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Guided Notes - Economic Principles and Policies

This document outlines fundamental economic principles, including opportunity cost, comparative advantage, and economic indicators such as GDP and CPI. It discusses various economic systems, including capitalism, socialism, and communism, highlighting their key characteristics and differences. The document also emphasizes the mixed market nature of the U.S. economy and the ongoing debate regarding the balance between capitalism and government regulation.

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Shaun Sullivan
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23 views

Guided Notes - Economic Principles and Policies

This document outlines fundamental economic principles, including opportunity cost, comparative advantage, and economic indicators such as GDP and CPI. It discusses various economic systems, including capitalism, socialism, and communism, highlighting their key characteristics and differences. The document also emphasizes the mixed market nature of the U.S. economy and the ongoing debate regarding the balance between capitalism and government regulation.

Uploaded by

Shaun Sullivan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Economic Principles and Policies

Objective
In this lesson, you will fillin the blanks

Basic Principles of Economics


Opportunity Cost
descision and ____________
Every economic ____________ choice carries costs, or risks, as well as benefits, or rewards.
oppurtunity
→ Economists call this phenomenon "_______________________ cost," meaning the choices
you make are done so at the cost of the best alternative option.
→ Imagine that the government allocates $2 billion for rebuilding infrastructure. The program could
potententially
____________________ provide a number of benefits.
against
→ It is important to weigh the potential benefits of the program ______________ its opportunity costs.
financially
With the money it spent, the government could have funded other programs ______________.

Comparative Advantage
"Comparative advantage" is an economics term that describes how one country or organization has the ability
produce
to _____________ lower
a good or service at a _____________ cost than its competitors. Countries tend to
export
__________ only those goods in which they have a comparative advantage.

Defining Economic Indicators


health
Economists have developed certain measures that they use to understand the _________________ of a given
indicators
economy. These measures are known as economic _________________ gross
. The ___________ domestic product
price
(GDP), the consumer ____________ index (CPI), and the unemployment rate.
• monetary
GDP: the total _______________ amount of all goods, services, and structures produced within a
strength
country in a year. The GDP helps gauge an entire economy's ______________ or weakness.
• changes
CPI: general price _____________ occurring in an economy. It helps gauge inflation and cost-of-living
changes.
• labor
Unemployment rate: the number of people out of work as a percentage of the __________ workforce.

alternating
The business cycle describes the pattern of ___________________ periods of economic expansion and
contraction.

A normal economy will show a trend of increasing real GDP overtime.

• Expansion is a phrase where there is increase in economic activity. During an expansion,


productivity, employment, and profits skyrocket.
• Contraction is a decrease in economic activity. It is normally accompanied by rise in
unemployment and a drop in GDP.
• A prolonged contraction/recession is called a depression. It last at least 2 years.

Inflation: a general increase in prices overall.


value
→ Over time, inflation causes money to lose some of its __________.
Deflation: a general decrease in prices overall.
increase
→ During a period of deflation, a currency will actually ______________ in value.
A moderate rate of inflation occurs naturally and is relatively harmless, but extreme
inflation and deflation ________ detrimental
changes can be very ___________________ to the economy.

Economic Systems
There are four main types of economic systems: market, command, mixed, and traditional.
• market
In a ______________ economy, production and distribution of goods and services take place through
flexible price system. Businesses and consumers _____________
free markets and are guided by a ________ decided
what they will purchase and produce without government intervention.
• centrally
A command economy is __________________ planned and controlled. The government often
owns the means of production and distribution, and there is little consumer _____________.
________ choice
• both
A mixed economy has aspects of ________ a command economy and a free market. There is some
intervention
government ________________________ in the economy, but this intervention occurs with some
freedom
level of private economic ______________.
• regulated system.
Traditional economies are driven by cultural customs and may employ a ____________
Capitalism
privatley
Capitalism is an economic system in which the means of production are ______________ owned and
free
operated for profit through employed labor. The idea of a ________ market carries great importance
in capitalist economies.
laissez faire
Strict free-market capitalists believe in ______________-__________ ideals. This French term refers to the
government
belief that the __________________ should stay out of all economic affairs as much as possible.
regulated
Today, many areas of the world have adopted a more ____________________ approach to their economies.

Socialism and Communism


progressive
In the early 1800s, communism and socialism were relatively __________________________ concepts that
embraced some sort of control.

In contrast to market economies, which feature little or no government control,


modern socialism and communism, in theory, rely on government or social control
buisnesses
of ________________ tax
and income ____________________ .
• mixed
Modern socialism is a system based on a _____________ economy, which
advocates that society, or the government owns and/or manages the means
of production and distribution. In actual practice, society or the government
exerts
simply _____________ private
more control over ____________ property and business than is found in a
market economy; but private property and businesses still exist.

• communism
With modern __________________, the government owns the means of production and controls both
all
production and distribution. Modern communism advocates that ______ property should be owned by
buisnesses
society or the government. There is no private property or ______________.

The Mixed Market of the United States


pure
Many nations do not use a single, ________ purely capitalist
economic system. In fact, very few _________
or communist nations exist or have ever existed.
market
Although the United States primarily has a __________________ economy, the government exercises some
regulation
____________________ and economic involvement, including taxation.
• regulated -market system. Investors buy and sell the
Wall Street provides a good example of this __________
oversight
stocks on Wall Street; however, the US government exercises _________________ by passing laws that
affect the _economy
____________, including making insider trading illegal.

balance
In the US, citizens and politicians continually debate the right ____________ between
generaal welfare,
capitalism, innovation, and free markets on one hand, and ____________
economic _security
____________, and opportunity on the other. The US government plays an
potential
important role in protecting Americans from the _______________ risks of capitalism.

Summary
What are the main differences among capitalism, socialism, and communism today?

The key differences:

Capitalism emphasizes private ownership and minimal government interference.


Socialism seeks a balance between public and private ownership with increased government
regulation.
Communism advocates for complete government ownership and control, eliminating private
property.

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