1.6: Key Terms
- Page ID
- 181284
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- circular flow diagram
- a diagram that views the economy as consisting of households and firms interacting in a goods and services market and a labor market
- command economy
- an economy where economic decisions are passed down from government authority and where the government owns the resources
- division of labor
- the way in which different workers divide required tasks to produce a good or service
- economics
- the study of how humans make choices under conditions of scarcity
- economies of scale
- when the average cost of producing each individual unit declines as total output increases
- exports
- products (goods and services) made domestically and sold abroad
- fiscal policy
- economic policies that involve government spending and taxes
- globalization
- the trend in which buying and selling in markets have increasingly crossed national borders
- goods and services market
- a market in which firms are sellers of what they produce and households are buyers
- gross domestic product (GDP)
- measure of the size of total production in an economy
- imports
- products (goods and services) made abroad and then sold domestically
- labor market
- the market in which households sell their labor as workers to business firms or other employers
- macroeconomics
- the branch of economics that focuses on broad issues such as growth, unemployment, inflation, and trade balance
- market
- interaction between potential buyers and sellers; a combination of demand and supply
- market economy
- an economy where economic decisions are decentralized, private individuals own resources, and businesses supply goods and services based on demand
- microeconomics
- the branch of economics that focuses on actions of particular agents within the economy, like households, workers, and business firms
- model
- see theory
- monetary policy
- policy that involves altering the level of interest rates, the availability of credit in the economy, and the extent of borrowing
- private enterprise
- system where private individuals or groups of private individuals own and operate the means of production (resources and businesses)
- scarcity
- when human wants for goods and services exceed the available supply
- specialization
- when workers or firms focus on particular tasks for which they are well-suited within the overall production process
- theory
- a representation of an object or situation that is simplified while including enough of the key features to help us understand the object or situation
- traditional economy
- typically an agricultural economy where things are done the same as they have always been done
- underground economy
- a market where the buyers and sellers make transactions in violation of one or more government regulations