Strand 1 Flashcards
(34 cards)
Economic Participants:
Households: Consumers of goods and services; providers of labor.
Businesses: Producers of goods and services; employers of labor.
Government: Regulator and enforcer of economic policies; provider of public goods.
Gross Domestic Product (GDP):
Definition: Total value of goods and services produced within a country.
Importance: Indicator of economic health and standard of living.
Inflation:
Definition: General increase in prices and fall in the purchasing value of money.
Impact: Affects cost of living, interest rates, and financial planning.
Business Cycles:
Expansion: Period of economic growth.
Recession: Period of economic decline.
Depression: Severe and prolonged downturn in economic activity.
Government and Economic Policy:
Fiscal Policy: Use of government spending and taxation to influence the economy.
Monetary Policy: Management of money supply and interest rates by the Federal Reserve.
Law of Supply and Demand:
Supply: Quantity of a product or service available.
Demand: Consumer desire for a product or service.
Relationship determines price levels.
Economic Choices:
Rational decision-making in resource allocation.
Scarcity impacts choices and necessitates trade-offs.
Factors of Production:
Resources required for production: land, labor, capital, and entrepreneurship.
Economic Reasoning:
Use of opportunity cost and trade-offs in personal financial decisions.
Practice Questions
Describe the roles of households, businesses, and government in the economy.
What is GDP and why is it a critical economic indicator?
Explain how inflation can impact an individual’s financial decisions.
Compare and contrast expansion, recession, and depression in the context of business cycles.
Discuss how fiscal and monetary policies can be used to manage economic activity.
Standard 2: Economic Systems and Impact on Financial Choices
Key Concepts
Economic Systems:
Capitalism: Private ownership with minimal government interference.
Laissez-Faire: Extreme form of capitalism with no government involvement.
Social Market: Combines free market with social policies.
Neo-Capitalism: Modern capitalism with government regulations.
Socialism: Government ownership of resources.
Fascism: Authoritarian government with strong economic control.
Communism: Classless society with communal ownership of resources.
Types of Economic Systems:
Traditional: Customs and traditions shape economy.
Market: Decisions made by individuals based on supply and demand.
Command: Government makes all economic decisions.
Mixed: Combination of market and command systems.
Free Market and Property Rights:
Encourage innovation and economic growth.
Correlate with higher levels of economic prosperity.
Practice Questions
Compare the ideologies of capitalism and socialism.
Provide examples of how traditional, market, command, and mixed economic systems function in the real world.
Discuss how property rights contribute to economic growth.
Tips for Exam Preparation
Understand Key Terms: Be sure to understand and be able to explain all key terms and concepts.
Apply Economic Reasoning: Practice applying economic reasoning to real-life scenarios and personal finance decisions.
Practice Questions: Regularly review practice questions and attempt to answer them without aid.
Review Examples: Study historical and current examples of different economic systems to understand their practical implications.
What are the roles of households in the economy?
Households are consumers of goods and services and providers of labor.
What are the roles of businesses in the economy?
Businesses are producers of goods and services and employers of labor.
What is the role of government in the economy?
The government acts as a regulator and enforcer of economic policies and provides public goods.
What is Gross Domestic Product (GDP)?
GDP is the total value of goods and services produced within a country.
Why is GDP important?
GDP is an indicator of economic health and standard of living.
What is inflation?
Inflation is the general increase in prices and fall in the purchasing value of money.
How does inflation impact financial decisions?
Inflation affects the cost of living, interest rates, and financial planning.
What is an expansion in business cycles?
Expansion is a period of economic growth.
What is a recession in business cycles?
Recession is a period of economic decline.
What is a depression in business cycles?
Depression is a severe and prolonged downturn in economic activity.
What is fiscal policy?
Fiscal policy is the use of government spending and taxation to influence the economy.
What is monetary policy?
Monetary policy is the management of money supply and interest rates by the Federal Reserve.
What is supply in the context of the law of supply and demand?
Supply is the quantity of a product or service available.
What is demand in the context of the law of supply and demand?
Demand is the consumer desire for a product or service.
How do supply and demand relate to price levels?
The relationship between supply and demand determines price levels.
What is economic reasoning?
Economic reasoning involves using opportunity cost and trade-offs in personal financial decisions.
What are the factors of production?
The factors of production are land, labor, capital, and entrepreneurship.
What is capitalism?
Capitalism is characterized by private ownership with minimal government interference.
What is laissez-faire?
Laissez-faire is an extreme form of capitalism with no government involvement.
What is a social market economy?
A social market economy combines free market principles with social policies.
What is neo-capitalism?
Neo-capitalism is modern capitalism with government regulations.
What is socialism?
Socialism is characterized by government ownership of resources.
What is fascism?
Fascism is an authoritarian government with strong economic control.
