Ch 1 Economic Vocabulary

growth, resources – "The free market is not primarily a device to procure ____. It is a device to secure the most efficient use of _____." –Henry C. Wallich
purchasing power parity – the purchasing power parity between two countries' currencies is the nominal exchange rate at which a given basket of goods and services would cost the same amount in each country.
Specialization – Doing things your good at
The amount the FED charges banks for loans is known as the… – Discount Rate
ESSAY #1: Explain how excessive taxation can seriously harm or even destroy an economy.
ESSAY #2: Discuss some of the problems inherent in socialism. Why do people continue to accept socialistic policies in spite of the dangers? – ESSAY #1: Look at page 169 (1. Excessive taxation a-d).
ESSAY #2: Look at 202-204.
FED tools to in influence money supply – Reserve requirements, open market operations, discount rate
Benefit principle – The idea that people should pay taxes based on the benefits they receive from government services.
physical capital – tools, equipment, and factories used for production
The primary purpose of ________ is to encourage the expenditure of funds on research and development to create new products.
Law of supply – – Other things remain the same, the higher the price of a good, the greater is the quantity supplied; and the lower the price of a good, the smaller is the quantity supplied
– positive relationship
Value added tax – This is a tax on a wide range of goods and services. The rate is usually 17.5%. Reduce business costs which increases supply.
Adam Smith is to Capitalism as Karl Marx is to – Communism
If supply does down – Price goes up
Factors of Production – land – rent
labour – wages
capital – interest
entrepreneurship – profit
The primаry purpоse оf ________ is tо encourаge the expenditure of funds on reseаrch and development to create new products.
inflation – rise in the general level of prices
Socialism – A system in which society, usually in the form of the government, owns and controls the means of production.
Opportunity cost – The opportunity cost of a decision is the next best alternative that you give up in making that decision
demand curve – graphically shows the data from a demand schedule
Frictional Unemployment – Unemployment that occurs while peole are looking for a job that is a good fit

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