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Basic Economic Decisions
The choices that must be made in any society regarding what to produce, how to produce, and to whom production is distributed.
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Economic System
The way in which an economy is organized to make the basic economic decisions.
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Traditional, or Agrarian, Economy
An economy that relies largely on tradition, custom, or ritual when making the basic economic decisions.
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Barter
The direct exchange of goods or services for other goods or services.
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Market Economy
An economy in which the basic economic decisions are made by individual buyers and sellers in markets using the language of price.
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Price System
A market system; one in which buyers and sellers communicate through prices in markets.
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Private Property Rights
Individual rights to possess and dispose of goods, services, and resources.
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Free Enterprise
The right of a business to make its own decisions and to operate with a profit motive.
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Capitalism
An economic system with free enterprise and private property rights; economic decision making occurs in a market environment.
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Circular Flow Model
A diagram showing the real and money flows between households and businesses in output, or product, markets and input, or resource, markets.
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Output Markets (Product Markets)
Markets in which businesses are sellers and households are buyers; consumer goods and services are exhanged.
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Input Markets (Resource Markets)
Markets in which households are sellers and businesses are buyers; factors of production are bought and sold.
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Least Cost (Efficient) Method of Production
The method of production that allows a good or service to be produced at the lowest cost.
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Market Failure
A market system creates a problem for a society or failes to achieve a society's goals.
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Government Regulation
Government commissions and boards are involved in business decision making.
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Planned Economy (Command Economy)
An economy in whic the basic economic decisions are made by planners rather than by private individuals and businesses.
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Socialism
An economic system in which many of the factors of production are collectively owned and an attempt is made to equalize the distribution of income.
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Planning Failure
Centralized planning creates a problem for a society or fails to achieve a society's goals.
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Mixed Economy
AN economic system with some combination of market and centralized decision making.
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Privatization
The granting to individuals of property rights to factors of production that were once collectively owned or owned by the state.
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Laissez-Faire Capitalism
Capitalism with a strong emphasis on individual decision making; little or no government interference.
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Mercantillism
An economic system or philosophy that subordinates individual interests and decisions to those of the state.
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Industrial Revolutin
A time period during which an economy becomes industrialized; characterized by such social and technological changes as the growth and development of factories.
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Muckrakers
Authors, journalist, and others who sensationalized American social problems in the early twentieth century.
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New Deal
A series of programs and legislative reforms instituted during the administration of Franklin D. Roosevelt in the Great Depression of the 1930s.
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Employment Act of 1946
Legislation giving the federal government the right and responsibility to provide an environment for the achievement of full employment; full production, and stable prices.
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