chapter 11

1. competition

2. rewarding of hard work

3. encouraging entrepreneurship

4. ability to save

5. little government control

6. encouraging inventions

list the causes for economic success. (there are 6)

1. business cycles

2. inflation of money and prices 

3. unforgiving system

list the complaints about the free market. (there are 3)

total factor productivity (TFP)

output per unit of all production units

sole proprietorship

simplest form of business organization; has 1 owner

partnership 

2 or more owners

corporation

legal construct owned by shareholders

limited liability company (LLC)

combines a partnership and a corporation

business cycle

changes in levels of economic activity over time

expansion

AKA “the boom”

GDP (gross domestic product) 

value of all finished goods and services produced within a country during a year’s time

GNP 

value of finished goods and services produced by a nation’s citizens during a year’s time

peak

the highest point of the expansion

recession

period of economic decline; GDP is low for 2 months or longer

trough 

the lowest point

depression

an especially severe recession

demand-pull inflation

demand becomes greater than supply resulting in shortages

cost-push inflation

production cost increases, so product price increases

consumer price index (CPI)

the most used tool to measure inflation

base period 

time period that has been chosen when the prices of goods are set to 100%

1982-1984 

fill in the blank 

base period is currently ______-_______ (CPI is compared to the base period) 

stagflation

high levels of inflation combined with high unemployment

stagnancy

fill in the blank

stagflation results in _________ of production

supply-side economics 

cutting taxes to make more money available for savings, R&D, hiring new employees, etc.

SSE

implemented by Ronald Reagan

ronald reagan

fill in the blank

the SSE was implemented by _____ _______

• selfishness 

• envy 

these are the two main criticisms of a free market economy. 

greedy

fill in the blank

it is not _______ to try to better oneself economically 

profit

fill in the blank

people who produce for ______ are people who benefit society as a whole

success 

fill in the blank 

the pursuit of _______ can be carried too far

envy

fill in the blank

people in a free market nation can also be prone to ____ the success of others

budget 

a spending plan that ensures you can pay for the things you need

1. net income

2. Lord’s work

3. savings

4. living expenses for each month

5. balanced budget

6. budget

fill in the blank

creating a budget:

1. Know your ___ _______ 

2. Set aside money for the ______ _____ 

3. Set aside money for _______

4. Determine your ______ _________ ___ _____ _____

5. _______ _______: income equals expenses 

6. Stick to your _______

balanced budget

income equals expenses

1. Housing 

2. Food and Groceries

3. Loans 

4. Personal Care Items 

5. Education

6. Insurance 

7. Vehicle 

8. Clothing 

9. Cell phone / internet / TV

10. Gifts 

11. Travel 

12. Miscellaneous

list some examples of balanced budget. (there are 12 that were given…)

will

how an estate is to be divided among people or organizations

living will

directs a health care professional what to do should a person become incapacitated

health care power of attorney 

makes health care decisions for an individual if the person becomes incapacitated and is not able to make a decision for themselves

financial power of attorney 

gives someone else the right to make financial decisions for a person and control his finances when he can’t for himself