Economic Terms and Concepts (Part 2) - CE. 11, CE. 12, and CE. 13

Traditional Economy

Economy that makes economic decisions that are based on customs, traditions, and on what happened before in history; examples: tribes in Amazon rainforest and Inuit of Arctic region.

Free Market Economy (Free Enterprise)

The economy where there is no government control of the economy; there is NO purely free market economy in the world. Private individuals and businesses make all economic decisions in this type of economy.

Command Economy

The economy where there is total government control of the economy; example: North Korea.

Mixed Economy

An economy that is a mix of the free market system with some government influence and involvement. It is the most common kind of economic system and the U.S. uses this system. (Mix between government involvement and private ownership.)

Regulation

Making laws or rules about how things should work.

Regulatory Agencies

Agencies in the government that make sure businesses are acting properly. Examples: FCC and FTC.

16th Amendment

Gives congress the power to tax personal and business incomes.

Federal Reserve System (the Fed)

Acts as the central bank of the United States of America. Maintains value of currency, regulates banks, manages the amount of money in circulation and acts as a bank for the federal government.

Federal Communications Commission (FCC)

Regulates the radio, television, telephone and Internet industries.

Federal Trade Commission (FTC)

Protects consumers, works to prevent monopolies, encourages competition (works to stop unfair business practices).

Environmental Protection Agency (EPA)

Protects human health and the environment.

Globalization

Process of spreading ideas, products, and other aspects of culture throughout the world.

Circular (Economic) Flow

The term for the continuous flow of money, resources, goods and services among individuals, businesses and the government in the economy.

Public Goods and Services

Goods and services provided by the government for the use of all people (examples: public schools, roads, parks, police and fire departments, etc.).

Private Sector

The part of the economy that is controlled by individuals or businesses, not the government.

Public Sector

The part of the economy that is controlled by the government.

Price

The amount of money exchanged for a good or service.

Monopoly

A company that controls all production and sales of a particular product or service, often resulting in higher prices for the consumer.

Competition

Rivalry between sellers of similar goods/services that leads to lower prices and better quality for consumers.

Proprietorship

Has just one owner

Partnership

Has two or more owners

Corporation

A business owned by stockholders who share in its profits but are not personally responsible (liable) for its debts.

Inflation

A general increase in prices and fall in the purchasing value of money.

Interest

Amount a bank pays people to deposit money, AND the amount a bank charges people to borrow $$.

Loan

Money borrowed from a bank to achieve a personal or business goal. This must be payed back plus interest.

Entrepreneur

A person who starts a new business in the hope of making a profit from his or her efforts

Standard of Living

The level of wealth, comfort, goods, and necessities available to a group of people in a certain area.

Cost of Living

Money needed to pay for basic expenses like housing, food, clothing, and healthcare.

Bank

A financial institution that receives deposits and makes loans. They make money by charging interest on loans. Also offers a full range of savings sand checking accounts.

Deposit

Money put in the bank for safe-keeping, and to earn interest.

Investment

A purchase of something in the hope that it will increase in value over time (like stock in a company), or help one's business or savings increase in value.

Government Spending

Includes all government consumption, investment, and transfer payments.

Credit

Money you borrow.

Financial Capital

The money needed to start or expand a business (to buy the tools, equipment, etc.).

Principal

Original amount of money borrowed in a loan.

Consumption

The act of buying and using a product.

Revenue

Money collected by the government through taxes and fees.

Currency

Coins and paper bills used as money.

Debit Card

A bank card that automatically deducts the amount of a purchase from the checking account of the cardholder.

Antitrust Laws

Laws that prevent monopolies and promote competition and fairness.

Credit Union

A nonprofit financial institution (functions like a bank) that is owned by its members and organized for their benefit.

Shareholder

A person who invests in a corporation by buying stock and is a partial owner.

Financial Institution

Businesses that provide banking services to consumers and businesses (examples: Banks, Savings and Loan Associations and Credit Unions).

Income Tax

Tax paid to the state, federal, and local governments based on income earned over the past year.

Federal Reserve Notes

Paper money issued by the federal reserve banks; most of the nation's currency.

Checks

Written orders to a bank to pay a certain amount of money from a checking account to another person or business; function like cash or currency.