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THE US ECONOMIC SYSTEM Basic Economic Concepts -Economics: _________________________________________________________________ -Consumer:__________________________________________________________________ -Goods: products that are purchased and eventually used up -Consumer goods:_____________________________________________________ -Capital goods: used to produce; tools and machinery -Services:___________________________________________________________________ -Producer: someone who makes the goods or provides the service Four Factors of Production -Land: natural resources -Labor: human resources -Capital:____________________________________________________________________ -Entrepreneurship: ____________________________________________________________ Four economic questions to ask -What goods and service will be produced? -How will they be produced? -Who gets the goods and services? -How much will be produced? -Trade-off: what you could be doing -Scarcity:_________________________________________ _________________________________________________ -Opportunity Costs:_________________________________ -Demand:_________________________________________ -Law of Demand: when the price of a product or service goes up, the demand for the product will decrease -Supply:__________________________________________ -Law of Supply: when the price of a good or service goes up, the supply will also rise -Surplus: when supply is greater than demand -Shortage: when demand is greater than supply Economies: -Command Economy: _______________________________ -Market Economy:__________________________________ -Mixed Economy:__________________________________ -Tradition Economy:________________________________ Market Economy: -Adam Smith’s book The Wealth of Nations -Invisible hand: when individuals are left alone to act in their own self interest, the economy will benefit -laissez-faire:_________________________________ -Profit motive: ________________________________ -Capitalism: Private property, profit motive, competition, freedom of decision Mixed Economy: -Capitalism with some government intervention, US is a mixed economy International Trade: -Free Trade between Mexico, US, Canada:_______________________________________ -Advantages: all nations use resource more wisely -Disadvantages: home businesses threatened with loss of jobs, cheaper imports -NAFTA: North American Free Trade Agreement -Between ________________________________ 1 -NATO: North Atlantic Treaty Organization: -Between________________________________ -WTO: World Treaty Organization -Between________________________________ -EU: European Union, __________________________ -Balance of Trade: when the amount of goods and services bought and sold between two nations is exactly the same -Trade deficit:___________________________________ -Trade surplus:___________________________________ -Tariff: tax on imported goods -Quota: sets a limit on the number of imports allowed -Embargo: ban on trade with a specific country Business Cycle: -Trough:__________________________________________ -Expansion:_______________________________________ -Peak:____________________________________________ -Contraction:______________________________________ Types of Businesses: -Sole Proprietorship: single owner, or married couple; has all costs and responsibilities -Partnership: 2 or more owners share in wealth, responsibility -Corporation: many owners (stock holders), share in wealth, little decision involvement Stock market: where buying and selling of stock takes place -Bull market: stocks are up, selling fast, high dollar -Bear market: stocks are low, low dollar, slow economy Labor Unions: organization formed to protect interest and safety of workers -Collective bargaining: unions and employers negotiate conditions of employment -Strike:___________________________________________ -Mediation: a neutral person help both sides reach a compromise -Arbitration: when a third party makes a final decision for both sides -Picketing: boycott, right-to-work laws -Open shop:_______________________________________ -Closed shop: only labor union members can work Types of Competition in the economy -monopoly: _______________________________________ -Pure competition: a market with many sellers who produce an identical product The Health of the Economy -Inflation: increase in price over a period of time -Unemployment rate:________________________________ -Gross Domestic Product (GDP): total yearly output of goods and services produced. -measures the market value of all goods and services, best indicator of the health of the economy Per Capita Income: average income per year for a region, country Remember with graphing: Demand line goes down, Supply line goes up!!!!!!! Taxes: regressive taxes are lower % the less you earn Progressive taxes are higher % the more you earn Voluntary: example would be the Lottery 2 3