Chapter 4: Political Economy

**market**

is the common term used to describe any setting in which supply and demand (sellers and buyers, workers and firms, etc.) interact with one another. 

Gini index

is a coefficient that attempts to measure the degree to which income is distributed from the top to bottom of a society.

Liberal systems

are liberalized, essentially meaning "freed, "in the degree to which the state might otherwise attempt to regulate the behavior of economic actors.

Mexico

developed massive industrial parastatal companies in the era of PRI dominance (1911 to the 1980s), some of which are still state- owned today.

real estate

Tax is typically collected in the form of income tax (on wages), property taxes (on ________) or sales tax (applied to purchases)

Social expenditures

are similar to public goods, in that both involve the state providing some kind of economic good or service to their people, but public goods are provided to all people regardless of their status.

Extreme poverty

may seem like a subjective term, but it is often defined as living below the equivalent of two dollars per day, which can be a good indicator of the degree to which daily survival is difficult for a number of people in a country.

Regulations

are directives from the government that control the activities of people and firms in the market.

Vladimir Lenin

developed a Marxist- Leninist ideology of democratic centralism, which would centralize political decision making into a small revolutionary elite who would make all decisions on the basis of benefiting the common man as much as possible (thus making it theoretically "democratic, "in his view)

Economic freedom

refers to the degree to which individuals and private firms are free to own property and make decisions about how to use, consume, or invest it without interference from the state.

Mercantilism

emerged in the seventeenth century in association with the rise of absolute monarchies in Europe, establishing state- owned manufacturing and trading companies with the aim of bringing gold, prestige, and power to the kingdom.

Social expenditure programs

are commonly referred to as the welfare state, implying that the state is taking the welfare of its poor and most vulnerable people on as a responsibility to correct, or in other cases, the state is providing a universal benefit as a guaranteed right to all of its people.

gross domestic product

(or GDP) is the total value of all goods and services produced within a country for a given period of time (usually measured per year)

Central banks

have a core responsibility to ensure that the money supply is growing just fast enough to accommodate an expanding economy and growing population without growing the money supply so much that inflation occurs.

Property

is, quite simply, ownership of goods and services.

GDP total

Dividing the ________ by the population of the country can show the average income and standard of living for the average person.

Public goods

are those goods and services that are provided to citizens, either free of charge or at heavily subsidized rates, by the state.

Whereas GDP

________ shows the production of the aggregate economy, GDP per capita is a measure of the standard of living of the average person in the economy.

extreme poverty

Conquering ________ is often a top policy consideration for developing countries.

Regulations

________ can be justified as measures to improve the safety of employees on a job site, protecting consumers from harmful products, protecting the cleanliness of the environment, or preventing fraud and abuse by company insiders, among many other reasons.

Social expenditures

are given to some members of society, but not others, in the name of helping achieve more economic equality.

The conflict between these two values often defines the political climate in a state, and from this conflict has emerged a common terminology

right and left

**subsidy**

a payment from the state to assist consumers in purchasing the product or a payment directly to the producer to help them keep prices lower.

**black market**

continues to operate illegally despite the laws of the state.

Taxation

is the process of collecting money from individuals, businesses and other entities to fund public services like schools, roads, infrastructure and more.

**Money**

is an extraordinarily complicated topic that will not be covered in full detail in this course, but for a brief explanation, it is essentially some item that a society has generally agreed upon to be universally accepted as payment for all other goods and services. 

Central banks

have a core responsibility to ensure that the money supply is growing just fast enough to accommodate an expanding economy and growing population without growing the money supply so much that inflation occurs. 

**free-trade**

agenda, believing that allowing people the freedom to buy and sell whatever they please without restriction will result in the highest net economic growth, as individuals are better suited to decide what they want, or where they can sell at a high profit on their own, without constraints from the government. 

Social democratic systems

similarly value the benefits that come from private property ownership and using markets as the mechanism for resource allocation, but they also attempt to correct for the economic inequality, which by necessity accompanies a liberal capitalist system.

Communism

is rooted in the ideology of Karl Marx, the author of the *Communist Manifesto*, who decried what he saw as the oppression of the working-class laborer by the industrial capitalist during the Industrial Revolution in the nineteenth century. 

**surplus value**

when they worked to create a finished manufactured product from a set of raw materials. 

Mercantilism

emerged in the seventeenth century in association with the rise of absolute monarchies in Europe, establishing state-owned manufacturing and trading companies with the aim of bringing gold, prestige, and power to the kingdom.

**GDP per capita**

is a measure of the standard of living of the average person in the economy.

Gini index

is a coefficient that attempts to measure the degree to which income is distributed from the top to bottom of a society.