Term
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Definition
| greek for: one who manages a household |
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Term
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Definition
| the study of how society manages its scarce resources |
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Term
| What 4 main decisions does a household/economy face? |
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Definition
1. Who will work?
2. what goods and how many of them be produced?
3. What resources should be used in production?
4. At what price should the goods be sold? |
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Term
| The management of society's resources is important because why? |
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Definition
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Term
| List the four principles listed under "How people make decisions" |
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Definition
1. people face tradeoffs
2. the cost of something is what you up to get it.
3. rational people think at the margin
4. people respond to incentives |
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Term
| List the principles under "how people interact with each other" |
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Definition
5. trade can make everyone better off
6. markets are usually a good way to organize economic activity.
7. governments can sometimes improve economic outcomes |
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Term
| True or false: According to principle 6 the gov't can always improve economic outcomes. |
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Definition
| false: should be according to principle 7 and the gov't can sometimes improve economic outcomes. |
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Term
| True or False: According to Principle 6 markets are always a good way to organize economic activity. |
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Definition
| False: markets are usually a good way to organize economic activity. |
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Term
| List the principles under "the forces and trends that affect how the economy as a whole works" |
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Definition
8. the standard of living depends on a country's production.
9. Prices rise when the government prints too much money.
10. Society faces a short-run tradeoff between inflation and unemployment. |
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Term
| How many principles are listed under "how people make decisions" |
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Definition
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Term
| How many principles are listed under "how people with each other"? |
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Definition
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Term
| How many principles are listed under "The forces and trends that affect how the economy as a whole works" |
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Definition
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Term
| The term "there is no such thing as a free lunch" is matching to which principle? principle 1, 2, or 3? |
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Definition
| principle 1: people face tradeoffs |
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Term
The following issues match what group and principle?
1. guns v. butter
2. food v. clothing
3. leisure time v. work
4. efficiency v. equity |
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Definition
Group: How People Make decisions
Principle: 1 |
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Term
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Definition
| society gets the most that it can from its scarce resources. |
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Term
| does efficiency guarantee equal shares for everyone? |
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Definition
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Term
| does equity guarantee advancement? |
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Definition
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Term
| true capitalism is equity or efficiency? |
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Definition
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Term
| true communism is efficiency or equity? |
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Definition
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Term
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Definition
| means the benefit of those resources are distributed fairly among the members of society |
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Term
| decisions requires the comparisons of costs and benefits of alternatives according to principle 2 or 6? |
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Definition
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Term
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Definition
| what you give up to obtain the item |
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Term
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Definition
| small, incremental adjustments to an existing plan of action |
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Term
| according to what principle do people make decisions by comparing cost and benefits at the margin |
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Definition
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Term
| The rational person establishes a cost benefit anaylsis (CBA) according to what principle? |
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Definition
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Term
| The decision to choose one alternative over another occurs when that alternative's marginal what exceed its marginal what? according to principle? |
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Definition
| benefits exceed costs. according to principle 4. |
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Term
| According to what principle do marginal changes in cost or benefits motivate people to respond? |
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Definition
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Term
| According to principle 5 or 7 people gain from their ability to trade with one another? |
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Definition
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Term
| True or False: According to principle 5 competition results in gains from trading? |
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Definition
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Term
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Definition
| trade allows people to specialize in what they do best |
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Term
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Definition
| economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services |
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Term
| Who made the observation that households and firms interacting in markets act as if guided by an 'invisible hand'? |
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Definition
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Term
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Definition
| occurs when the market fails to allocate resources efficiently |
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Term
| True or False: When the market fails, the gov't can intervene to promote efficiency and equity |
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Definition
| true according to principle 7 |
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Term
| How can market failure be caused? |
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Definition
1. an externality
2. market power |
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Term
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Definition
| the impact of one person or firm's actions on the well-being of a bystander |
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Term
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Definition
| the ability of a single person or firm to unduly influence market prices |
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Term
| How can the standard of living be measured? |
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Definition
1. comparing personal incomes
2.comparing the total market value of a nation's product. |
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Term
| True or False: Almost all variations in living standards are explained by differences in countries' productivities according to principle 9? |
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Definition
| false: according to principle 8 |
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Term
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Definition
| the amount of goods and services produced from each hour of a worker's time |
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Term
| what does the Philips Curve illustrate? |
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Definition
| the tradeoff between inflation and unemployment. |
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Term
| is the tradeoff b/t inflation and unemployment long-run or short-run? |
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Definition
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Term
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Definition
| when there is high unemployment and high inflation; occurs when a natural disaster happens. |
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Term
| List the three circles of Economics |
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Definition
1. How people make decisions
2. How people interact with each other
3. The forces and trends that affect how the economy as a whole works |
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Term
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Definition
| where you focus on your gains 100% not the competition |
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Term
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Definition
| willing to sacrifice some of your profit to cause another's profit to suffer more. |
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Term
| state and local gov'ts operate under what when the gov't is considered for involvement for economics? |
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Definition
| fairness v. attractiveness |
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Term
| what things must one consider when gov't gets involved with the economy? |
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Definition
1. quality of life for constituents
2. quality of market for business
3. growth v tradition
4. environmental concerns
5. gov't aid v. market competition
6. fairness v. attractiveness |
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Term
| What 3 things can Local Gov't provide? |
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Definition
1. Tax incentives to corporations
2. aid in building, or outright building, the plant and infrastructure
3. sewage extension, lighting, power lines and sources |
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Term
| what 6 things does state gov't provide when involved with economy? |
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Definition
1. tax incentives to corporations
2. offer larger infrastructure development
3. build freeway system to the plant and allow easier connectivity for export of product.
4. subsidized labor training
5. low interest loans
6. relaxed regulations |
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Term
| What 5 things can Federal Gov't provide for businesses when involved in the economy? |
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Definition
1. aid in research and development
2. monopoly busting
3. regulatory agencies
4. military protection
5. trade agreements with other countries |
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Term
| What does Federal Gov't operate under when involved in economy? |
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Definition
| competition; makes sure american business can compete globally. |
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Term
| What two policies govern macroeconomics for society? |
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Definition
1. fiscal policy
2. monetary policy |
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Term
| What two things make up the fiscal policy? |
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Definition
1. taxing and spending (by the gov't)
2. controlled by the President & Congress |
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Term
| What two things make up Monetary Policy? |
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Definition
1. regulation of the amount of money in circulation.
2. controlled by the federal reserve board |
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Term
| What two classes of person make up competing theories for governmental involvement? |
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Definition
1. Classic Liberalism
2. Utilitarianism |
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Term
| How does Classical Liberalism operate? (2) |
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Definition
1. Let businesses regulate themselves
2. Lassiz-Faire, Lassiz-Passer "let it be, leave it alone". |
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Term
| define: the idea of Spontaneous Order |
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Definition
| order that arises through human action instead of human design. |
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Term
| Adam Smith believed people were inherently good, dumb, evil or selfish? |
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Definition
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Term
| Voltaire believed people were inherently good, dumb, evil or selfish? |
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Definition
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Term
| Hume believed people were inherently good, dumb, evil or selfish? |
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Definition
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Term
| Mandeville believed people were inherently good, evil, dumb or selfish? |
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Definition
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Term
| What does Utilitarianism operate by? |
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Definition
| greatest good for the greatest number |
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Term
| Who is the father of Utilitarianism? |
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Definition
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Term
| What did John Stuart Mill do? |
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Definition
| changed the meaning of economics to liberty and freedom; introduced the harm principle |
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Term
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Definition
| freedom to do what you want w/o harming another |
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Term
| What 2 competing theories are for gov't involvement in economics? |
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Definition
1. Keynesian Economics
2. Supply-Side Economics |
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Term
| Who made up Keynesian Economics? |
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Definition
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Term
| What 6 things make up Keynesian Economics? |
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Definition
1. Gov't duties and economy are linked
2. spend money and give tax cuts when the economy is in trouble
3. increase taxes when the economy is booming
4. focused on unemployment
5. Phillips Curve
6. 1970's encountered stagflation |
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Term
| What 2 things make up Supply-side economics? |
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Definition
1. focused on inflation
2. to lower inflation, money needs to be removed from circulation
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Term
| What is the theory and application of the Supply-side economics? |
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Definition
1. Theory - get people to save money by giving tax cuts.
2. Application - people spent the money they saved from taxes |
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Term
| How are capitalism and democracy alike? |
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Definition
| both are market driven, people invest, either money or time or vote, for a product. |
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Term
| What is capitalism based on? |
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Definition
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Term
| what is democracy based on? |
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Definition
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Term
| True or False: Capitalism and Democracy can operate concurrently? |
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Definition
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Term
| What political group operates under Equality of Results? |
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Definition
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Term
| What political group operates under equality of opportunity? |
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Definition
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Term
| define: Equality of Results |
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Definition
| everyone works hard and achieves varying results, but everyone gets an equal share |
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Term
| define: Equality of Opportunity |
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Definition
| everyone starts at the same place and what you do with it is your choice |
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