Foundational Economic Principles
In this economy, people barter and trade resources, passing down methods of acquisition to each generation.
What is a traditional economy?
During this phase of the business cycle, the economy bottoms out.
What is a trough?
The law of supply states that companies will supply more product as this rises.
What is price?
This institution controls fiscal policy.
What is the government?
This institution, the central bank of the United States, sets monetary policy.
What is the Federal Reserve?
In this economic system, supply and demand sets prices & production with minimal to no government involvement.
What is a free market economy?
This rises during recessions, most notably evidenced by the Great Depression (1930s) and the Great Recession (2008).
What is the unemployment rate?
As price of a product increases, demand for that product will do this.
What is decrease?
This government-controlled resource is the government's largest source of revenue.
What are taxes?
This determines how much you will have to pay back on a loan; the higher it is, the less you borrow and vice versa.
What is an interest rate?
In this type of economy, the government controls all factors of production.
This condition sees prices rise during economic peaks, but actually signals that an economy is healthy & adjusting to growth.
What is inflation?
This intersection of supply and demand is where you can expect the price of a product to be set.
What is equilibrium (or market) price?
The government may enact policies like these to stimulate the economy, including tax reduction or spending more money.
What is expansionary policy?
Monetary policy attempts to control this by utillizing the discount rate, reserve requirement, and open market operations.
What is the money supply?
Factors of production fall under these four categories.
This coincident indicator measures a nation's total economic output for one year.
What is Gross Domestic Product (GDP)?
This type of product's demand will increase if a similar good's demand decreases.
What is a substitute good?
The government often runs this, which means it spends more than it collects in revenue.
What is a deficit?
The central bank may increase the reserve requirement to prevent banks from loaning money, which would be an example of this type of policy.
This concept states that people have to make choices because they have unlimited wants, but limited resources to fill them.
What is scarcity?
What is a leading indicator?
Many goods necessary to survival (salt, gasoline, water) fall under this category and do not respond greatly to changes in price.
What are inelastic goods?
What is the debt ceiling?
Open market operations includes the buying or selling of these from the government.
What are bonds?