Standard 1 : Scarcity
Productive resources are limited. Therefore,
people can not have all the goods and services they want; as a result, they must
choose some things and give up others.
Standard 3 : Allocation of Goods
Different methods can be used to allocate goods and services.
People acting individually or collectively through government, must choose which
methods to use to allocate different kinds of goods and services.
concepts: Economic Systems, Market Structure, Supply, Command Economy, Market
Economy, Traditional Economy
Standard 4 : Role of Incentives
respond predictably to positive and negative incentives.
Standard 7 :
Markets - Price and Quantity Determination
Markets exist when buyers and
sellers interact. This interaction determines market prices and thereby allocates
scarce goods and services.
Related concepts: Market Structure, Markets,
Price Floor, Price Stability, Quantity Demanded, Quantity Supplied, Relative Price,
Standard 8 : Role of Price in Market System
send signals and provide incentives to buyers and sellers. When supply or demand
changes, market prices adjust, affecting incentives.
Non-price Determinants, Price Floor, Price Stability, Supply, Determinants of
Demand, Determinants of Supply, Law of Demand, Law of Supply, Price Ceiling, Substitute
Standard 10 : Role of Economic Institutions
evolve in market economies to help individuals and groups accomplish their goals.
Banks, labor unions, corporations, legal systems, and not-for-profit organizations
are examples of important institutions. A different kind of institution, clearly
defined and enforced property rights, is essential to a market economy.
concepts: Legal and Social Framework, Mortgage, Borrower, Interest, Labor Union,
Legal Forms of Business, Legal Foundations of a Market Economy, Nonprofit Organization,
Property Rights, Banking
Standard 11 : Role of Money
it easier to trade, borrow, save, invest, and compare the value of goods and services.
Related concepts: Exchange, Money Management, Money Supply, Currency, Definition
of Money, Money, Characteristics of Money, Functions of Money
12 : Role of Interest Rates
Interest rates, adjusted for inflation, rise
and fall to balance the amount saved with the amount borrowed, which affects the
allocation of scarce resources between present and future uses.
concepts: Interest Rate, Monetary Policy, Real vs. Nominal, Risk, Investing, Savers,
Standard 14 : Profit and the Entrepreneur
are people who take the risks of organizing productive resources to make goods
and services. Profit is an important incentive that leads entrepreneurs to accept
the risks of business failure.
Related concepts: Taxation, Costs, Costs
of Production, Entrepreneur, Risk, Taxes, Cost/Benefit Analysis, Innovation, Entrepreneurship,
Standard 15 : Growth
Investment in factories, machinery,
new technology, and in the health, education, and training of people can raise
future standards of living.
Related concepts: Incentive, Interest Rate,
Opportunity Cost, Production, Technological Changes, Trade-off, Trade-offs among
goals, Human Capital, Intensive Growth, Investment, Physical Capital, Productivity,
Risk, Standard of Living, Economic Efficiency, Economic Equity, Economic Freedom,
Economic Growth, Economic Security, Investing, Business, Businesses and Households,
Factors of Production, Health and Nutrition, Savers, Savings, Stock Market
16 : Role of Government
There is an economic role for government in a market
economy whenever the benefits of a government policy outweigh its costs. Governments
often provide for national defense, address environmental concerns, define and
protect property rights, and attempt to make markets more competitive. Most government
policies also redistribute income.
Related concepts: Externalities, Income,
Natural Monopoly, Redistribution of Income, Role of Government, Taxation, Transfer
Payments, Bonds, Distribution of Income, Income Tax, Maintaining Competition,
Monopolies, Negative Externality, Non-clearing Markets, Positive Externality,
Property Rights, Public Goods, Maintaining Regulation, Taxes, Regulation, Government
Expenditures, Government Revenues
Standard 17 : Using Cost/Benefit Analysis
to Evaluate Government Programs
Costs of government policies sometimes
exceed benefits. This may occur because of incentives facing voters, government
officials, and government employees, because of actions by special interest groups
that can impose costs on the general public, or because social goals other than
economic efficiency are being pursued.
Related concepts: Cost/Benefit Analysis,
Benefit, Costs, Special Interest Group, Barriers to Trade
: Macroeconomy-Income/Employment, Prices
A nation's overall levels of income,
employment, and prices are determined by the interaction of spending and production
decisions made by all households, firms, government agencies, and others in the
Related concepts: Gross Domestic Product (GDP), Macroeconomic
Indicators, Nominal Gross Domestic Product (GDP), Per Capita Gross Domestic Product
(GDP), Potential Gross Domestic Product (GDP), Real Gross Domestic Product (GDP),
Standard 19 : Unemployment and Inflation
imposes costs on individuals and nations. Unexpected inflation imposes costs on
many people and benefits some others because it arbitrarily redistributes purchasing
power. Inflation can reduce the rate of growth of national living standards because
individuals and organizations use resources to protect themselves against the
uncertainty of future prices.
Related concepts: Types of Unemployment, Causes
of inflation, Consumer Price Index (CPI), Deflation, Labor Force, Unemployment,
Unemployment Rate, Inflation
Standard 20 : Monetary and Fiscal Policy
government budgetary policy and the Federal Reserve System's monetary policy influence
the overall levels of employment, output, and prices.
Inflation, National Debt, Tools of the Federal Reserve, Discount Rate, Federal
Budget, Fiscal Policy, Monetary Policy, Open Market Operations, Reserve Requirements,
Budget, Budget Deficit, Central Banking System, Budget Surplus, Causes of inflation