Factors
Expansion-economy grows. Peak-economy is at its strongest. Contraction/Recession-economy starts to slow down. Trough-demand, production, employment are at their lowest levels.
List and briefly describe the fours stages of the business cycle.
The government regulates use of private property my zoning laws. These laws limit what type of business, industry, or neighborhood can be built where.
What is the most common way the government regulates use of private property? What do these laws do?
Both rely on other people for goods and services.
How are specialization and interdependence connected?
Consumers, people who decide to buy goods and services. Producers, person or company who provides goods or services.
What are the two major groups of a people in a free-enterprise system?
If the Fed wants the money supply to contract, it sells government securities. If the Fed wants the economy to expand, it buys government securities back from investors.
How does the FED affect the money supply through open-market operations? (two ways)
Leading indicators help economists make predictions about future growth. Coincident indicators show economists show the economy is doing at the present time. Lagging indicators help economists determine how long the current phrase may last or what caused that phases in the first place.
Explain the difference between leading, coincident, and lagging economic indicators.
Protecting Workers, govt. prevents businesses from taking unfair advantage of workers and protects against discrimination and unsafe working conditions. Protecting Consumers, FDA protects people from unsafe foods and medicines, CPSC make certain that consumer items are not dangerous, SEC protects investors from being cheated when they purchase stocks, and FDIC insures backs can always back up your deposits up to $100,000. Limiting Negative Effects, pollution and EPA creates rules to limit negative effects like air and water pollution. Encouraging Competition, competition can benefit consumers and help the economy grow and government regulations make certain companies compete fairly with each other.
What are the four main goals of government regulation? List AND briefly describe each.
Absolute advantage can produce a good more easily than its trading partners do. Comparative advantage which products service offers that country the greatest absolute advantage.
What is the difference between absolute and comparative advantages?
Demand is the amount of good or service a customers is willing to buy at various prices for a set period of time. Law of Demand is when demand for a good/service is related to its price. Supply is the quantity of goods/services that producers are willing to offer at various prices for a set period of time. Law of Supply is when supply of a good/service is related to its price.
What is demand? What is Law of Demand? What is supply? What is law of supply?
If the Fed wants the economy to grow, it lowers the discount rate so banks borrow more money. If the Fed wants to slow economic growth, it raises discount rates, so banks pass the higher interest rates on to borrowers so fewer people borrow money.
How does the FED affect the money supply through the discount rate? (two ways)
Availability, location, and movement of human and capital resources.
What other resources affect the U.S. economy?
Increases in government spending can increase demand and producers can hire workers to meet new demand.
How does changes in government spending affect the economy?
An economic sacrifice.
What is a trade-off?
Encourages producers to improve or invent new products, Benefits Consumers because it can lower the price of goods/services, and these businesses are in competition.
What are three positive effects of competition in the market place?
If the Fed wants to expand the money supply, it lowers the reserve requirement. If the Fed wants to slow economic growth, it raises the reserve requirement.
How does the FED affect the money supply through the reserve requirement? (two ways)
War, extreme weather, other catastrophic, unforeseen events.
What can economists, consumers, and producers not predict or prepare for?
The amount of money available in the economy at any one time.
What does monetary policy determine?
Reciprocal trade agreements, regional trade organizations, and international trade agreements.
What are three examples of international cooperation?
A surplus is when the quantity supplied is greater than the quantity demanded. Surplus tells producers they are charging too much or something else is wrong with their product/service. Shortage is when the quantity demanded is greater than the quantity supplied. Shortage tells producers they are charging too little and need to raise their prices.
What is a surplus and what does it say to the producer? What is a shortage and what does it say to the producer?
Lower taxes so that people have more money to spend on goods and services and businesses sell more and hire new employees, but government revenue is cut. Government may raise taxes to slow down economic growth or inflation.
How does the government change tax rates to affect the economy? (two ways)
Business investment, Money & credit, and Public Opinion.
What are three influences on the business cycle?
Easy-money policy increases the amount of money in the money supply. Tight-money policy raises interest rates to discourage borrowing, and the amount of money borrowed declines.
What’s the difference between easy-money and tight-money policies?
Trade surplus, Trade Deficit, and balance of payments.
What are three advantages of international trade?
They all can invest and have new technology.
How do entrepreneurs, small businesses, and corporations use revenue from investments?
Long-term
Fiscal policy is used with _______ effects in mind