social, and market perspectives

• Subsistence Theory: Argues that wages gravitate toward the minimum amount required for a worker and their family to survive and reproduce. [1]

• Wage Fund Theory: Proposes that wages depend on a fixed pool of capital or savings set aside by employers specifically to pay workers. [1, 2]

• Residual Claimant Theory: States that labor gets whatever revenue is left over after paying all other factors of production, such as rent, interest, and profit. [1, 2]

• Marginal Productivity Theory: Contends that a worker's wage equals the value of their marginal product—the extra output generated by hiring one additional worker under competitive markets. [1, 2]

• Bargaining Theory: Emphasizes that wages are set through direct negotiation between employers and labor unions, reflecting each party's relative power. [1, 2]

• Supply and Demand (Modern) Theory: Explains wages as the market equilibrium price where the overall demand for labor by employers meets the supply of labor from workers

Low Wage Jobs

High demand, low skill

High Wage Jobs

High demnad, high skill

The Federal Insurance Contributions Act

ax that requires employers and employees to split a 15.3% tax to fund Social Security and Medicare

When Can You Access Social Security?

67

Budget

Income should exceed expenses

Market Structure

The number of firms that supply goods /

services to consumers for sale. This impacts

competition.

Market StructureThe restaurant industry

Competition

The number of (sellers) firms who compete

for customers (buyers).

Competition example

There is lots of competition in the

fast-food industry because it is a

$300B industry.

Perfect

Competition

This is a model (does not exist in reality) that

alludes to firms selling identical items at the

same price.

Perfect Competition example

Perfect competition is a model used to

compare the other three types of

competition.

Monopolistic

Competition

Competition with many sellers and buyers.

Goods / services are similar but not identical.

Monopolistic Competition example

Jean industry: There are many sellers

and many buyers. Jeans come in all

colors, fits, and while similar, are all

unique.

Oligopoly

(Competition)

Competition with several large sellers who

dictate the market. They often copy each

other.

Oligopoly example

Cell phone industry: There are a few

big sellers (AT&T , Verizon, T -Mobile).

When one does something successful,

the other sellers will follow.

Monopoly

(Competition)

No competition exists. There is one seller and

many buyers who are at the mercy of the

seller.

Monopoly example

Microsoft was deemed a monopoly in

the 1980s and required to break

Inflation

When price levels rise and income does not

rise

Inflation example

Inflation explains why a soda that

once costs .99¢ now costs $1.29, a

24% increase, yet income levels did

not increase by 24% over this same

time period.

Unemployment

The number of people actively seeking

full-time employment that cannot find any. A

goal is to have unemployment around 3.5% or

less.

Primary sector of

the economy

Industry that involves products from the

earth. Sometimes called raw materials.

Primary Sector Example

Farming, mining, aquaculture, forestry,

& hunting

Secondary sector

of the economy

Industry that involves the manufacturing 

Secondary Sector example

Car manufacturing industry, textiles

industry

Fiscal Policy 

Taxing and spending policies created by Congress and

President

Contractionary Fiscal Policy 

Decreased spending and/or increased taxes or a combination

of the two.

Expansionary Fiscal Policy 

Increased spending and/or decreased taxes or a combination

of the two.

Monetary Policy 

The expansion and contraction of the money supply

maintained by the Federal Reserve.

Sectors of the US economy 

Primary, Secondary, Tertiary, Quaternary, and Quinary

Tertiary sector of

the economy

The services sector of the economy