Key concepts within economics

• Factors of production

  The major inputs required to produce goods and services
• Communism

  A classless society where everyone owns the factors of production, and output is distributed equally
• Socialism

  Has both private property and some public ownership and control of industry, with the goal of meeting specific collective objectives and providing free and easy access to things like education and healthcare
• Invisible hand

  The idea that individuals and businesses meet society's needs when they seek their own self-interest
• Circular flow model

  A model that shows the interactions between businesses, individuals, and the government in a modern economy
• Microeconomics

  • Studies the behavior of individual people and businesses in order to understand why they make the economic decisions they do and how these decisions affect the larger economic system
  • Tends to focus on economic tendencies, such as how individual choices and actions impact changes in production
• Macroeconomics

  • Studies the big picture, including economy-wide factors such as the effect of rising prices or inflation on the economy
  • Seeks to track and understand the financial indicators that clarify an economy's success or failure over time, such as gross domestic product (GDP), changes in unemployment, and consumer spending
• Economic indicators

  • Gross Domestic Product (GDP)
  • Unemployment
  • Inflation (or Deflation)
  • Balance of Trade
• Gross Domestic Product (GDP)

  The total value of all of the completed goods and services produced by an economy during a period of one year
• Unemployment

  The Unemployment Report estimates the number of people who are working for pay during a given period, used to determine whether unemployment is worsening
• Balance of Trade

  A comparison of the amount of money that is spent on imports of goods and services and the amount of money it earns on goods and services it exports
• Balance of trade is measured primarily by recording all of the products that pass through the customs office of a country
• Positive balance of trade

  When a nation exports more than it imports
• Negative balance of trade

  When a nation buys more than it sells
• Neither a positive nor negative balance of trade is necessarily good or bad
• Inflation and Deflation

  Inflation in consumer prices is measured and tracked so that problems in the economy can be pinpointed. Deflation is when the rate of inflation is negative.
• Key questions in Macroeconomics

  • What causes unemployment?
  • How does inflation occur?
  • What stimulates economic growth?