Unit 1
Cost of the next best alternative use of money, resources or time when one choice is made rather than another.
Opportunity Cost
an economic system in which prices are determined by unrestricted competition between privately owned businesses.
Free Market Economy
A person who organizes, manages, and takes on the risks of a business.
Entrepreneur
Someone steals your work that you have patented, what do you do?
Sue them in civil court
Point on a graph where supply and demand meet
Equilibrium
Scottish moral philosopher and a pioneer of political economics. Seen today as the father of Capitalism. Wrote On the Wealth of Nations (1776)
Adam Smith
What is the GDP formula
GDP = Consumer spending + Investment Spending + Government Spending + (Exports - Imports)
What is the number economists call a healthy inflation rate?
2%
Institution that functions much like a business, but does not operate for the purpose of generating profits
Non-profit organization
Name one benefit and one negative of international trade
Answers will vary
The quantity of something that producers have available for sale
supply
A very rapid rise in the price level; an extremely high rate of inflation.
Hyperinflation
a form of business ownership that is separate from the owners personal accounts and offers both limited liability to its owners and exempts the business from certain taxes.
Limited Liability Company (LLC)
Something the government does to get rid of monopolies
Trust busting
a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology
production possibilities frontier
Explain Shortage
A situation in which quantity demanded is greater than quantity supplied
What are the 3 measures of a healthy economy?
GDP
Unemployment Rate
Inflation
The cost of borrowing money
Interest rate
a state of limited competition, in which a market is shared by a small number of producers or sellers.
Oligopoly
Economic policy of shielding an economy from imports through trade restriction or barriers (tariffs or bans)
Protectionism (Trade Barriers)
A person who purchases goods and services for personal use
the FED
What is the difference between Fiscal and Monetary Policy
Monetary - run by the fed, controls interest rates
Fiscal - ran by the government, controlled through taxation and government spending
when a country exports more than it imports
Trade surplus
the ability of an individual, a firm, or a country to produce more of a good or service than competitors
Absolute Advantage