Untitled Flashcards Set

Economics

The study of how people and societies use limited resources to satisfy unlimited wants and needs.

Scarcity

There are not enough resources to satisfy everyone’s wants.

Factors of Production

Resources used to make goods and services: land, labor, capital, and entrepreneurship.

Opportunity Costs

The value of what you give up when you make a choice.

Production Possibilities Curve

A graph showing the different combinations of goods a country can produce with its limited resources.

Traditional Economy

An economy where decisions are made based on customs, habits, and traditions.

Command Economy

An economy where the government makes all decisions about production and distribution.

Economic System

The way a country organizes its economy to answer basic questions about production.

Market Economy

An economy where people and businesses decide on production and consumption based on supply and demand.

Circular Flow Model of Income & Output

A diagram showing how money, goods, and services move between households and businesses.

Mixed Economy

An economic system that incorporates elements of both market and government control.

Laissez Faire

An economic philosophy that advocates minimal government intervention in the economy.

Market Economy Characteristics

Features that encourage competition, innovation, efficiency, choice, and freedom.

Socialism

An economic system where the government controls key industries to reduce income differences.

Demand

How much consumers are willing and able to buy at different prices.

Supply

How much producers are willing and able to sell at different prices.

Law of Supply

As the price of a product increases, the quantity supplied also increases.

Law of Demand

As the price of a product increases, the quantity demanded decreases.

Real Income Effect

When prices rise, a person's income buys fewer goods.

Substitution Effect

When consumers switch to cheaper alternatives as prices rise.

Marginal Utility

The additional satisfaction gained from consuming one more unit of a good.

Law of Diminishing Marginal Utility

Each additional unit consumed provides less added satisfaction than the previous one.

Determinants of Demand

Factors that influence demand including consumer income and preferences.

Elasticity of Demand

The responsiveness of demand to changes in price.

Inelasticity of Demand

When demand remains relatively unchanged despite price changes.

Determinants of Supply

Factors that affect the quantity suppliers are willing to sell.

Law of Diminishing Returns

Adding more of one resource will eventually produce less additional output.

Shortage

When demand exceeds supply at a given price.

Surplus

When supply exceeds demand at a given price.

Price Floor

A legal minimum price that can be charged, such as minimum wage.

Price Ceiling

A legal maximum price that can be charged, for example rent control.

Market Structure

How industries are organized based on competition.

Perfect Competition

A market with many sellers and identical products.

Monopoly

A market structure where one seller controls the price and supply.

Oligopoly

A market dominated by a few large firms that can control prices.

Monopolistic Competition

Many sellers offer similar but not identical products.

Antitrust Regulation

Laws aimed at preventing monopolies and promoting fair competition.

Horizontal Merger

The combination of two companies in the same industry.

Conglomerate

A company that owns businesses in various, unrelated industries.

Sole Proprietorship

A business owned and operated by a single individual.

Partnership

A business owned by two or more individuals sharing profits and responsibilities.

Limited Partnership

A partnership where some partners have limited liability and do not manage the business.

Corporation

A legal entity separate from its owners that offers limited liability.

Franchise

A business model where individuals can operate under a larger company's name.

Limited/Unlimited Liability

Limited liability means owners are not personally responsible for debts; unlimited liability means they are.

Mechanization

Using machines to perform work previously done by humans.

Division of Labor

Breaking production into smaller tasks, with each worker specializing in one task.

Automation

The use of technology to perform tasks without human intervention.

Robotics

The use of robots to perform tasks, particularly in manufacturing.

GDP

Gross Domestic Product; the total value of all goods and services produced in a country in a year.

Formula for GDP

C + I + G + X (Consumer spending, Business investments, Government spending, Net exports).

Real GDP

GDP adjusted for inflation, reflecting the true value of economic output.

Counting the Population

To determine representation in government and allocate funding for public services.

U.S. Census Bureau

The agency responsible for collecting and analyzing demographic data in the U.S.

Future Population Growth

Measurements focus on birth rates, death rates, and migration patterns.

Poverty

The state of having insufficient income to meet basic needs.

Reasons for income inequality

Differences in education, job types, and access to opportunities.

Business Cycle

The natural rise and fall of economic growth over time.

Phases of the Business Cycle

Expansion, Peak, Contraction (Recession), Trough, and Recovery.

Causes of the Business Cycle

Consumer confidence, investment fluctuations, government policies, external shocks, and technology.

The Great Depression

Severe economic downturn in the 1930s.

The Great Recession

Economic downturn that occurred in 2008.

Inflation

A general increase in prices that reduces purchasing power.

Deflation

A general decrease in prices that increases purchasing power.

Consumer Price Index (CPI)

A measure of the average change in prices paid by consumers over time.

Base Year

A reference year used for comparing economic measures.

Market Basket

A collection of goods and services tracked for price changes in the CPI.

Demand-Pull Inflation

Inflation that occurs when demand exceeds supply.

Cost-Push Inflation

Inflation caused by rising production costs.

Unemployment

The condition of being without a job while actively seeking work.

Frictional Unemployment

Short-term unemployment caused by people transitioning between jobs.

Seasonal Unemployment

Unemployment linked to seasonal work patterns.

Cyclical Unemployment

Unemployment resulting from economic downturns.

Structural Unemployment

Unemployment due to a mismatch between workers’ skills and job requirements.

Full Employment

A situation where all who want a job have one, with minimal unemployment.

Stagflation

An economic condition characterized by high inflation and unemployment with stagnated growth.

Budget Deficit

When government spending exceeds its revenue.

Budget Surplus

When government revenue exceeds its spending.

National Debt

The sum of money the government owes due to borrowing.

Deficits vs National Debt

Deficits are yearly shortfalls, while national debt accumulates from past deficits.

Debt-to-GDP Ratio

A measure comparing a country's total debt to its gross domestic product.

Types of Taxes

Progressive taxes increase with income; proportional taxes are flat; regressive taxes burden lower incomes more.

Fiscal Policy

Government decisions regarding spending and taxation that affect the economy.

Social Insurance Programs

Programs funded by payroll taxes providing benefits like Social Security.

Public Assistance Programs

Government-funded programs to aid those in economic need.

Public-Works Projects

Government-funded construction efforts to boost the economy.

Public Goods

Goods or services provided by the government for free use by the public.

Functions of Money

Medium of Exchange, Store of Value, and Unit of Account.

Types of Money

Commodity Money, Fiat Money, and Representative Money.

Characteristics of Money

Durable, Portable, Divisible, Uniform, Limited Supply, and Acceptable.

Money Supply (M1 & M2)

M1: Cash and checking accounts; M2: M1 plus savings and small deposits.

Gold Standard

A system where currency backs up by a commodity, limiting inflation.

The Federal Reserve System

The central banking system of the U.S., comprising 12 regional banks.

Responsibilities of the Fed

Regulate banks, manage money supply, and set interest rates.

Monetary Policy

Fed's actions to control money supply and influential interest rate.

Fractional Reserve System

A system where banks keep a fraction of deposits as reserves.

Jerome Powell

Current Chair of the Federal Reserve.

Reserve Requirement

The minimum reserves a bank must hold against deposits.

Discount Rate

Interest rate charged by the Fed to banks for short-term loans.

Federal Funds Rate

Interest rate that banks charge each other for overnight loans.