Properties of Free Enterprise
What are the three basic principles of free enterprise?
1. Profit Motive
2. Open opportunity
3. Economic Rights
Define GDP
The total value of all final goods and services produced in an economy.
Define what is a Public Good
A shared good or service for which it would be inefficient or impractical to make consumers pay individually and to exclude those who do not pay?
Define Welfare.
Government aid for those who need extra help sustaining their quality of life.
What are the consumer benefits of free enterprise?
1. Consumers have the freedom to make their own economic choices
2. Consumers can send signals to businesses about what to produce and how much to make as well as a desirable price range
Define what is a business cycle.
The pattern of a period of expansion followed by a period of contraction
How does the government pay for public goods?
Taxes
Name a cash transfer program.
Social security, TANF, Unemployment Insurance, Workers' Compensation, Food Stamps
What are the negative effects of government regulation in the free enterprise system?
1. Cuts into business profits
2. Can stifle competition and cause unnecessarily high prices for consumers
What happens when there is a short contraction?
A recession.
Name an example of a public good.
National parks, fire protection, Space Exploration, Roads
What cash transfer program provides cash payments for the disabled and retired?
Social Security
What are the definitions for the terms profit motive and open opportunity?
Profit motive: The desire for financial gain that drives individuals and businesses to make decisions that improve their material well-being.
Open opportunity: The principle that anyone can compete in the market-place.
What is the trough of the business cycle?
The lowest point in the business cycle.
Define market failure.
A situation in which the free market, operating on its own, does not distribute resources efficiently.
What cash transfer program provides cash payments to people who have lost their job?
Unemployment Insurance
What are all 4 economic rights under the American free enterprise?
1. Legal Equality
2. Private Property
3. Free Contact
4. Voluntary Exchange
What are the 4 things that affect the business cycle?
1. Interest rates
2. External shocks/events
3. Business Investment levels
4. Consumer Expectations
Define Free-rider.
Someone who would not be willing to pay for a certain good or service, but would get the benefit of it anyway if it were provided as a public good.
What cash transfer program provides cash payments to low-income families?
Temporary Assistance for Needy Families