ECONOMIC

S

MARKET ECONOMY

Capitalism

Based on Supply and Demand

No Government Intervention

LAW OF SUPPLY

Supplier will be willing to offer more goods at a higher price

LAW OF DEMAND

The higher the price, the less people will demand it

COMMAND ECONOMY

Government makes all Economic Decisions

Socialism and Communism

MIXED ECONOMY

United States, has a mixed Economy but, it is more Market then Command

U.S. ECONOMY

Banking Regulations

Governmental Protection AgenciesEx: E.P.A., F.D.A., etc.

Public Utilities= Legal Monopolies because they are regulated

Government Intervention is needed at times, but not always the best solution

ENTREPRENEUR

Person who starts a business

Capital, anything used to produce something else

Tools, pizza oven, etc.

THREE TYPES OF BUSINESS

Sole Proprietor

Partnership

Corporation

PARTNERSHIP

Business owned by two or more people

CORPORATION

Owned by stockholders and run by hired help

Where most profits in America are produced

STOCKS AND BONDS

Stocks = Ownership

Bonds = Loan

LABOR UNIONS

Formed because employees wanted control over working conditions

Safety, minimum wage, child labor, etc.

COLLECTIVE BARGAINING

Employee and Employer work together to reach an agreement

Conflict = workers want more money and benefits, employers want more profits.

FRINGE BENEFITS

Vacation

Sick Leave

Medical Insurance

STRIKE

Work Stoppage.

PERSONAL FINANCEFixed Expenses vs. Variable

Expenses

FIXED EXPENSES

Don’t change as fast-rent, mortgage payment, insurances

VARIABLE EXPENSES

Can change month to month (leisure) this is what you have the most control over

TAXES

Money paid to the Governments

Income tax

Sales tax

Property tax

TAX METHODS

Progressive- More you make higher percentage you pay

Regressive- taxes a larger percentage from lower income people (some believe state sales tax is regressive)

Proportional- some percentage from everyone(flat tax)

SALES TAX

Can be either regressive or proportional, depends on your point of view

BANKING

Making loans, most important role

High Debt= High Interest Rate

BANK ACTIVITY

Depends on Economy

Inflation- rise in prices

Deflation- decrease in prices

Recession- decline in activity

U.S. CURRENCY

Has value because U.S. Government and the Economics of the world says it does

Not backed by gold or silver

LOANS

Helps the Economy grow

FEDERAL RESERVE BANK

Created by Congress in 1913

Regulates money supply by influencing borrowing.

FEDERAL RESERVE ACTIVITY

Inflation- discourages loans by raising interest rates

Recession- encourages loans by lowering interest rates