Tmrkfk Flashcards
(29 cards)
Economy
the production and consumption of goods and services and the supply of money
Production
The creation of goods and services
Consumption
The purchasing of goods and service to satisfy needs and wants
Interdependence
joint dependence between participants in an economy
Saving
Regularly putting aside some money for future use
Investments
The action of funding to build wealth and save money
Exports
Goods and service sold by local business to oversea consumers
Imports
Goods and service bought by local business to oversea consumers
Recession
mild contraction in the level of economic activity resulting in reduced spending, rising unemployment and a slow rate of economic growth
Business cycle
Cyclical fluctuations in the general level of economic activity
Depression
Severe contraction in the level of economic activity results in many business failures and high levels of unemployment
Inflation
Rise in price across all of the economy, causing money to loose value
Demand
The quantity of products that consumers will buy at a particular price
Supply
The quantity of products that businesses will sell at a particular price
Price mechanism
The interaction of supply and demand in the market to determine products
Law of demand
When prices rise, demand falls and when prices fall, demand rises
Law of supply
When prices rise, supply rise and when prices falls, so does supply
Market Equilibrium
The point at which the demand and supply curves intersect
Changes in demand for price mechanism
Increase in demand ?
- shift to the right
- increase in price + quantity
Decrease in demand ?
- shift to the left
- decrease in price + quantity
Changes in supply price mechanism
Increase in supply !
- shift to the right
- decrease in price
- increase in quantity
Decrease in supply?
- increase in price
- decrease in supply
Contraction (business cycle)
key features
- failing levels of production (output)
- decreasing consumer spending
- rate of inflation decreases
- wage rates generally falls
- interest rates eventually fall
- level of unemployment rises
Expansion (business cycle)
key features
- rising levels of production (output)
- increasing consumer spending
- rate of inflation may rise
- wage rates generally rise
- interest rates eventually rises
- level of unemployment falls
How does recession happen?
Caused by a lack of spending. Business may cut back on production, some employees might lose their jobs and incomes
How does “booms” occur?
High production and consumption lead to business producing more. However they can’t keep producing forever as there is a limit. Additional spending pushes up prices. Inflation, rise in price. Major economic problem and will eventually bring an end to the continued growth.
