Inflation and Invisible Hand Essay

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| | | * FREE ENTERPRISE is where individuals are free to decide what to produce, how to produce it, and at what price to sell it. * A BUSINESS is any activity that seeks to provide goods and services to others while operating at a profit. * REVENUE is the total amount of money a business takes in during a given period by selling goods and services. * PROFIT is the amount a business earns above and beyond what it spends for salaries and other expenses. * A LOSS occurs when a business’s expenses are more than its revenues. * An ENTREPRENEUR is a person who risks time and money to start and manage a business. * RISK is the chance an entrepreneur takes of losing time and money on a business that may not prove profitable. * STANDARD OF LIVING refers to how well off an individual or a society is, mainly in terms of want satisfaction though goods and services. * STAKEHOLDERS are all the people who stand to gain or lose by the policies and activities of a business. * SERVICE ECONOMY - more effort is devoted to the production of services than to the production of goods. * e-BUSINESS - producing and selling through the internet for a profit. | | * The English economist Thomas Malthus believed that population growth would outstrip resources. * In response, Thomas Carlyle called economics “THE DISMAL SCIENCE.” * ADAM SMITH advocated creating wealth through entrepreneurship. Rather than divide fixed resources, Smith envisioned creating more resources so that everyone could be wealthier. * The INVISIBLE HAND is a phrase coined by Adam Smith to describe the process that turns self-directed gain into social and economic benefits for all. * Basically, this meant that a person working hard to make money for his or her own personal interest would (like an invisible hand) also benefit others. | | * The INVISIBLE HAND is a phrase coined by Adam Smith to describe the process that turns self-directed gain into social and economic benefits for all. * Basically, this meant that a person working hard to make money for his or her own personal interest would (like an invisible hand) also benefit others. | | The FACTORS OF PRODUCTION are the resources used to create wealth * CAPITAL (e.g., machines, tools, and buildings; but not money—money is used to buy factors of production) | | * Free market economies exist when the market largely determines what goods and services get produced, who gets them, and how the economy grows. * Command economies are economic systems in which the government largely decides what goods and services will be produced, who will get them, and how the economy will grow. | | * People under free-market capitalism have FOUR BASIC RIGHTS: * The right to private property. * The right to own a business and to keep all of that business’s profits after taxes. * The right to freedom of competition. * The right to freedom of choice. * One benefit of such rights is that people are willing to take more RISKS than they would otherwise. | | * SOCIALISM is an economic system based on the premise that some, if not most, basic businesses should be owned by the government so that profits can be distributed among the people. * COMMUNISM is an economic and political system in which the state (the government) makes almost all economic decisions and owns almost all the major factors of production. | | * MIXED ECONOMIES are economic system in which some allocation of resources is made by the market and some by government. * THE U.S. HAS A MIXED ECONOMY. * For instance, the government has become the largest employer in the U.S. | | * PRODUCTIVITY is the amount of output you generate given the amount of input (e.g. hours worked.) * GROSS DOMESTIC PRODUCT (GDP) is the total value of goods and services produced in a country in a given year. * Business cycles are the periodic rises and falls that occur in economies over time.
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