Commerce

What is the nature of economics?

The study concerned with consuming goods and services that help regular functioning.

What are the cyclical fluctuations in the general level of economic activity called?

Business cycle.

What is a severe contraction in the level of economic activity with many business failures and high unemployment?

Depression.

Define recession in economic terms.

A relatively mild contraction in the level of economic activity.

What happens during an economic contraction?

The economy loses steam.

What does economic expansion refer to?

When there is economic growth.

What is the peak of economic growth referred to as?

Boom.

How is economic growth defined?

The national output of an economy.

What does the business cycle describe?

A period of high and low economic activity.

What causes fluctuations in the business cycle?

Total spending by consumers, business spending, and government spending.

What is inflation?

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

What causes inflation?

When demand for goods and services exceeds what businesses can supply.

What are recessions primarily caused by?

A lack of spending.

What happens during a depression?

Income and production are at their lowest, and unemployment is at its highest.

What occurs in the boom phase of the business cycle?

Growth and prosperity increase in production, spending, and employment.

What is a characteristic of a contraction phase?

Decreased consumer spending.

What signifies an expansion in the economy?

Increased levels of production and consumer spending.

Define the circular flow of income.

It shows connections between sectors of an economy and the flow of money.

What are 'leakages' in economics?

Withdrawals of money from the economy.

What are 'injections' in the circular flow of income?

Incomes introduced into the economy from external sources.

What is the role of the government in the economy?

To manage and maintain a balance within the economy.

What is market equilibrium?

The point where demand and supply intersect.

What happens when demand increases?

The demand curve shifts to the right, leading to a rise in price and quantity.

What happens when the supply curve shifts outward?

There will be a rise in price and a fall in quantity.

Name two types of market interventions by the government.

Price ceilings and price floors.

What is a price ceiling?

A maximum price set by the government for a good or service.

What is a price floor?

A minimum price set by the government for a good or service.

What is a tax?

A mandatory financial charge imposed by the government on individuals or businesses.

What is a subsidy?

A financial benefit provided by the government to lower production costs.

How do taxes affect supply?

Taxes shift the supply curve to the left, increasing the cost of supply.

How does a subsidy affect a supply and demand graph?

Shifts the supply curve to the right, increasing supply.

What is an example of a financial market?

Banks acting as intermediaries between savers and borrowers.

What does the law of demand state?

As the price rises, demand decreases, showing an inverse relationship.

What factors can shift the demand curve?

Preferences, number of buyers, prices of related goods, expectations, income.