Types of Economies
an economic system where customs, traditions, and beliefs determine how goods and services are produced, distributed, and consumed
Traditional
the national bank that controls U.S. monetary policy.
The Federal Reserve (FED)
This causes slower economic growth.
decreased government spending
When there is a limited amount of a given resource
Scarcity
The highest point on the business cycle is called a
Peak
Income the government gets from people.
taxes
The people get to make whatever they like without government involvement. Competition between businesses ensures that prices are lower, but businesses that cannot compete will not survive.
Market
How does the FED promote a healthy economy?
By increasing or decreasing the money supply
Cutting taxes does this.
speeds up economic growth.
This is the total value of all goods and services that are created within the nation during a single year.
GPD (Gross Domestic Product
An economic downturn
Recession
When there is too much currency in circulation, so the value of money falls.
Inflation
An economic system where the government has total control over what is produced and how it is produced. The government makes all of the decisions. There is no competition because businesses are run by the government.
Command
The amount of money the Federal Reserve requires banks to keep in reserve.
Reserve requirement
The manner in which government regulates the economy to provide for the greater good.
Regulatory policy
Most highly valued alternative given up or forgone when a choice is made.
Opportunity cost
A period of economic growth
Expansion
As price increases, the quantity suppliers are willing to supply increases.
law of supply
a blend of Command and Market economies. People have a choice about what to produce and how to produce it, but the government helps to regulate the economy in order to protect consumers from abuse.
Mixed
The interest rate the Federal Reserve charges on banks when they borrow money.
Discount Rate
What the president and congress use to control the economy via taxing and spending.
Fiscal policy
Measures the percentage of people who want to work but cannot find a job.
Unemployment Rate
The business cycle is a measure of
Real GDP over time
As price falls, the quantity demanded rises.
law of demand
The US Has this type of Economy
Mixed
This is the process by which the Fed buys and sells government securities.
Open Market Operations
This speeds up economic growth.
increased government spending
This is used to measure inflation. It measures the change in the prices of a wide variety of goods over time. If it is high it means that prices are going up quickly (inflation).
CPI (Consumer Price Index)
When GDP goes down, Consumer Price Index is low/prices are falling, or Unemployment rates go up, it is a sign of a
Recession
Spending more money than you make.
Deficits