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35 Cards in this Set

  • Front
  • Back
Economics
the study of how scarce resources are allocated among alternative uses
Scarcity
not having as much of something as you want
Opportunity Cost
the cost of something as measured by the loss of the best alternative thing or activity
Capitalism
private ownership of capital good
market for financial investment
Prices, output, and distribution of goods determined by competition in a free market
Feudalism
Capital owned by lords, king and church
No financial market. investments made by ing or lords for military or political purposes
Prices determined by tradition or lords and rarely change
Effects of technology
Rising standard of living sue to an increase in the number, quality, and variety of goods
Size of business firms increased
Improved the division of labor
Work became boring and people were less self sufficient
Each new level of technology threatened the position of those using the old technology
Cost per unit of output
total resource cost per hour of work/output per hour of work
Adam Smith
Because of freedom and competition, the economy could take care of itself and the government should leave it alone
Karl Marx
The economy is unstable, will eventually collapse and give way to Communism
Keynes
Mixed economy of the private sector and government. Government alters it's spending to offset undesirable changes in private sector spending
Reasons for trend toward big business
advances in technology-economies of scale
Corporate Mergers
Busniess Cycle of large firms replacing small ones
Importance of small business
Provide a variety of goods and services
Employ a quarter of the nations labor force
Reasons why big businesses are not as big and powerful as they seem
Foreign competition
THey can be so large that they become weak and inefficient
Five layers of distribution of income
Poor and near poor
Working class
Middle Class
Upper Class
Poor and near poor
young
colored
female head of household
old
no education
no wealth
Working class
factory workers, sales clerks
unionized
some wealth
high school education
Middle class
higher education
less successful job than upper class
wealth
Upper Class
Athletes, doctors, etc.
Large income
higher education
Real Gross Domestic Product
the value at base period prices of all final goods and services that are produced in a given country during a given period of time
Consumer goods and services
Goods and services purchased by households and governments for individual use
Investment or capital goods
goods that are used to produce other goods or to provide services
Components of Real Domestic Income
wages, salaries, benefits, etc
Consumer price index
a measure of the level of prices of several thousand consumer goods and services that are purchased by the average metropolitan area resident
How CPI affects a persons real income
If nominal income is more than the CPI, real income goes up
Rate of unemployment
percentage of the labor force that is looking for a job but cant find one
Frictional unemployment
unemployment by people who can get an acceptable job
Structural unemployment
unemployment for a long time because of lack of skills and personal characteristics
Comparing the economies performance
lowest inflation and unemployment, highest real GDP
Macroeconomics
study of unemployment, inflation, economic growth, and goverment policies
Aspects of household saving
Financial
Real
What happens when household savings exceeds firms investment?
prices and output go down due to lack of demand, unemployment goes up
What can the government do about the previous problem?
borrow the excess savings and use it for public investment
Real personal consumption expenditures
expenditures by households for consumer goods and services that are measured in real terms
Real Wealth
real value of property minus the real value of debts
Real Gross Private Investment Expenditures
real value of expenditures for plant and equipment, office buildings, homes, etc that are held for inventories