Consumer Economics Unit 1

economics

the study of the production, consumption, and distribution of a country’s goods and services

economic systems

economic indicators

business cycle

periods of economic growth and slowdown

supply and demand

impacts the economic challenge of scarcity

traditional economy

decisions based on society’s values, culture, and customs, also slow to change

command economy

economy controlled by government, lack of consumer choice

market/free enterprise

privately owned business compete for profits, limited government regulations, encourages entrepreneurship

mixed economy

US system, uses commander regulations, and market competition and supply and demand concepts

scarcity

the problem that all societies are faced with

the 3 questions that resolve scarcity issues

what will be produced? how will it be produced? who will get what is produced?

gross domestic product (GDP)

best measure of economic growth, value of all goods and services produced by a nation in a year

factors calculated in GDP

consumer spending, business investments, exports, government spending

consumer price index

measures the average change in prices over time for selected goods and services, “cost of living”

inflation

overall increase in the price of goods and services, decreases value of a dollar

unemployment

percentage of the civilian population without a job but actively looking for one

prosperity/peak

highest level of economic activity, high production, low unemployment, high GDP

depression/trough

lowest level of economic activity, demand for goods decreases, unemployment increases, lowest GDP

recession/contraction

noticeable drop in economic activity, decrease in demand and profits, rise in unemployment, decreasing GDP

recovery/expansion

overall rise in economic activity, unemployment decreases, new businesses opening, increasing GDP

supply

amount of a product or service producers are willing to provide

demand

quantity of a product or service consumers are willing to buy

law of supply

producers choose to sell more of something at a higher price than a lower price for more profit

law of demand

the higher demand for a product, the higher the price goes

human resources

skills, labor, knowledge of people

natural resources

water, oil, minerals, trees, etc.

equilibrium

when supply and demand are balanced

maximum efficiency

the approximate point at which the quantity supplied equals the quantity demanded

goal of monetary and fiscal policy

to keep prices and inflation stable and economic growth steady

fiscal policy determined by…

determined by president and congress

monetary policy determined by…

determined by the federal reserve

fiscal policy

if taxes are increased, consumer spending decreases / if taxes are decreased, consumer spending increases

monetary policy

reserve requirements, interest/discount rates, open-market operations

reserve requirements

banks must keep a certain % of total deposits on-hand in cash

interest/discount rates

the interest rate the fed charges banks to borrow money for lending to consumers

open-market operations

the fed buys and sells government and corporate bonds

national debt

the total amount of money that the federal government owes (36.18 trillion)