CHAPTER 2 Flashcards
Macroeconomics
The Country’s Overall Economy
Microeconomics
- Consumers
- Families
- Businesses
Fiscal Policy
- Government efforts to influence the economy:
• Taxation
• Government Spending
• Controlled by Congress/Budget Process
Monetary Policy
Federal Reserve actions to shape the economy:
- Supply & Demand of Money
• Cost of Credit
- Controlled by the Federal Reserve (FED)
• Seven Member Board
• Chairman
M1 Money Supply
all currency—paper bills and metal coins—plus checking accounts and traveler’s checks
M2 Money Supply
all M1 plus most savings accounts, money market accounts, and certificates of deposit
The Free Market
- Private Ownership
- Economic Freedom
- Fair Competition
- Innovation and Hard Work
Businesses offer Value to
- Customers
- Employees
- Suppliers
The Fundamental Rights of Capitalism
- The right to own a business and keep after-tax profits
- The right to private property
- The right to free choice
- The right to fair competition
Four Degrees of Competition
Pure Competition
Monopolistic Competition
Oligopoly
Monopoly
Pure Competition
many competitors selling virtually identical products
Monopolistic Competition
a market structure with many competitors selling differentiated products
Oligopoly
a market structure with only a handful of competitors selling products that are either similar or different
Monopoly
a market structure with just a single producer completely dominating the industry
The Foundation of the Free Market
- How much can we make/sell?
- How much will consumers buy?
- At what price?
