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Flashcards in Discovery Unit 1 Glossary Deck (16):
1

economy

The set of social arrangements that answers four fundamental questions: What is produced?, How are goods and services produced?, Who will produce?, and For whom is it produced?

2

market-oriented
economy

Represents one end of the economic spectrum in which most economic decisions about what to produce, how to produce, who will produce,
and for whom to produce are made by buyers and sellers.

3

market

An institution that brings together buyers and sellers of goods or services.

4

command economy

Represents one end of the economic spectrum in which the government either makes most economic decisions or at least strongly influences them.

5

black markets

Markets where the buyers and sellers make transactions without the government's approval.

6

specialization

Occurs when workers in a particular small job are allowed to focus on the types of production where they have an advantage.

7

economies of scale

Describes a situation in which, for goods and services, as the level of production increases, the average cost of producing each individual unit declines.

8

exports

Goods and services that are produced domestically and sold in other countries. An increase in exports adds to gross domestic product (GDP) since the good was produced locally.

9

imports

Goods and services that are produced abroad and then purchased domestically. An increase in imports lowers gross domestic product (GDP) since domestic dollars are spent on foreign goods. Net exports, or the trade balance, provide a measure of the gap between exports and imports.

10

gross domestic product

The market value of all final goods and services produced in the economy during a defined period of time.

11

Microeconomics

Focuses on the actions of particular actors within the economy, such as households, workers, and businesses.

12

macroeconomics

Looks at the economy as a whole, focusing on issues like the growth rate of production of goods and services, unemployment, the inflationary increase in prices, and levels of exports and imports.

13

monetary policy

One of the two main tools of macroeconomic policy. Monetary policy involves policies that affect bank lending, interest rates, and financial capital markets.

14

fiscal policy

One of the two main tools of macroeconomic policy. Set of policies relating to government spending, taxation, and borrowing.

15

circular flow diagram

Type of diagram that can show, for example, the economy as consisting of two groups, households and firms, that interact in two general markets: markets for goods and services and markets for factors of production.

16

model

A simplified representation of an object or situation that includes enough of the key features to be useful.