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chapter 1 (Types of economic system (Factors of production – resources…
chapter 1
Types of economic system
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Land and natural resources – elements used in the production process to make appliances, automobiles, and other products
Examples: crude oil, forest, minerals, land, and water
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Capital – the money, facilities, equipment, and machines used in the operation of organizations
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Entrepreneurship – the activity that organizes land and natural resources, labor, and capital
Entrepreneur – a person who risks time, effort, and money to start and operate a business
Generally, the business cycle consists of four phases (continued):
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To offset the effects of recession and depression, the federal government uses both monetary and fiscal policies.
Monetary policies – Federal Reserve’s decisions that determine the size of the supply of money in the nation and the level of interest rates
Fiscal policy – government influence on the amount of savings and expenditures; accomplished by altering the tax structure and by changing the levels of government spending
Federal deficit – a shortfall created when the federal government spends more in a fiscal year than it receives
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Gross domestic product (GDP) – the total dollar value of all goods and services produced by all people within the boundaries of a country during a specified time period—usually a one-year period
To make accurate comparisons of the GDP for different years, dollar amounts must be adjusted for inflation and deflation.
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Generally, the business cycle consists of four phases:
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Depression – a severe recession that lasts longer than a typical recession and has a larger decline in business activity when compared to a recession
capitalism
Capitalism – an economic system in which individuals own and operate the majority of businesses that provide goods and services
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Invisible hand – a term created by Adam Smith to describe how an individual’s personal gain benefits others and a nation’s economy
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consumer price index (CPI) – a monthly index that measures the changes in prices of a fixed basket of goods purchased by a typical consumer in an urban area
Producer price index (PPI) – an index that measures prices that producers receive for their finished goods