Download Guide 3

Economics Study Guide 3
Economics Systems
Traditional Economic System- An economics system that is based on customs and traditions.
The focus is to produce and sell products in the same manner generation after generation.
(Example would include the Amish society)
Command Economic System- A system where the Government has control over the all aspects
of the economy. (Example North Korea, Cuba)
Free Market Economic System- A system where buyers and sellers through supply and demand
determine economic outcomes with minimal government influence. ( Also known as a “Free
Enterprise Economy”)
Opposite Market Types
Perfect Competition- A market type with a large number of firms and identical Products. There
are no barriers to enter the market. (Examples include agricultural product like wheat, corn
ect.
Monopoly- A market type where a single firm is the entire market for the product. Monopolies
have complete power over the price and quantity produced.
Key Terms
Federal Reserve Bank – The Central Bank of the United States of America.
Census- A government count of the U.S population taken every 10 years
Dow Jones Industrial Average- Represents 30 stocks in the New York Stock Exchange to
monitor market price changes
Bull Market- A stock Market where most prices are rising
Karl Mark- Known as the Father of Communism. Economic philosopher who favored more
government intervention in the economy
Adam Smith- Economic philosopher who favored less government intervention in the
economy. This “hands off’ approach to the economy is called Laissez-Faire. Wrote the book The
Wealth of Nations
GDP- Gross Domestic Product- Dollar value of all final goods and services produced in a country
during a 1 year period.
Inflation- A general rise in prices
Consumer Price Index- CPI- Compares the prices of 90,000 goods for price changes over time
to measure Inflation.
Business Cycle
Identify the Stages in the Business Cycle
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Expansion- GDP is rising
Peak- GDP stops rising
Recession- GDP is falling
Trough- GDP stops falling