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39 Cards in this Set
- Front
- Back
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Define a market system
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The system is characterized by the private ownership of resources and the use of markets and prices to coordinate and direct economic activity
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Define a command system
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Is a system in which there is just an edict or law or someone in government that says this is the way we will run the economy . Ex north Korea, Cuba
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What dictates which goods and services are produced in a command economic system?
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The government decides
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What dictates which goods and services are produced in a market economic system?
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This is based on what consumers want to buy
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How will goods and services be produced in a command system??
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The government decides how they will be produced
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How will goods and services be produced in a market system?
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These good will be produced in the least costly manner
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What decides who will get goods and services in a command system?
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The government decides by rationing out goods and services to the people
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What decides who will gets goods and services in a market system?
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It is based on the consumers willingness and ability to pay
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How does a command economy accommodate change?
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It often isn't easy to accommodate change if at all with this system
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How does a market economy accommodate change?
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Prices and profits give off signals which dictate change
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Define progress?
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Standard of living
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How will a command system promote progress?
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Because a command system lacks incentives it often is uneasy to promote progress
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How will a market system promote progress?
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It is automatic because prices and profits dictate signals which can lead to change ( incentives)
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Define capital goods.
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Goods that are used it producing other goods rather than being bought by the consumer
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Define financial capital.
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The idea that a business or a firm uses capital today to produce profit tomorrow.
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What is a circular flow?
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A diagram to explain how the macro economy works
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Who is involved in a simple circular flow?
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The consumer and the buisness
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Wat are the flows in a simple macro economy?
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The resource flow and the money flow
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What are the markets in a simple macro economy?
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The product market and the resource market
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Define a resource market
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A resource market is a staple in a macro economy that is composed of capital goods and labor
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Define a product market
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A product market is a staple in a macro economy that represents where people are buying the g&s that people ant to buy
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Define a resource flow in a simple economy
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A good or service from the business to the house hold
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Define a money flow in a simple economy
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Money circulation from the house holds to the business and back around again.
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What is the strength of a flow represent?
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The strength of the economy.
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What is a leakage ?
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A weakening of the economy . Taxes and saving are leakages
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What is an injection into the economy?
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A strengthening of the economy.
Loans and spending |
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Wat is a steady circular flow?
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Equilibrium of the economy where leakage = injection
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Who are the players in a four person circular flow?
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The federal government, banking, the consumer and the business
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WhAt are the four resources of the house hold?
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Land, capital , entrepreneur and labor
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How does a buisness or firm decide how to produce a good or service?
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The look at cost through resource units required.
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Define investment
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Growth within the buisness sector not the stock market. Theis pertains to capital goods and financial capital
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Define an open economy.
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An economy that trades with other economies. A circular flow with exports
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What is excluded from the GDP ?
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Sales of used items, stock market trading , private transfer payments, public transfer payments
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What are public transfer payments?
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Payment from the government to a person. Ex: welfare, social security and veterans pay
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What are private transfer payments?
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Payments between two people. Ex: payments and gifts
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define aggregate output
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The primary measure of the economy's performance is its annual total output of goods and services
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what are nonproduction transactions?
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purely financial transactions and secondhand sales.
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what are the three Financial Transactions?
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Public transfer payments, Private transfer payments, Stock market transactions
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define secondhand sales
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Secondhand sales contribute nothing to current production and for that reason are excluded from GDP.
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