Relationships and Operation - GED Social Studies

The term Economic equilibrium refers to a state where the supply of a product is equal to the demand for the product. This is an ideal situation that would in theory keep prices and profits consistent. When supply outstrips demand, the price of something will fall, and when the supply cannot meet the demand, the price of something will rise.

In a progressive tax system, the wealthier someone is the higher proportion of tax they must pay. This is the tax system that currently exists in most western countries, including the United States. On the opposite side of the spectrum is a regressive tax system, where the wealthier members of society pay taxes at a lower proportion than everyone else.

Consumer expenditure, or simply consumption, measures the economic output that is devoted to satisfying the wants and needs of individual consumers within an economy. Investment measures the amount of output that is directed toward business or other producers in order to grow the productive capacity of the economy. Government spending measures the amount of output that is directed toward government provision of goods and services, such as roads or police protection. Net exports measure the amount of output that is traded with other countries, and since a country can run either a trade deficit or surplus, this component can be positive or negative. In most modern market or mixed economies, people are relatively free work and consume as they choose. As a result, a majority of economic output in most countries is devoted toward consumer expenditures. Some countries have especially large government sectors, where government spending comes close to matching the consumer sector of the economy. In the United States, consumer expenditure accounts for nearly 2/3 of economic output.

The Standard of Living in a country, or region, refers to the quality of life, material wealth, and comfort experienced by the people living there. America and Europe have comparatively high standards of living, while the majority of Africa and Asia have comparatively low standard of living.

An "incentive" is some advantage (lower taxes, cheaper land, access to resources or market, etc.) that a government can offer to a business or a type of businesses to encourage the growth and spread of business in their area.

Deflation is the term in economics for a general fall in prices. This does not mean that a decrease in the price of single good signifies deflation. A "general fall" is a situation where prices across the economy are falling in aggregate. While in passing it might seem like falling prices seem obviously good (who doesn't like cheap stuff?!), deflation has proved to be a problematic phenomenon in practice. Falling prices, for instance, also necessitate falling wages. It is now widely accepted that most episodes of deflation are caused by fluctuations in the money supply. When the money supply shrinks, prices fall as the value of any single dollar is increased by the dollar's newfound rarity. When Bryan criticizes making "money dear" he is criticizing an inadequate supply of money that is unneccesarily driving prices down. When he mentions that there are a few who benefit from "hard times", he hints at what economists have identified as the biggest problem with a bout of deflation. Changes in the price level affect different people differently. For interest, those that have large cash holdings or those that have lent money out with large interest rates stand to gain from the money supply shrinking and their own holdings becoming more valuable. Deflation frequently implies a redistrubution of wealth away from the poor or debtors to the rich or creditors, which can be economically and socially destabilizing.

Inflation is the increase in the price of something, or the fall of the purchasing power of money over time. Most contemporary economists favor a low rate of inflation that is predictable and steady, rather than no inflation whatsoever, and certainly much more than high and fluctuating levels of inflation. A low and steady rate of inflation, according to the majority of economists, makes it much easier for the economy to recover after a recession or depression.

The English (later British) East India Company was founded in 1600 by Elizabeth I, who gave the company a trading monopoly on all trade with the East Indies (India and much of South Asia). The company was a combined venture of several investors who pooled their resources and shared in the profits, much in the way of a modern corporation owned by shareholders. This practice is called a joint stock company.

The Federal Reserve System was created in 1913 in response to a series of financial panics. It is tasked with regulating and controlling the American banking system, which includes controlling the money supply, setting interest rates, and regulating the behavior of financial institutions.

The Federal Reserve System is comprised of the Federal Open Market Committee, which conducts monetary policy for the US economy, and a set of regional banks that provide services and regulation for private banks in a given region. The Federal Reserve System (often shortened to Federal Reserve or simply "the Fed") was established in 1913 in response to a number of financial crises that had plagued the United States throughout its history. It functions as a central bank that provides credit and banking services to all private banks in the country. Through its operation as a "bank for the banks", it controls the supply of money within the US economy. Economists widely believe that the Fed's maintenance of the money supply is an important factor in preserving growth and fighting of recessions.

The Panic of 1837 was an economic crisis, or collapse, that lasted for several years and dramatically worsened the state of the American economy. The term, "panic," is frequently used to describe a period of economic recession, depression, or instability.

Adam Smith was a British economist and writer in the eighteenth century. He was a famous advocate of laissez-faire capitalism (the idea that the government should have minimal interference in the economy). His most famous work, The Wealth of Nations, remains influential to this day, and is something of a shrine to free-market capitalism.

Mercantilism was the prevailing economic theory of the sixteenth and seventeenth centuries of European history. It was gradually replaced by free-market capitalism in the eighteenth and nineteenth centuries as, essentially, the European nations realized they could make even more money this way. In the mercantilist system, the primary economic goal of government was to establish trade monopolies and colonies to help with the redistribution of wealth and resources back to the mother country. Mercantilism was particularly influential in the histories of the Dutch, French, English, and Spanish Empires.

Collective bargaining is the term given to negotiations between an employer and a group of employees—usually a union. The purpose is to agree upon terms of employment, wage, payment structure, and so on.

To barter is to exchange goods or services with someone else without the use or exchange of money. Throughout human history, bartering has been a common means by which goods are exchanged between individuals or social groups.

The law of supply and demand states that if the supply of something goes up and the demand for something goes down, then the price will fall significantly. A surplus means having more of something than is needed. For example, a company produces 100,000 dolls for the holiday season. There is a demand for only 20,000 at the price for which the company wants to sell them. This leaves a surplus of 80,000. If the company wants to increase the demand for the rest of the dolls they will have to lower the price they are willing to sell them at dramatically. This is the law of supply and demand.

Excise taxes are taxes that are levied on a specific good. They differ from related taxes like sales taxes, which are levied at a set rate across all goods sold. Within the United States, gasoline taxes are a prime example of excise taxes. Every gallon of gasoline sold in the United States has 18.4 cents in tax added to its price that ends up paid to the federal government. Many states also levy their own gasoline taxes as well. Federal gasoline tax revenue is applied to the mainentance of the US highway system. Excise taxes are popular as policies that are designed to extract revenue for the upkeep of public systems from those that specifically benefit from said system. Those that pay gasoline taxes are, for example, very likely to benefit from driving their gasoline burning cars on publicly maintained highways.

An excise tax is a tax issued on the production or purchase of goods sold within a country. Often, excise taxes are issued by the government to try and prevent certain dangerous or unhealthy forms of behavior, so there are excise taxes on cigarettes for example.

Capital Gains Tax is a tax paid to the Federal government on the sale of things such as land, stocks, bonds, property. It is a tax on the profit, or the amount of money you made (the gain), in the sale of capital.

The term Economic equilibrium refers to a state where the supply of a product is equal to the demand for the product. This is an ideal situation that would in theory keep prices and profits consistent. When supply outstrips demand, the price of something will fall, and when the supply cannot meet the demand, the price of something will rise.