Economic Theory In Todays World Flashcards
Basic economic decisions would be made according to the concepts of supply and demand according to what?
A pure market system
In order for business to produce, business would have to go to other markets to secure what?
Resources
Resources would be allocated in a ___________ market and the good and services made with them would be allocated in a ___________ market.
Resource
Consumer
To produce a product a business need what three things?
Labor
Capital
Raw materials
Resources are drawn into production of products that are most in what by consumers?
Demand
An economy operating with a free market system has what sort of economy?
Classical economy
The economy in the US began in the ___________ tradition.
Classical
What is not a problem in a classical system?
Unemployment
A lower wage rate will not be a problem in a classical economy because price always ________ due to lower resource cost.
Fall
A persons purchasing power or real income, remains constant or may even __________ in a classical economy because of lower resource cost.
Increase
Inflation is also not a serious problem in a classical economy because as prices get too high, people stop what?
Buying products
The classical economic system finds a balance between lower ________ and lower ________.
Wages
Prices
The relatively free markets in the US greatly encouraged the ___________ of the country.
Development
The free markets in the US were not _____ ________ and could not solve all the problems a growing population faced
Fool proof
Some goods and services could ______ be provided through a free market system.
Not
Without profit there is no incentive to what?
Produce
The drawback to the classical economic system is that it cannot ________ problems on its own and must be modified.
Correct
No adjustments in a classical economic system happen ___________.
Immediately
Adjustments in a classical economic system don’t happen immediately leading to long period a of what two things?
Decline
Recovery
Fluctuations in economic activity are known as what?
Business cycles
What group tends to be hurt by both inflation and unemployment?
The poor
Periods of alternating inflation and unemployment are a clear violation of what standard since it only hurts the poor?
Equality standard
A second problem in a market system is that producers may be able to ______ some production costs in search of higher profits. (I.e. Water usage, clean air)
Ignore
When’s business is able to dump some of its costs of production on someone else or society it’s called what?
Externalizing costs
A third problem with a market system arises when people are drawn into the work force in __________ fashion.
Unequal