Chapter 17

Adam Smith
– considered to be the Father of Capitalism and Modern Economic, “wealth of nations” advocated the idea of laissez faire; or government not involving themselves in the economy.
Sentence- Adam Smith is considered to be the Father of Capitalism because of his strong belief in laissez faire economics.
Wealth of Nations
This is the 18th century book written by Scottish economist Adam Smith in which he spells out the first modern account of free market economies.
Sentence- “Wealth of Nations” advocated the idea of laissez fair economics.
Capitalism
An economic system based on private ownership of capital
Sentence- In a capitalist economy the government has no influence.
Laissez faire economics
Theory that opposes governmental interference in economic affairs beyond what is necessary to protect life and property.
Sentence- People who believe in laissez faire economics believe that the government should have no influence in the economy
Socialism
A system in which society, usually in the form of the government, owns and controls the means of production.
Sentence- In a socialist economy the government controls the economy
Inflation
A rise in the general level of prices in an economy.
Sentence- People don’t like inflation because it causes things to cost more money
Unemployment rate
The number of Americans who are out of work but actively looking for a job. The number does not usually include those who are not looking.
Sentence- The lower the unemployment rate the better the economy is doing
Fiscal policy
Government policy that attempts to manage the economy by controlling taxing and spending.
Sentence- Taxes is part of the governments fiscal policy
Monetary Policy
A form of government regulation in which the nation’s money supply and interest rates are controlled
Sentence- Monetary policy is when the fed tells the banks how much money they need to keep in the bank, thus controlling how much money is in the economy
Federal Reserve System.
A national banking system, established in 1913, that controls the U.S. money supply and the availability of credit in the country.
Sentence- the Federal Reserve System regulates banks to make sure that the money supply in circulation helps the economy
Keynesian economic theory
The theory emphasizing that government spending and deficits can help the economy weather its normal ups and downs. Proponents of this theory advocate using the power of government to stimulate the economy when it is lagging.
Sentence- People who support the Keynesian economic theory tend to support more f a socialist economy
Supply side economics
Theory adopted by Reagan that cut taxes (especially to wealthy) to increase purchasing power of businesses and consumers.
Sentence- Supply side economics was advocated by President Reagan
Monetarism
A theory that government should control the money supply to encourage economic growth and restrain inflation.
Sentence- The monetarism theory is like socialism
Multinational corporations
a company that is heavily engaged in international trade, beyond exporting and importing
Sentence- Multinational corporations tend to have their products manufactured in third world countries and import the finished products back to the states.
Antitrust policy
A policy designed to ensure competition and prevent monopoly, which is the control of a market by one company.
Sentence- An example of the antitrust policy is all of the different athletic brands- Nike, Underarmer, Addias
Labor Unions
An organization formed by workers to strive for better wages and working conditions
Sentence- Labor unions protect the rights of the workers
Collective bargaining
Process by which a union representing a group of workers negotiates with management for a contract
Right-to-work-laws
legislation that gives workers the right, under an open shop, to join or not join a union if it is present
Sentence- The right of work laws allow free riders to get all the benefits of the labor union.

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