| A | B |
|---|
| Economy | The way a nation makes its economic choices |
| Resources | Are all things used in producing goods and services, the technical term economists' use for resources is Factors of Production, Four categories compromise the Factors of Production |
| Factors of Production | Land- Refers to everything on the earth that is in its natural state... this includes everything contained in the earth or found in the seas. Coal and crude oil are natural resources, and so is a lake and all the living things in a lake |
| Factors of Production | Labor- Refers to all people who work in the economy. Labor includes full and part-time workers in both private and public sectors |
| Factors of Production | Capital- Includes money needed to start and operate a business. It also includes the goods used in production process. Factories, office buildings, computers, and tools area ll considered capital resources |
| Factors of Production | Entrepreneurship- Refers to the skills of people who are wiling to risk their time and money to run a business |
| Economies | All economies have different proportions of resources. The U.S. has an educated labor force, a great deal of capital, an abundance of entrepreneurs, and many natural resources |
| Economies | Underdeveloped nations are not that fortunate; they have natural resources to spare but not capital or skilled labor to help develop them |
| Scarcity | It is apparent that nations have unlimited wants and needs for growth and development but limited resources to meet them. This is the difference between wants and needs and avialble resources is called scarcity, scarcity forces nation to make economic decisions |
| Economic Systems | Market or Capitalist vs. Command or Planned. No economy can be called purely market or purely command, elements of both systems are found in all economies, making all economies mixed |
| Market Economies | In a pure market economy, there is no government involvement in economic decisions, The U.S. is a market economy. Consumers decide what should be produced, how products will be produced is left up to businesses in a market economy |
| Market Economies (Cont.) | The people who have more money are able to buy more goods and services, to obtain money; people are motivated to work and invest the money they make |
| Mixed Economies | All economies in the world today are mixed. Three political philosophies that have shaped the world economies are: Capitalism, Socialism, and Communism |
| Command Economies | A system in which the government controls the factors of production and makes all decisions about their use |
| Capitalism | Same as free enterprise, private ownership of business, market place competition, concerned about people, care for those who cannot care for themselves |
| Capitalism (Cont.) | Democratic society, Believe power belongs in hands of people, more than one political party |
| Socialism | Increased government involvement in people's lives and the economy, main goal is to keep prices low for all people, provide employment for many, government runs key industries and makes economic decisions |
| Socialism (Cont.) | State controlled companies are generally in telecommunications, mining, transportation, and banking, have more social services, medical care is free or low cost, education is free |
| Socialism (Cont.) | Have pensions and elderly care, businesses and individuals pay higher taxes than in capitalist countries to pay for all of these "free" government services |
| Socialist Countries | Canada, Germany, Great Britain, Sweden, and Australia are socialist countries |
| Communism | Countries have a totalitarian for of government, which means that the government runs everything. One political party runs the government, people are assigned jobs, there is no unemployment |
| Communism (Cont.) | Government decides the type of schooling people will receive and tells them where to live, No incentive for people to increase their productivity, Cuba and North Korea are communist countries |
| Privatization | Refers to the process of selling government-owned businesses to private indivisuals, this process generates much needed revenue for the governments involved |
| Goals of A Successful Economy | Increase productivity, lower unemployment, maintain stable prices. All nations analyze their economies to see how well they're doing, their analysis helps them determine which phase of the business cycle their economies are in, this determination allows businesses, consumers, and government to make appropriate economic decisions |
| Productivity | output per worker hour that is measured over a defined period of time, such as a week, month, or year |
| Businesses can increase productivity by... | Investing in new equipment, providing additional training or financial incentives, and reducing workforce and increasing the responsibilities of the workers who remain |
| Gross Domestic Product | a measure of the goods and services produced using labor and property located in this country |
| Inflation Rate | Refers to rising of prices. A low inflation is good because this shows the economy is stable. Controlling inflation is one of a governments major goals |
| What are the two measures of inflation? | Consumer Price Index and Producer Price Index |
| What is Consumer Price Index? | Measures the change in price over a time of some 400 specific retail goods and services used by the average urban household. Also called the cost-of-living index |
| What is Producer Price Index? | Measures wholesale price levels in the economy and is often a trendsetter, as producer prices generally get passed along to the consumer |
| Unemployment Rate | The higher the unemployment rate, the greater the chances of an economic slowdown, the lower the unemployment rate, the greater the chances of an economic expansion |
| The Business Cycle (All Parts) | Recovery, Prosperity (Expansion), Recession, Depression |
| The Business Cycle (Part 1) | Recovery- increase in the overall economic activity. Businesses pick up, people find jobs, the demand for good increases |
| The Business Cycle (Part 2) | Prosperity also known as Expansion, economy if flourishing, a good time to start a business |
| The Business Cycle (Part 3) | Recession - a period of economic slowdown that lasts for two quarters or six months or longer |
| The Business Cycle (Part 4) | Depression - a period of prolonged recession. Becomes nearly impossible to find a job and many businesses close down |
