economics ch2

Laws of economics

general rules that guide the production, distribution and consumption of goods (pg 17) ESSAY

Mercantilism

an economic system that advocates the building up of the state's treasury with the goal of accumulating as much wealth (gold) as possible

Trade balance

the difference between the amount of goods a nation sells and the amount that it buys

Tariffs

taxes that governments used to discourage imported goods

Imperialism

the establishment of colonies and territories for the benefit of the ir mother countries (english empire in the 17-1800s)

Physiocrats (“the economists”)

economists in the 1700s who first tried to create a science of PDC of goods; Believed that a nation's true wealth comes from land and natural resources

Samuel du pont

published Physiocracy (“the rule of nature”)

Laissez-faire

“let things alone”; the government should leave the economy to operate itself with little intervention

Classical economics

a belief system that originated with physiocrats; the free-market system is the best possible system

Adam smith

the founder/father of modern economics

Division of labor

separation of complex work into individual tasks to increase productivity

Specialization

allowing an individual to excel in one specific area of his field resulting in higher quality products or service

Labor

single most important aspect of any economy; without this, an economy will suffer or fail - results in a productive economy

to sell

Producer’s desire

to buy

Consumer’s desire

The “invisible hand”

brings the desires of consumers and producers together and satisfies both of them

Prosperity

general economic success; the ability to enjoy many different goods and services

Wealth

the value of goods and finances that a person own

Labor or work

the true source of wealth and prosperity

Wealth of nations

most famous economic book in history; established basic principles of modern economics (1776)