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Understanding Business Ch. 2
RCC BUS 10. Nickels
73
Business
Undergraduate 1
01/06/2014

Additional Business Flashcards

 


 

Cards

Term
Keynesian economics
Definition
Increase government spending and cut taxes to improve economy
Term
Define: Macroeconomics
Definition
is that part of economic study that looks at the operation of a nation’s economy as a whole.
Term
Define: Microeconomics
Definition
is that part of economic study that looks at the behavior of people and organizations in particular markets
Term
Define: Economics
Definition

 

is the study of how society chooses to employ resources to produce goods and services and distribute them for consumption among various competing groups and individuals.

Term
Define: Resource Development
Definition

is the study of how to increase resources and to create the conditions that will make better use of those resources

Term
Malthus and neo-Malthusians
Definition

Economics is the "dismal science"

 

Believe there are too many people in the world and that the solution to poverty is radical birth control

Term
Adam Smith
Definition

advocated creating wealth through entrepreneurship.

 

Rather than divide fixed resources, Smith envisioned creating more resources so that everyone could be wealthier.

 

                      FREEDOM was vital to the survival of any economy.

 

people will work hard if they have INCENTIVES for doing so.

Term
Father of modern economics
Definition

Adam Smith

 

Term
Define: INVISIBLE HAND
Definition
As a person is working hard for their own personal interest, their work would benefit others
Term
Define: Capitalism
Definition

an economic system in which all or most of the means of production and distribution are privately owned and operated for profit.

Term
Four basic rights or the foundations of capitalism
Definition

Private Property

right to own a Business

Freedom of Competition

Freedom of Choice

Term
How free markets work
Definition
Consumers of goods and services send signals about what to make, how many, price, etc for those goods and services by choosing what to buy or not to buy.
Term
How free market price is determined
Definition
the balance of supply and demand
Term
Define: Supply
Definition

to the quantity of products that manufacturers or owners are willing to sell at different prices at a specific time

Term
Define: Demand
Definition

to the quantity of products that people are willing to buy at different prices at a specific time.

Term

Equilibrium Theory

 

Definition

 because supply and demand interactions determine prices, there is no need for the government to set prices.

 

quantity supplied>quantity demanded then surplus cause
sellers to lower the price.


quantity supplied<quantity demanded, shortage cause sellers to increase the price.

Term
Four degrees of Competition
Definition

Perfect Comptetition

Monopolistic Competition

Oligopoly

Monopoly

Term
Define: Perfect Competition
Definition
when there are many sellers in a market and
none is large enough to dictate the price of a product.
Term
Define:  monopolistic competition
Definition

a large number of sellers produce very
similar products that buyers nevertheless perceive as different, such as hot dogs, sodas, personal computers, and T-shirts.

 

Term

Define: Product differentiation

 

What is it key to?

Definition

the attempt to make buyers think similar products are different in some way

 

such as hamburger advertisments

 

 

Key to monopolistic competition

Term
Define: Oligopoly
Definition
a degree of competition in which just a few sellers dominate a market
Term

What happens to prices in an Oligopoly?

 

What is used to differentiate products?

Definition

In an oligopoly, products from different companies tend to be priced about the same.

 

Intense price competition would lower profits for everyone, since a price cut by one producer would most likely be matched by the others.

 

product differentiation, rather
than price, is usually the major factor in market success in an oligopoly

Term
Define: Monopoly
Definition
one seller controls the total supply of a product or service, and sets the price.
Term
Benefit and limitations of free market
Definition

Best opportunity for poor people

Inequality in that some can't or won't work

greed leads to scandals

Some government regulations are necessary

Term
Define: Socialism
Definition

 

an economic system based on the premise that some, if not most, basic businesses should be owned by the government so that wealth can be distributed evenly among the people

Term
Small businessess in socialism
Definition
not run by the government but are heavily taxed
Term
Benefit of Socialism
Definition

1.Income is taken from the wealthier people and redistributed to the poorer members of the population.

 

                  2.   Workers in socialist countries are given free education, free health care, free child care, and more employee benefits.

Term
Negatives of Socialism
Definition

 1.     Socialism may create more equality than capitalism, but it TAKES AWAY SOME WORK INCENTIVES

 

2.   Very high tax rates

 

3.   Professionals who earn a lot of money leave for countries were they can keep their money.

 

4.   Socialist systems tend to discourage the best from working as hard as they can and result in FEWER INVENTIONS AND LESS INNOVATION.

 

Term
Define: Brain Drain
Definition
The loss of the best and brightest people to other countries
Term
Define: Communism
Definition
An economic and political system in which the government makes almost all economic decisions and owns almost all the major factors of production.
Term
Father of Communism
Definition
Karl Marx
Term
Negatives of Communism
Definition

1.The government has no way of knowing what to produce because prices don’t reflect SUPPLY and DEMAND

 

2.   Due to Govt. guessing shortages of many items may develop.

 

                  3.   Communism doesn’t inspire business people to work hard, and is slowly disappearing as an alternative economic form.

Term
Communism tends to move towards ____ resulting in _____
Definition
Communisim moves towards a free market resulting in prosperity
Term
Name the Two major economic systems
Definition

Free-Market Economies

 

Command Economies

Term

Define: Free-Market Economy

 

What are it's negatives?

Definition

exist when the market largely determines what goods and services get produced, who gets them, and how the economy grows.

 

doesn't seem to respond enough to the needs of the poor, the old, the disabled, or protect the environment.

Term

Define: Command Economy

 

What are it's negatives

Definition

exist when the government largely decides what goods and services will be produced, who gets them, and how the economy will grow.

 

don't create enough jobs or wealth to keep economies
growing fast enough. Thus, governments are disappearing or cutting back on social programs
and lowering taxes on businesses and workers to
generate more business growth and more revenue.

Term
Define: Mixed Economy
Definition
Economic systems in which some allocation of resources is made by the market and some by the government
Term
Three major indicators of economic conditions are?
Definition

(1) the gross domestic product (GDP)

(2) the unemployment rate

(3) price indexes

Term
Define: Gross Domestic Product
Definition
he total value of final goods and services pro-
duced in a country in a given year.
Term
Who contributes to GDP?
Definition
Both domestic and foreign-owned companies can produce the goods and services included in GDP, as long as the
companies are located within the country’s boundaries
Term

A major influence on the growth of GDP is?

Definition
productivity of the workforce—how much output workers create with a given amount of input
Term
Define Unemployment Rate
Definition
The number of civilians at least 16 years old who are unemployed and tried to find a job within the prior four weeks
Term
Price indexes measure?
Definition
inflation, disinflation, deflation, and stagflation.
Term
Define: Inflation
Definition
A general rise in the prices of goods and services over time due to a decrease in the purchasing power of money caused by an increase of supply of the currency
Term
Define: Disinflation
Definition
The slowing of inflation
Term
Define: Deflation
Definition
When prices declines due to a reversal of inflation
Term
Define: Stagflation
Definition
when the economy is slowing but prices are going
up anyhow.
Term
Define: Consumer Price Index
Definition
consists of monthly statistics that measure the pace of inflation or deflation
Term
Define: Core Inflation
Definition
That means the CPI minus food and energy costs.
Term
Define: Producer Price Index
Definition
An index that measures prices at the wholesale level.
Term
4 types of unemployment
Definition

frictional, structural, cyclical, and seasonal

Term
Define: Friction Unemployment
Definition

those people who have quit work because they didn’t like and haven’t yet found a new job.

 

 and

 

the people who are entering the labor force for the first time or are returning to the labor force after significant time away

Term
Define: Structural unemployment
Definition

unemployment caused by the restructuring of firms or by a mismatch between the skills of job seekers and the requirements of available jobs

 

(e.g., coal miners in an area where mines have been closed).

Term
Define: Cyclical unemployment
Definition
occurs because of a recession or a similar downturn in
the business cycle
Term
Define: Seasonal unemployment
Definition
occurs where demand for labor varies over the year, as with the harvesting of crops.
Term
Higher productivity = ___ Prices
Definition
Higher productivity = lower Prices
Term
Service economy and the productivity problem...what is it?
Definition

Service industries grow much slower because they can not compete with the productivity in the manufacturing sector

 

New tech tends to increase quality not quantity

Term
Define: Business Cycles
Definition

the periodic rises and falls that occur in economies over time.

Term
What are the four phases or business cycle
Definition

ECONOMIC BOOM

RECESSION 

DEPRESSION

RECOVERY

 

Term
Define: Recession
Definition
two or more consecutive quarters of decline in the GDP
Term
Define: Depression
Definition
a  severe recession, usually accompanied by deflation.
Term
Define: Recovery
Definition
occurs when the economy stabilizes and starts to grow leading to an economic boom, starting the cycle all over again.
Term
Define: Fiscal policy
Definition
refers to the federal government’s efforts to keep the economy stable by increasing or decreasing taxes or government spending.
Term

What are the two tools of fiscal policy

 

Definition

Taxation

 

Govt. Spending

Term
High vs. low tax rates
Definition

high tax rates slow the economy
because they draw money away from the private sector and put it into the government and discourage small-business due to decrease the profits businesses 

 

low tax rates will give the economy a boost.

Term
Define: national deficit
Definition
the amount of money the federal government spends beyond what it gathers in taxes for a given fiscal year.
Term
Define: national debt
Definition
the sum of government deficits over time.
Term
Define: National Surplus
Definition
government takes in more revenue than it spends
Term
Is the Federal Reserve Controlled by The Govt.?
Definition
the Federal Reserve Bank is a semiprivate organization that is not under the direct control of the government but does have members appointed by the president.
Term
Define: Monetary policy
Definition
is the management of the
money supply and interest rates by the Federal
Reserve Bank.
Term
When do feds raise or lower interest rates?
Definition

economy is booming, the Fed tends to raise interest
rates. This makes money more expensive to bor-
row. Businesses thus borrow less, the economy
slows as they spend less money

 

Economy is bad, lower interest rates. Businesses tend to borrow more, and the economy is expected to grow.

Term
Money Supply in the U.S.
Definition

Controlled by The Federal Reserve 


The more money the Fed makes available to businesspeople, the faster the economy grows.

 

To slow the economy, the Feds lowers the money supply.

Term
Define: Discount Rate
Definition

The rate at which the fed will loan money to other banks.

 

Essentially, the wholesale price of money

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