Chapter 2 Flashcards
(19 cards)
PPC
production possibilities curve
Purpose for economic models
instruct & predict
GDP
gross domestic product- sum of goods & services business produce & sell
Consumption expenditures
Total of what households spend on GDP
Factors of production
- Capitol, Entrepreneurship, land, labor
- business gets from household
Land
Natural resources that go into production of goods
Labor
Human effort that goes into creation of goods & services
Capitol
- Goods used to produce other goods
- money household loans to business
- tools business uses to produce their goods & services
Entrepreneurship
- Most important factor of production
- creatively combining land, labor, & capitol in unique ways to develop new & useful goods & services
Factor cost
- rent, wages, profit, interest
- represents payments business firms make in exchange for factor costs (business -household)
Rent
Payments for use of owner’s property
Wages
Payments for labor used to produce goods or services
Interest
Payments business make on borrowed money
Profit
Difference in revenue from sells & capitol that went into production
Transfer payments & (gov’t buys from businesses)
Money or goods given to household from gov’t w/ mo expectations of repayment
Personal & business tax
Household & business pay taxes to gov’t to help pay for its expenses
Budget deficit
Gov’t spends more than it receives
Budget surplus
Gov’t receives more in taxes than it pays out
Savings & dissaving
Household saves money in bank & withdraws or borrows from bank
