Abeka Economics Final Exam Study Sheet – Flashcards
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Berlin, Germany
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an example of the contrasting effects of Communism (East Berlin) and free market (West Berlin)
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Bilateral Trade Agreement
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an agreement that affects only the two countries (parties) that make it
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Bureaucracies
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large, complex organizations made up of appointed officials and their numerous agencies and departments
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Capital
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a tool or resource used to produce or distribute goods; a good that is not produced for direct use by end consumers
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Communism
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an economic system based upon public ownership and governmental control of the production and distribution of nearly all natural resources
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Comparative Advantage
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the ability of an entity to produce a good or provide a service at an opportunity cost that is lower than that of another producer
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Cost-Push Inflation
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inflation caused by rising production costs that result in businesses increasing their prices
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Demand
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the relationship between a god' s price and the quantity that people are willing to buy
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Demand-Pull Inflation
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inflation caused by demand becoming greater than supply, forcing up the prices that consumers must pay
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Depreciation
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the diminishing of the value of goods that is caused by wear and time
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Division of Labor
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the separation of work into individualized tasks
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Economy
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any system for the production, distribution , and consumption of goods and services
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Elastic
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if prices go up people will buy less of the of that produce
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Euro
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the official currency of the nations in the European Union
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Federal Reserve
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the central banking network of the United States ultimately responsible for forming American monetary policy and for controlling the national money suply
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General Agreement on Tariffs and Trade (GATT)
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regulations that guided international trade before the WTO's establishment in 1995
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Geographic Specialization
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the production of goods in which a country or region has absolute or comparative advantage
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Globalism
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a philosophy which regards the entire world as one giant community that should be unified politically and economically
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Gross Domestic Product (GDP)
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the value of all finished goods and services produced by a nation's citizens during a year's time; includes the value of goods made by all citizens and foreigners located within that country
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Gross National Product (GNP)
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the value of all finished goods and services produced by a nation's citizens during a year's time; includes items produced by citizens outside that nation's borders, ut does not include items produced by foreigners within the country
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Industriousness
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moral quality that involves doing quality work in an efficient manner
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Inelastic
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even though the price goes up the consumer will still pay the price because they feel there are no substitutes
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Inflation
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the situation that occurs when market prices rise because too much money is in circulation
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Input
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the total amount invested in the production of a good
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Investment
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the commitment of resources to a project or purpose that is expected to bring future profit to the investor
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International Monetary Fund (IMF)
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organization originally established to impartially monitor the value and exchange of national currencies; the IMF presently finances governments, provided funds for national development, and advises nations on how to run their economies
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Keynesianism
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economic philosophy based on the belief that a society's economic problems can be better solved by "expert planners" than by the natural corrections of a free market
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Kyoto Protocol
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regulations requiring nations to buy allowances of "carbon credits" to decrease CO2
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Legal Tender
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any form of money that has been declared a valid means of payment
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Macroeconomics
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the study of national and international economies and how these major economies are affected by large-scale choices and public policies
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Marginal Utility
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the amount of satisfaction that results from a one-unit increase of a prodcut
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Market
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a mechanism that allows people to exchange goods
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Market Signal
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a sign used by consumers and producers to determine how much of a good to buy or sell at a given price and time
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Mercantilism
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an economic system that advocates the building up of the state's treasury with the goal of accumulation as much bullion as possible; holds that a nation's wealth lies in its stockpiles of precious metals
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Microeconomics
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the study of specific components within a major economy and how the choices made by individuals, households and businesses affect that economy
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Multilateral Trade Agreement
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an agreement that involves more than two nations
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National Sovereignty
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the exclusive power of an independent state to rule and regulate internal affairs without foreign interfence
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Nationalism
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the promotion of one's own nation and government's annual revenue falls short of its annual expeniiture
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North America Free Trade Agreement (NAFTA)
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regional trade agreement adopted by the US, Canada, and Mexico in 1993
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Opportunity Cost
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the value of the best alternative that is foregone when a different alternative is taken
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Overspecialization
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the production inefficiency that results when the division of labor is carried past the point of maximum efficiency
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Service
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intangible goods produced by labor and for which people expect to pay
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Social Security
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enacted in 1935 to provide an american form of social income; overseen by the Social Security Administration
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Socialism
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any economic system based upon collective ownership and control of many or most national resources
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Specie
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coined, metallic money
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Supply-Side Economics
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the theory that reduction of taxes makes more money available for private investment in capital and research, thereby increasing productivity
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Surplus
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a situation in which the quantity supply exceeds the quantity demanded at a given price
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Sherman Act
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law passed in 1890 that was one of the first and most important of the U.S. antitrust laes
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Total Cost
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the sum cost of all the factors of production used in making goods
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Tying Contracts
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a binding agreement that forces a consumer to buy a certain product before he can buy the product he really wants
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United Nations (UN)
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a global organization whose original purpose was the promotion of world peace and economic prosperity
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World Bank
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an organization originally established to lend money to battle-torn Japan and Western Europe after WWII; presently acts as a welfare agency that lends funds to countries in poverty or financial distress; consists of two institutions,, the International Bank for Reconstruction and Development and the International Development Association
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World Trade Organization (WTO)
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an agency that purposes to assist the free flow of trade among nations, help countries establish free trade through negotiations, and resolve trading conflicts; this organization is an outgrowth of the General Agreement on Tariffs and Trade
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Adam Smith
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the founder of modern economics; wrote the Wealth of Nations
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Carl Menger
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created the Water-Diamond Paradox
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David Ricardo
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warned of the dangers of protectionism (the theory that domestic manufacturers need government protection against foreign competitors)
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Franklin Roosevelt
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invented the New Deal
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Henry Ford
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came up with the "American system" of mass production
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Karl Marx
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Father of Communism; greatly promoted Communism; wrote the book Das Kapital(explained communism) and the pamphlet The Communist Manifesto(explained how to get to communism)
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Milton Friedman
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U.S. most influential economists; an advocate of the laissez-faire policies; also became associated with monetarism(the theory that the variation in the money supply is the main source of economic fluctuations).
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Physiocrats
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a French group of economic critics known as some of the earliest advocates of laissez-faire economics
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Pierre Samuel du Pont
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published Physiocracy and was part of the Physiocrats
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Ronald Reagan
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implemented the policies based on supply-side economics
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Sir Thomas Gresham
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came up with Gresham's Law which states that when people cannot trust the value of a form of money they will save for themselves forms of money that seem more stable and valuable
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Thomas Robert Malthus
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Prophet of Doom; pretty much said that the population was going to multiply so fast that food wouldn't be able to be made fast enough to feed the entire population and suggested to reduce the birth rate to combat this "problem"
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scarcity, utility
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determines the value of a good
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basic components of Capitalism
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property rights, freedom of enterprise and competition in a market environment, and limited government
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punish evil, reward good
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primary responsibilities of government
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components of mass production
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division of labor(specialization), standardized parts, automatic conveyance(the assembly line)
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different types of accounts
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checking, savings, money market and CD(certificate of deposit)
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checking account
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popular form of transaction account which is an account that allows checks to be written up to the dollar amount that the account holder has deposited
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savings account
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a bank account that allows the account holder to earn interest on his deposits
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money market account
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an account that allows limited transactions and pays an interest rate that changes with the demand for loans.
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CD or certificate of deposit
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an account that guarantees a certain interest rate and has a specified maturity date
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functions of money
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to be a medium of exchange; provide a measure of value and provide a store of value
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four factors of production
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labor, natural resources, capital, entrepreneurship (fifth and is always the fifth one is information
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four common economic systems
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traditional, command, free enterprise and mixed
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traditional economy
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a system in which decisions involving the production, distribution and consumption of goods are based upon custom, heredity and caste
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command economy
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a system in which a centralized authority determines the production and distribution of goods and services as well as things like savings, investments, and prices
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free enterprise economy
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a system in which people are free to make their own economic choices
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mixed economy
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a system that combines a god measure of free enterprises in some areas with heavy state regulations in others
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four phases of business cycle
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expansion, peak, recession and trough
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oligopoly
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a market that occurs when an industry is dominated by only a few firms.
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legal monopoly
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monopoly granted by the government in order to encourage production
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natural monopoly
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monopoly that occurs when a single firm can satisfy the demand for a good more efficiently than multiple firms could
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different market models
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perfect competition, monopolies, monopolistic competition and oligopolies
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perfect competition
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a market in which there are many independent sellers and buyers, all firms produce a standardized product, firms have free access to the market, and relevant market information is available to all firms and buyers
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monopolies
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a market in which there is only one supplier of a good, no other firms produce a close substitute for that good, and entry into the market is blocked
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monopolistic competition
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a market in which there are a large number of firms that provide differentiated products and have free access to the market;
