Академический Документы
Профессиональный Документы
Культура Документы
Profits
The difference between a business s revenues and its expenses. The rewards owners get for risking their money and time.
Economic Systems
Economic System
A nation s system for allocating its resources among its citizens, both individuals and organizations
Factors of Production
Labor: Human resources Capital: Financial resources Entrepreneurs: Persons who risk starting a business Physical resources: Tangible things used to conduct business Information resources: Data and other information used by businesses
2009 Pearson Education, Inc.
Market Economy
Individual producers and consumers control production and allocation by creating combinations of supply and demand.
Market
A mechanism of exchange between buyers and sellers of a good or service.
2009 Pearson Education, Inc.
Market Economics
Capitalism
The government supports private ownership and encourages entrepreneurship. Individuals choose where to work, what to buy, and how much to pay. Producers choose who to hire, what to produce, and how much to charge.
Supply
The willingness and ability of producers to offer a good or service for sale.
Shortage
A situation in which the quantity demanded will be greater than the quantity supplied
Causes lost profits Invites increased competition
2009 Pearson Education, Inc.
Degrees of Competition
Perfect Competition
Prices are determined by supply and demand because no single firm is powerful enough to influence the price of its product.
All firms in an industry are small. The number of firms in the industry is large.
Natural monopolies: Industries in which one firm can most efficiently supply all needed goods or services; typically allowed and regulated by legislated acts and governmental agencies.
Example: Electric company
2009 Pearson Education, Inc.
Economic Indicators
Economic Indicators
Statistics that show whether an economic system is strengthening, weakening, or remaining stable Measure key goals of the U.S. economic system: economic growth and economic stability Economic growth indicators
Aggregate output, standard of living, gross domestic product, and productivity
Aggregate Output
Growth during the business cycle is measured by the total quantity of goods and services produced by an economic system during a given period.
Standard of Living
The total quantity and quality of goods and services that consumers can purchase with the currency used in their economic system.
2009 Pearson Education, Inc.
Real GDP
GDP that has been adjusted to account for changes in currency values and price changes.
Balance of Trade
How does a trade deficit affect economic growth?
The deficit exists because the amount of money spent on foreign products has not been paid in full. In effect, therefore, it is borrowed money, and borrowed money costs more money in the form of interest. The money that flows out of the country to pay off the deficit cannot be used to invest in productive enterprises, either at home or overseas.
Inflation
Inflation occurs when the amount of money injected into an economy exceeds the increase in actual output, resulting in price increases exceeding purchasing power increases.
Inflation rate: The percentage change in a price index such as the CPI.
2009 Pearson Education, Inc.
Cyclical Unemployment
Businesses continuing to eliminate jobs during a business cycle downturn cause more reduced revenues and further job losses.
2009 Pearson Education, Inc.
Depression
A prolonged and deep recession
Monetary Policy
The manner in which a government controls its money supply. Working mainly through the Federal Reserve System, the government can influence banks willingness to lend money and prompt interest rates to go up or down.
Stabilization Policy
Coordinating fiscal and monetary policies to smooth fluctuations in output and unemployment and to stabilize prices.