Econ test 2

One of the three fundamental economic questions

What to produce?

One of the three fundamental Economic questions

How will it produce?

One of the three fundamental Economic questions

Who produces it?

One of the 6 Economic goals (Economic freedom_

The ability to make our own economic decisions without interference from the government

One of the 6 Economic goals (Economic efficiency)

The result of using resources in a way that produces the maximum amount of goods and services

One of the 6 Economic goals (Economic equity)

Involves the fair and just ditribution of a societys wealth

One of the 6 Economic goals (Economic growth)

a condition in which an economy is expanding and producing more and better goods and services

One of the 6 Economic goals (Economic security)

the idea that the less fortunate members of society should get the economic support they need to live a decent life

One of the 6 Economic goals (Economic stability)

a condition in which the goods and services people count on are available when they want them

What is the economic goal for Traditional economies? (one of the 4 types of econonies)

Stability and security

What is the economic goal for Command Economies? (One of the 4 types of economies)

Accumulating wealth and goods for the ruling class while preserving economic stability

What is the economic goal for Market Economies? (One of the four types of economies)

Economic freedom and efficiency

What is the economic goal for Mixed economies? (one of the four types of economies)

To prevent the abuses and shortcomings of both the command and market systems.

Invisible hand

Adam Smith’s metaphor to explain how an individual’s pursuit of economic self-interest can promote the well-being of society as a whole

Circular flow model

a diagram that shows the circular movement of money, resources, and goods and services among households and producers in an economy

Equal opportunities (characteristics of a free enterprise system)

We all have the same legal rights to seek an education and compete in the market place

Profit motive (characteristics of a free enterprise system)

Provides our incentive to work and create a new business (the desire to make a profit)

Property rights (characteristics of a free enterprise system)

the rights of those who own land, buildings, or other goods to use or dispose of their property as they choose

Limited Government (characteristics of a free enterprise system)

Government laws and agencies regulate, but do not operate U.S business

Economic freedom (characteristics of a free enterprise system)

the ability of people to make their own economic decisions without interference from the government

Competition (characteristics of a free enterprise system)

Firms are free to compete with one another for our business. When they do, customers benefit.

Binding Contracts (characteristics of a free enterprise system)

We have the right to enter into contracts to buy and sell goods and services . Contracts are legally binding.

Specilization

When an individual decides to focus their labor on a specific type of production

Commerce Clause

Gives congress the power to regulate interstate trade

Socialism

a political and economic philosophy based on collective or government ownership of a society’s resources and means of production, with the goal of achieving social and economic equality

Communism

a political and economic systen in which all property and wealth is collectively owned by all the members of society

Capitalism

The free market economic system

Productivity

a measure of the efficiency with which goods and services are produced, stated as a ratio of output per unit of input.

Absolute Advantage

the condition that exists when someone can produce a good or service using fewer resources than someone else

Comparative advantage

the condition that exists when someone can produce a good or service at a lower opportunity cost than someone else

PPF (Production Possibilites Frontier)

a simple model of an economy that shows all the combinations of two goods that can be produced with the resources and technology currently available