DECA Vocab Chapter 3

Economy/Economic System

The organized way a nation provides for the needs and wants of its people.

Resources

All the things used in producing goods and services.

Factors of production

The term economists use when they talk about economic resources. Comprised of land, labor, capital, and entrepreneurship.

Infrastructure

The physical development of a country. Includes its roads, ports, sanitation facilities, and utilities.

Entrepreneurship

Refers to the skills of people who are willing to invest their time and money to run a business.

Scarcity

Forces nations to make economic choices. For example, entrepreneurs in underdeveloped nations may not have much money or resources.

Traditional economy

Habits, traditions, and rituals answer the basic questions of what, how, and for whom. The answers are often based on cultural or religious practices and ideals that have been passed from one generation to the next.

Market economy

There is no government involvement in economic decisions. Individuals and companies own the means of production and businesses compete for consumers.

Command economy

A system in which a country’s government makes all economic decisions regarding what, how, and for whom goods and services will be produced and distributed.

Productivity

The output per worker hour that is measured over a defined period of time, such as a week, month, or year,

Gross domestic product (GDP)

The output of goods and services produced by labor and property located within a country.

Gross national product (GNP)

The total dollar value of goods and services produced by a nation.

Inflation

Refers to rising prices. Low rate is 1-5%, high rate is 10% or higher.

Consumer price index (CPI)

Measures the change in price over a period of time of 400 specific retail goods and services used by the average urban household.

Producer price index (PPI)

Measures wholesale price levels in the economy.

Business cycle

Includes these phases: expansion, recession, trough, and recovery.

Expansion

Time when the economy is flourishing

Recession

Period of economic slowdown that lasts for at least six months

Depression

A period of prolonged recession. During a depression, it becomes impossible to find a job, and many businesses are forced to shut down.

Recovery

Signifies a period of renewed economic growth following a recession or depression.