Flashcards in Chapter 4 Deck (11):
Study of how politics and economic are related and how their relationship shapes the balance between freedom and equality
The interactions between the forces of supply and demand, and they allocate resources through the process of those interactions
The ownership of goods and services exchanged through markets (land, business, personal items). A set of property rights can accompany ownership. Property rights must be regulated by the state
Goods provided or secured by the state that are available for society, meaning that no private person or organisation can own them
Institution that controls how much money is flowing through the economy as well as how much it costs to borrow money in that economy
- Controls amount of money in the economy
- Controls costs of borrowing money
- Lowers interest rates to stimulate the economy
- Raises interest rates to check inflation
How can states influence trade?
- Tariffs: tax on imported goods
- Quotas: limit quantity of a good coming into the country
- Non-tariff regulatory barriers: any non-tariff barrier
Why should states regulate trade?
- Comparative advantage: ability to produce a good more productively than another country
- To generate state revenue
- To foster local industry
- To protect local jobs
- To keep wealth in the country
Why shouldn't states regulate trade?
- To promote competition
- To keep the costs of goods low
- To stimulate the domestic innovation in areas of comparative advantage
- Laissez-faire: holds that the economy should be allowed to do what it wishes
- Capitalism: system of private property and free markets
- Minimal government control
- Individual freedom over collective equality
How do social democracies seek to achieve greater equality?
- through taxes, redistributing wealth from rich to poor
- Through trade; promoted but balanced with preserving domestic industry & jobs
- Through government regulation and even ownership of important sectors of the economy.