Unit 2B economic theories in liberal societies

Question 1

what is economics?

Answer 1

The study of how people choose to use resources.

Question 2

what are the 3 focuses of economics?

Answer 2

1. Production
2. Consumption
3. transfer of wealth

Question 3

what is scarcity?

Answer 3

State of resources being short supply

Question 4

How does scarcity occur?

Answer 4

Not enough resources to meet essential needs and every individuals unlimited desires.

Question 5

what are the 3 main economic systems when talking about economics?

Answer 5

1. Centrally planned economy
2. Mixed economy
3. Market economy

Question 6

How would a centrally planned economy respond to the 3 quetsions of economics?

Answer 6

-essentials are produced
-gov’t will produce it
-produced for ctizens

Question 7

What are the 3 main questions when considering economics?

Answer 7

1. What will be produced
2. Who will produce it
3. Who is it produced for

Question 8

How would a mixed economy respond to the 3 quetsions of economics?

Answer 8

-essentials and wanted are produced
-gov’t and entrepeneurs will produce
-produced for citizens and people who can afford it

Question 9

How would a Market economy respond to the 3 quetsions of economics?

Answer 9

-what people want will be produced
-entrepeneurs will produce it
-produced for people who can afford it

Question 10

What did Adam Smith believe?

Answer 10

-Gov’t should stay out of economics, people working for self-interest will sort it out

Question 11

Key principles of Adam Smith?

Answer 11

-supply and demand
-competition
-conusmer sovereignty
-profit motive

Question 12

What is the invisible hand?

Answer 12

capitalis concept ensuring that needs/wants of society will be met bc entrepeneurs only sell what consumers want

Question 13

Who is John Maynard Keynes?

Answer 13

Said in recessions, people would hoard their money instead of investing into the economy which would lead to prolonged recessions

Question 14

What did Keynes believe government should do in times of recession?

Answer 14

-raise interest rates
-raise taxes
-reduce govt spending

Question 15

What is demand side economics?

Answer 15

-governments spends money to create jobs
-people get jobs and get money
- people w money buy stuff (increasing demand in market)

Question 16

What’ were the first ideas of mixed economy?

Answer 16

Keynesians economics and its model for intentional government intervention

Question 17

Who applied Keynesian ideas?

Answer 17

Franklin D. Roosevelt in his creation of the new deal

Question 18

What is the monetarist theory?

Answer 18

idea that the best way to keep the economy stable is by controlling how much money is in the system.

Question 19

Who is Milton Friedman

Answer 19

Main thinker behind monetarism.
Believed inflation was caused by too much money circulation by the central banks

Question 20

Who is Friedrich Hayek?

Answer 20

believed that too much government control of the economy is dangerous, and that freedom and markets go hand in hand.

Question 21

Conclusion on monetarism

Answer 21

-focus on money supply
-control money policies
-small limited govt role
-control money supply to avoid inflation
-famous economist: Milton Friedman

Question 22

Conclusion on Keynesian economics?

Answer 22

-focus on spending with certains policies
-active involved govt
-inflation control by spending/tax
-famous economist: John Maynard Keynes

Question 23

What is supply side economics?

Answer 23

-govt reduce taxes and regulations on businesses
-incentive for buisnesses(use that extra money to increase production)
-increased supply of goods increases economic growth and it’ll trickle down

Question 24

What is supply side economics short and sweet

Answer 24

Make rich people richer so they can spend their loads of money on expensive things and allow lower class workers to continue having jobs

Question 25

What is Thatcherism?

Answer 25

-minimal govt interference in economy -controlling money supply is key to mashing inflation

Question 26

Who is Margaret thatcher?

Answer 26

Aka Iron Lady - Britain’s prime minister 1979-1990

Question 27

What did Margaret thatcher do?

Answer 27

-Stopped funding social housing- encouraged buying rather than rent -privatized utility companies -did not bend her will to accept the labour unions strike

Question 28

What is reagonmics?

Answer 28

-blamed stagflation on to to much govt spending -characterized by the belief in the trickle down effect

Question 29

What was Reagan’s strategy to combat gigh unemployment and high inflation?

Answer 29

-reduce taxes (income and business) -reduce regulation -increase spending on military

Question 30

What is regulation?

Answer 30

setting up guidelines that everyone has to follow, to keep things safe and fair.

Question 31

What is stagflation?

Answer 31

Prices keep going up, but the economy isn’t producing more goods and services, and people are losing jobs.

Question 32

What are direct taxes?

Answer 32

Taxes taken directly from the citizen by the government -real estate, personal incomes, corporate taxes

Question 33

What are indirect taxes?

Answer 33

Taxes imposed on a group and shifted to a payer -goods and services tax GST

Question 34

What is flat tax?

Answer 34

A standard tax rate applied to everyone regardless of income

Question 35

what is demand side economics?

Answer 35

idea that the best way to grow the economy is by increasing demand for goods and services, usually by boosting consumer spending through government policies like tax cuts for the middle class or increased public spending

Question 36

what is supply side economics?

Answer 36

Economic theory that promotes lower taxes and less regulation to boost business investment, increase production, and grow the economy.