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Flashcards in Chapter 2 Deck (55):
1

Economics

The study of how a society uses its scarce resources to produce and distribute goods and services

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Microeconomics

The sub-area of economics that focuses on individual parts of the economy, such as households or businesses

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Macroeconomics

The sub-area of economics that focuses on the economy as a whole by looking at aggregate data for large groups of people, companies, or products

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Factors of production

The resources used to create goods and services, including natural resources, capital, entrepreneurship, and knowledge

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Labour

Economic contributions of people

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Natural resources

Commodities that are useful inputs in their natural state

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Capital

The inputs, such as tools, machinery, equipment, and buildings, used to produce goods and services and get them to the customer

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Entrepreneurs

People who combine the inputs of natural resources, labour, and capital to produce goods and services with the intention of making a profit or accomplishing a not-for-profit goal

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Entrepreneurial thinking

Thinking like an entrepreneur - even those who work in a company

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Knowledge

The combined talents and skills of the workforce

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Circular flow

The movement of inputs and outputs among households, businesses, and governments; a way of showing how the sectors of the economy interact (study diagram pg. 34)

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Economic system

The combination of policies, laws, and choices made by a nation's government to determine what goods and services are produced and how they are allocated

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Market economy

An economic system based on competition in the marketplace and private ownership of the factors of production (resources); also known as the private enterprise system OR capitalism

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Command economy

An economic system characterized by government ownership of virtually all resources and economic decision making by central-government planning; also known as planned economy OR central planning

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Socialism

An economic system in which the basic industries are owned either by the government or by the private sector under strong government control

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Mixed economies

Economies that combine several economic systems; for example, an economy in which the government owns certain industries but the private sector owns others

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Market structure

the number of suppliers in a market

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Perfect (pure) competition

A market structure in which a large number of small businesses sell similar products, buyers and sellers have good information, and businesses can be easily opened or closed

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Monopolistic competition

A market structure in which many businesses offer products that are close substitutes, and in which entry is relatively easy

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Oligopoly

A market structure in which a few companies produce most or all of the output, and in which large capital requirements or other factors limit the number of companies

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Pure monopoly

A market structure in which a single company accounts for all industry sales and in which there are barriers to entry

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Barriers to entry

Factors, such as technological or legal conditions, which prevent new companies from competing equally with a monopoly

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Demand

The quantity of a good or service that people are willing to buy at various prices

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Demand curve

A graph showing the quantity of a good or service that people are willing to buy at various prices

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Supply

The quantity of a good or service that businesses will make available at various prices

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Supply curve

A graph showing the quantity of a good or service that a business will make available at various prices

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Equilibrium

The point at which quantity demanded equals quantity supplied

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Economic growth

An increase in a nation's output of goods and services

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GDP

Gross domestic product:
The total market value of all final goods and services produced within a nation's borders within a year

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GNP

Gross national product:
The total market value of all final goods and services produced by a country regardless of where the factors of production are located

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Business cycles

Upward and downward changes in the level of economic activity

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Recession

A decline in GDP that lasts for at least two consecutive quarters

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Full employment

The condition when all people who want to work and can have jobs

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Unemployment rate

The percentage of total labour force that is actively looking for work but is not actually working

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Frictional unemployment

Short-term unemployment that is not related to the business cycle (ex. those entering the job market for the first time i.e. university students)

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Structural unemployment

Unemployment that is caused by a mismatch between available jobs and the skills of available workers in an industry or region; it is not related to the business cycle

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Cyclical unemployment

Unemployment that occurs when a downturn in the business cycle reduces the demand for labour throughout the economy

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Seasonal unemployment

Unemployment that occurs during specific seasons in certain industries

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Inflation

The situation in which the average of all prices of goods and services is rising

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Purchasing power

The value of what money can buy

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Demand-pull inflation

Inflation that occurs when the demand for goods and services is greater than the supply

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Cost-push inflation

Inflation that occurs when increases in production costs push up the prices of final goods and services

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CPI

Consumer price index:
An index of the prices of a "shopping basket" of goods and services purchased by consumers

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PPI

Producer price index:
An index of the prices paid by producers and wholesalers for various commodities such as raw materials, partially finished goods, and finished products

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Bank of Canada

Canada's central bank, whose objective is the economic and financial well-being of Canada by creating a sound balance of growth, employment, and price stability

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Monetary policy

The measures taken by the Bank of Canada to regulate the amount of money in circulation in order to influence the economy

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Contractionary policy

The use of monetary policy by the Bank of Canada to tighten the money supply by selling government securities or raising interest rates

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Expansionary policy

The use of monetary policy by the Bank of Canada to increase the growth of the money supply

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Fiscal policy

The government's use of taxation and spending to affect the economy

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Federal budget defecit

The condition that occurs when the federal government spends more for programs than it collects in taxes

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National debt

The accumulated total of all of the federal government's annual budget defecits

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Crowding out

The situation that occurs when government spending replaces spending by the private sector

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Bonds

Securities that represent long-term debt obligations (liabilities) issued by corporations and governments

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Relationship management

The practice of building, maintaining, and enhancing interactions with customers and other parties to develop long-term satisfaction through mutually beneficial partnerships

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Strategic alliance

A cooperative agreement between companies; sometimes called a strategic partnership