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69 Cards in this Set

  • Front
  • Back
3 characteristics of capitalism
Private ownership of land
Competition
Profits
3 pillars of free enterprise
Private Property
Price System
Competition
Guarantees the individuals right to own, use, and dispose of things of value
Private Property
Where resources are allocated as a result of the forces of supply and demand
Price System
Rivalry amongst buyers and sellers in purchase of resources and products
Competition
3 Characteristics of private property
Natural Resources
Capital
Income
The Father of Economics
Adam Smith
The Wealth of Nations
Took a position against merchantilism
Taking over overseas territory for profit
merchantilism
"Leave us alone"
Laissez-Faire
A person who believes in private property
Physiocrat
People naturally strive to do whatever benefits them most
Self-Interest
Gives consumers what they want when they want it
"Invisible Hand"
Money value of a good or service
Price
Percent of the total
Market Share
Measure of the amount of goods and services an individual considers essential to well-being
Standard of Living
First benefit of competition
Gives us what we want when we want it
Second benefit of competition
To operate efficiently, we will need to conserve resources, increase output, and raise living standards
Negative of competition (potential)
Too much competition can lead to a monopoly
Effort to conduct one's activities in such a way as to achieve the greatest return
Economic self-interest
Example of economic self-interest 1
consumer will travel to get the best deal if it offsets the cost of travel and the cost of time
Example of economic self-interest 2
employeers will increase wages or working conditions to get the labor that is needed
Economic self-interest does not always go along with human behavior 1
People will not always take a higher paying job because they do not want to move to another region
Economic self-interest does not always go along with human behavior 2
Buisnesses contribute to charities
Force that drives entreprenuers to risk their capital in business ventures
Profit Motive
Profits set aside in the form of savings provides companies with the capital they need to expand
Profit Motive
Encourage owners to use their resources more efficently
Losses
In the real world, government plays a significant role and there are limitations to private property
Free Enterprise Theory vs. Reality
The right of government to take private property at a fair price for public use
Eminent Domain
Safeguard the market system
Role of government
Interstate Commerce Act (1887)
Set up to stop the abuse of railroads
Northerns Security Case
Enforced the ICA
Sherman Anti-Trust Act (1890)
Any combination in restrain of trade is illegal
Clayton Anti-Trust Act (1914) 1
Specified what acts would be considered in the restrain of trade
Clayton Anti-Trust Act (1914) 2
Set up the Federal Trade Commision
Federal Trade Commision
Allows government to step in and use power
Coller Anti-Merger Act
Declared mergers to be illegal, where they lessened competition of created monopoly
Where one company buys another coming together
Merger
Government provides some public goods and services
Mosquito Control
The effects of economic activities that fall outside the market system
Externality
Programs to assist those in need (two catagories)
Help People with their income
Eliminate causes of poverty
Programs to help special groups
Inventors - Patents
Programs to stablilize economy
The Employment Act
The Employment Act (1945)
Gave government the power to do three things
1. Encourage full employment
2. Stabilize Prices
3. Economic Growth
Final Market price of all goods and services produced in a country
Gross National Product
People living in the same dwelling and functioning as an economic unit
Household
Resources of land, labor, capital, and ownership
Productive Factors
Using money to purchas real capital to be used in the production of goods and services
Investment
Formula - Consumer Spending to buisness spending equals gross national product
CIG = GNP
1930 (first, second, third)
1. Consumer, 2. Investment, 3. Government
Now (first, second, third)
1. Consumer, 2. Government, 3. Investment
Five Economic Goals
1. Full Employment
2. Economic Growth
3. Price Stability
4. Economic Freedom
5. Economic Security
Jobs are available to everyone who is willing and able to work
Full Employment
Increase in output over a period of time, usually accomapnied by an increase of GNP
Economic Growth
Two ways to measure economic growth
1. Constant dollars (inflation)
2. Current dollars
Absense of inflation or deflation, a period of time in which there is little change in what the dollar can buy
Price Stability
Price Stability - Inflation
Period during which the purchasing power of the dollar is falling and prices are rising
Decrease of prices where purchasing power of the dollar is rising
Deflation
People can choose how to spend their money and earn a living
Economic Freedom
Those who are unable to care for themselves will be provided with help
Economic Security
Government Bailouts
1. Solvency
2. Insolvency
Company's financial help
Solvency
Cannot pay debts
Insolvent
1971: Penn Central
$125 Mil
1971: Lockheed
$250 Mil
1979: Crystler
$1.5 bil
1984: Cont. Illionois
$4.5 bil
Arguments: Defence
1. Maintain Public confidence
2. Companies pay back government
Arguments: Against
1. Not fair that government picks who to save
2. Tax Dollars