Name: Colton Laturno

Hour: 6
th
hour
Marketing
Chapter 3 Definitions
Term Definition
Economy:
The organized way a nation
provides for the needs and wants
of its people.
Resources:
All the things used in producing
goods and services.
Factors of production:
Term used to refer about
resources.
Infrastructure:
The physical development of a
country.
Entrepreneurship:
The skills of people who are
willing to invest their time and
money to run a business.
Scarcity:
The difference between wants
and needs and available
resources.
Traditional Economy:
Habits, traditions and rituals
answer the basic questions of
what, how, and for whom.
Market Economy:
Economy with no government
involvement.
Command Economy:
System in which a countrys
governments makes all economic
decisions regarding what, how,
and for whom goods and services
will be produced and distributed.
Business Cycle

Gross Domestic Product:
The output of goods and services
produced by labor and property
located within a country.
Gross National Product:
The total dollar value of goods
and services produced by a
nation, including goods and
services produced abroad by U.S
citizens and companies.
Inflation:
Refers to rising prices.
Consumer Price Index:
Measures the change in price over
a period of time of 400 specific
retail goods and services used by
the average urban household.
Producer Price Index:
Measures wholesale price levels
in the economy.
Business Cycle:
Recurring changes in economic
activity. (Economy expands and
contracts)
Expansion:
A time when the economy is
flourishing.
Recession:
A period of economic slowdown
that lasts for at least two quarters
of a year (six months).
Depression:
A period of prolonged recession.
Recovery:
The term that signifies a period of
renewed economic growth
following a recession or
depression.

Chapter 3 Outline
Section 1


1. A countrys ________________ determine its economic activities.

Economic resources

2. Factors of Production comprise four categories. They are:
a. Land
b. Labor
c. Capital
d. Entrepreneurship

3. Land includes everything contained in

The earth or found in the seas.

4. Examples of land include.

Coal, water, crude oil, trees, diamonds.

5. Labor refers to all the ..

Labor refers to all the people who work.

6. Labor includes .

Labor includes full and part time workers, managers, and professional people in botht he private
and public sectors.

7. What is Capital?

Capital includes money to start and operate a business. It also includes the goods used in the
production process.

8. Give several examples of capital resources.

Factories, office buildings, computers, and machines are all considered capital resources.

9. Infrastructure includes..

Infrastructure includes roads, ports, sanitation facilities, and utilities.

10. What do entrepreneurs organize to create the goods and services that are part of the economy?

Entrepreneurs organize factors of production to create the goods and services that are part of
an economy.


11. It is apparent that nations have unlimited wants and needs for growth and development but
Resources are limited so development is also limited.
12. The three basic questions every nation must ask when deciding how to use their limited
resources are

a. What goods and services should be produced?
b. How should the goods and services be produced?
c. For whom should the goods and services be produced and distributed?

13. In a Traditional Economy, the answers to the three basic economic questions are of based on
what?

The answers are often based on cultural or religious practices and ideals that have been passed
from one generation to the next.

14. In a pure Market Economy, the answers to the three basic economic questions are based on
what?
The consumers.
15. In a Command Economy, the government controls the ..
Government control all economic decisions regarding what, how, and for whom goods and
services will be produced and distributed.
16. What is a Mixed Economy?
A mixed economy is an economy that incorporates aspects from the three different types of
economies: traditional, market, and command.
17. The United States economy is considered a mixed economy. Explain.
The United States is considered a mixed economy because it incorporates ideas from all three
sides. It leans towards a market economy but, takes ideas from a command economy with laws
and regulations on businesses.
18. What is Capitalism?

Capitalism is a political and economic philosophy characterized by marketplace competition and
private ownership of businesses.


19. Nations that practice democracy believe that political power should be in the hands of the
______________.
People.
20. What is Communism?
Communism is a social, political, and economic philosophy in which the government, usually an
authoritarian one, controls the factors of production.
21. In a Communist Country, who decides they type of schooling an individual will receive and
where they will live?
The government.
22. Identify three Communists countries that exist today.

a. Cuba
b. North Korea
c. China

23. What is Socialism?

a. Socialism is a term that originally referred to a system on its way to the communist ideal
of a classless society.

24. What are three characteristics of a Socialist Country?

a. Tend to have more social services to ensure a certain standard of living.
b. Medical care and education are free or inexpensive.
c. Businesses and individuals pay much higher taxes than those in capitalist countries.

25. Several economies in the world today are considered Economies in Transition. What is an
Economy in Transition?
An economy in transition is an economy that is in the process of switching from one form of an
economy to another.
Chapter 3 Outline

Section 2

1. A healthy economy has three goals. They are:

a. Increase productivity.
b. Decrease unemployment
c. Maintain stable prices

2. The key economic measurements that nations routinely used to determine their economic
strength are.

a. Labor productivity
b. Gross domestic product
c. Standard of living
d. Inflation rate
e. Unemployment rate

3. Identify three ways in which a business can increase its productivity.

a. Invest in new equipment
b. Providing additional training for staff
c. Reduce work force and increase responsibilities of those who remain.

4. According to the U.S Bureau of Economic Analysis 2006 report, how much did the GDP grow in
that year?

127%

5. The GDP is made up of

a. Private investment
b. Government spending
c. Net exports of goods and services
d. Change in business inventories
e. Personal spending

6. Before 1991, what did the U.S. use as its primary measurement of productivity?
Gross National Product

7. Explain the difference between GDP and GNP?

GNP is the total dollar value of goods and services produced by a nation, GDP is the output of
goods and services produced by labor and property.

8. A countrys standard of living is a measurement of what?

The amount and quality of goods and services that a nations people have.

9. Why is a low inflation rate good for the economy?

It shows that an economy is stable.

10. Why is a high inflation rate bad for the economy?

Money starts to lose its value.

11. How does the government respond to an inflation rate that is increasing?

Raise interest rates to discourage borrowing money.

12. The Consumer Price Index is also known as

The cost of living index.

13. The higher the unemployment rate, the greater the .

The greater the chances of slower economic times.

14. What does the jobs index measure?

Consumers perceptions regarding the number of jobs available.

15. Identify the four phases of the Business Cycle.
a. Expansion
b. Recovery
c. Recession
d. Trough




Complete the following table by identifying each phase of the business cycle. Then, for each phase, give
three characteristics that identify that phase.
Phase Characteristics
1. Expansion


1. Unemployment low
2. Consumer confidence high
3. Businesses developing new products

2. Recession 1. Economy is slowing down
2. Businesses laying off workers
3. Consumer confidence and spending are low.

3. Trough 1. Economy stops slowing
2. Recovery may be imminent.
3.

4. Recovery 1. Economy starts to grow again
2. Jobs being created
3. Production of goods and services increases.



16. Identify the 2 biggest fears of a consumer during a recession.
a. Losing their job
b. Decrease in wages
17. Identify the effects on the economy when the government raises taxes.

Businesses and consumers have less money to fuel the economy.

18. How does the Federal Reserve respond to a slowing economy?

Lowering interest rates.

19. What did the American Government do to revive their economy that was in its worst
depression in 70 years?

Passed new acts to revive the economy.