The Interconnected Economy

These flashcards cover key concepts and terminology from the lecture notes on the interconnected economy.

Economy

The way a society organizes the production, distribution, and consumption of goods and services.

Command Economy

An economy where the government makes most economic decisions, known as a planned economy.

Market-oriented Economy

An economy where most economic decisions are made by individuals and businesses, with government intervention in the background.

Division of Labor

The process of breaking down production into smaller tasks performed by different workers, leading to increased efficiency.

Specialization

The concentration of workers on specific tasks or areas of expertise to improve productivity.

Circular Flow Diagram

A model showing how households and firms interact in different markets within an economy.

Economies of Scale

The cost advantages that enterprises obtain due to scale of operation, with cost per unit of output generally decreasing with increasing scale.

Globalization

The trend of increasing international trade and investment, leading to the interconnectedness of economies.

Microeconomics

A branch of economics that studies individual markets and the behavior of consumers and firms.

Macroeconomics

The branch of economics that studies the behavior of an economy as a whole, focusing on aggregate changes.

Monetary Policy

Policy that manages the money supply and interest rates to influence the economy.

Fiscal Policy

Government policy regarding taxes and spending to influence economic activity.

Economic Growth

An increase in the productive capacity of an economy, leading to a higher standard of living.

Low Unemployment

A goal of having a high percentage of the labor force employed.

Low Inflation

The goal of maintaining stable prices and avoiding excessive increases in the cost of living.

Sustainable Balance of Trade

A situation where the value of a country's exports equals the value of its imports, contributing to economic stability.