| A | B |
|---|
| scarcity | basic economic problem - too many wants too few resources |
| opportunity cost | value of next best alternative that had to be given up to do the actions that was chosen |
| Law of diminishing returns | as more of one resource is added to a fixed supply of other resources the output will rise for a while, but then decline |
| Role of the Fed | to establish monetary policy,issue money |
| More roles of the Fed | offer financial advice & loans to merchant banis, clears all checks |
| Expansionary monetary policy | recession |
| contractionary monetary policy | inflation |
| bull market | increase in stock prices |
| bear market | drop in stock prices |
| deficit | government spends more than it collects in revenues |
| underdeveloped nations | low literacy rate, low per capita GDP, majority of labor force engaged in agriculture,low life expectancy |
| fiscal policy | federal govt use of taxation & spending policies to affect overall business activity |
| why nations trade? | for exchange of goods & services, help nations deal with problem of scarcity,helps nations produce more efficiently |
| Traditional economy | custom,religion & tradition affects economic decisions ex India |
| Market/Capitalist/Free enterprise | individual decisionmakers, consumer demand & producer supply make economic decisions ex United States |
| Command economy | central agency makes basic economic decisions ex Communist China |
| Mixed economy | govt agency makes some decisions, private businesses make others ex Great Britain |
| Characteristics of monopoly | many buyers, one seller, product well-defined,price is controlled,can dominate market,little opportunity for new businesses to enter market |
| Characteristics of Perfect Competition | many buyers & sellers, many substitutes, no company can control price, can't dominate market, easy for new producers |
| Characteristics of Competitive Monopolies | many buyers & sellers, similar services, brand name loyalty, no firm can control price, may dominate market short term, easy for new businesses to enter market |
| Characteristics of Oligopolies | many buyers, few sellers, product may be differentiated but similar, price can be set by each company,difficult for new businesses to enter market |
| Example of Monopoly | utilities |
| Example of Perfect Competition | agriculture |
| Example of Competitive Monopolies | PC's clothing |
| Examples of Oligopolies | automobiles,cereals, airlines |
| Market Structure | describes how competitive specific industries are |
