Transcript Economics LEAP Review

Economics LEAP Review
Market System
• Market System: free enterprise or capitalist
system
• 
People are allowed to own property and
operate businesses with little government
interference
• 
Government doesn’t own all property or
tell people how to earn a living; works to
ensure fair business practices, safe
environment, and consumers are protected
Command System
• 
Command System: a small group of
government officials decides how to answer
the four questions of economics
• 
Government commands the choices about
production
• Also called Planned because central or gov.
planners control most of the resources and
decide how they should be distributed
• China and Cuba
Traditional System
• Traditional Systems: economics are based
on custom and tradition;
• Tradition provides the answers to the four
basic questions
• jobs are handed down from father to son;
• men and women work different jobs
• Produce enough for survival
• Third World Countries
• Maasai in East Africa; Inuit; Aborigines
Three Types of Resources
1. Natural Resources: resources found on Earth
such as land, forest, water, and minerals
-Some renewable; some non-renewable
2. Human Resources: labor; work of humans
3. Capital Resources: all money, tools,
equipment, and buildings used to produce
goods and services.
Economic Cycle
Supply
• Supply: the amount of goods and
services available
• The Law of Supply: as the price of a
good rises, the quantity supplied will
rise.
• Therefore, if the price decreases, the
supply will ____________
Demand
• Demand: the level of “want” for goods
and services
• The Law of Demand: says that when the
price of a good or service rises, the
amount demanded goes down.
• Therefore, if the price decreases, the
demand will _______________.
Allocation, Efficiency, and Scarcity
• Production based on availability of resources
and demand
• Must use resources efficiently
• Businesses don’t want to produce too few or too much
• Scarcity can affect production and prices
Opportunity Cost
• Trade-off: choice of one over the other
• Example> After you pay all of your bills, you
have $1,000 left. How do you spend it?
• Vacation? Save money? Spend it going out
and playing?
• Opportunity Cost: the cost of what you give
up Example> if you spend the $1,000 on
video games, your opportunity cost is what?
Taxes
Reason for taxes:
• Government can pay for
goods and services we use
• Income Tax: based on
earnings
• Property tax: based on
home and property values
• Sales tax: based on
purchases
• User fees: admission of
state parks, ferries, and
toll bridges
Inflation and Deflation
• Inflation: occurs when the demand for goods
and services is greater than the supply
• Prices rise
• Deflation: occurs when there is a greater
supply of goods and services than there is
demand for them.
• Prices fall
Gross Domestic Product
• GDP: value of all goods and
services produced in the United
States in one year
• Shows how well the economy is
doing
• If the GDP increases each year>
the economy is
_______________
• If the GDP decreases each
year> the economy is
_______________
CPI
• Consumer Price Index (CPI): measures
changes in the prices of necessary items
• Food, clothing, housing, transportation, and
medical care
• Calculated monthly by the Bureau of Labor
• Used to calculate inflation rate
Why is foreign trade necessary?
• 1.
People cannot obtain all the things they
need or want in their own country
• 2. Foreign relations; Countries may supplement
their political and military alliances through
foreign trade
• 3. A country may lack enough consumers to buy
the goods it produces.
• Balance of Trade: difference between a
country’s exports and its imports
• Trade Surplus: If it exports more than it
imports
• Trade Deficit: if it imports more than it
exports
• United States has a _______________
Foreign Policy
• Foreign Policy: a plan that a nation uses to
deal with other nations
• National Security: Foreign Policy goal that
tries to keep the country safe from attack
• US Foreign Policy goals: National security,
international trade promoting world peace,
democracy, and human rights
1. Isolationism: Policy that stats that a nation
should interact politically as little as possible
with other nations so that it can exist
peacefully by itself in the world
2. Protectionism: The policy of placing barriers
in the way of trade among countries; a tariff
is one such barrier to save domestic jobs
3. Sanctions: Penalties against nations that
have violated international law
Foreign Policy
4. Embargo: prohibition on trade with another country
5. Diplomacy: The way in which a nation conducts
relations with foreign governments
6. Foreign Aid: Assistance given to help other
countries
7. Alliances: Formal Unions or agreements among
nations