Economics: The Basics
Fill in the blanks:
Humans have ___________ wants and __________ resources.
unlimited
limited
What motivates entrepreneurs to start a business even though there are great risks involved?
Why do producers study productivity?
to make sure resources are being used efficiently so profits are maximized
reward offered to try to persuade people to take certain economic actions
What shape is the flow of economic activity?
circular
What forces people to make choices?
the scarcity of resources
What type of economy do we have in the United States? A thorough answer is needed.
Mixed Economy-
capitalism (mostly), socialism
What is the breaking down of a job into separate, smaller tasks to be performed individually called?
division of labor
What is the difference between opportunity cost and trade-offs?
opportunity cost- second choice
trade-offs- third choice, fourth choice,...
What does "laissez faire" economics mean?
the government should not get involved in the economy
What are the 3 questions all societies must answer due to scarcity?
What to produce?
How to produce?
For whom to produce?
Monopolies violate which feature of capitalism?
competition
What is it called when people, businesses, regions, and nations concentrate on goods and services that they can produce better than anyone else?
specialization
What do you call the resources needed to produce goods and services?
factors of production
How does knowing a country's GDP for multiple years allow you to determine if the country's economy is growing or slowing down?
GDP increasing=growing
GDP decreasing=slowing down
Define economics.
the study of how people make decisions with limited resources
How does competition benefit consumers?
It ensures reasonable prices and a variety of quality products.
What is human capital?
the skills/abilities and motivation of people
What does GDP measure?
the final value of all goods and services produced in a country in a year
What are the 4 sectors of the economy?
business, consumers, government, foreign
Why does Economics apply to all people and aspects of life?
Economics studies how people make choices with scarce resources. Every aspect of life involves making choices and every human must make them.
Many of our country's founders were inspired by a book from 1776 written by a Scottish economist. Who was the economist and what was the book?
Adam Smith
The Wealth of Nations
Name at least 3 ways businesses can invest in human capital.
training employees, creating a positive work environment, making employees feel valued, good leadership
What is the difference between disposable and discretionary income?
disposable- money left after taxes
discretionary- money left after necessities are paid for
What is meant by real GDP and GDP per capita?
real GDP- accounts for inflation
GDP per capita- GDP/population or GDP per person