Econ Unit 5 Notes

Corporations

• Ownership shares of a corporation are called stocks

• Stockholders elect a board of directors to act on their behalf.

• Stockholders have limited liability, meaning that they are not responsible for the debts of the corporation.

• Financial capital is the money needed to run a business or enable it to grow larger.

Unions

• Some workers join labor unions in order to have a better chance to obtain higher pay and better working conditions.

• In a modified union shop, workers do not have to join a union, but can choose to do so.

• Mediation is when a third party tries to help the union and the company reach an agreement.

Unions/Labor

• Collective bargaining is when union and company officials meet to discuss the terms of the workers’ new contract.

• The civilian labor force is the term for all civilians 16 years old or older who are either working or looking for work.

• The unemployment rate is the percentage of the civilian labor force who are not working but are looking for jobs.

Monopolies

• Antitrust laws are designed to control monopoly power and to preserve and promote competition.

• A natural monopoly occurs when the costs of production are minimized by having one firm produce the product.

GDP & Money

• The real GDP shows an economy’s production after the distortions of price increases have been removed.

• An economic expansion occurs when real GDP goes up.

• Inflation is a sustained increase in the general level of prices.

The Government and the Economy

• A budget is the blueprint of how the government will raise and spend money.

• A budget resolution is a document that totals revenues and spending for the year and sets targets for how much will be spent in various categories.

Business

• Private goods are goods that when consumed by one individual, cannot be consumed by another.

• When two or more companies form a single business, a merger has taken place.

• The alternating periods of economic growth and decline make up the business cycle.

The Government & The Economy

• When a government spends less than it receives in revenues, it has a budget surplus.

• When a government spends more than it receives in revenues, it has a budget deficit.

• When the governments spending equals its revenues, you have a balanced budget.

The Government and the Economy

• The FDIC is the federal corporation that insures individual accounts in financial institutions.

• The Federal Reserve System is our nation’s central bank.

• A fiscal year is a 12-month period that may or may not match the calendar year.

The Government and the Economy

• Debt is the money that has been borrowed but not yet repaid.

• States subsidize, or pay part of the costs of, a college education for resident students.

The Government and the Economy

• Social Security is a government program that provides money to people who are retired or disabled.

• Payroll taxes are deducted from a worker’s paycheck to fund Social Security and Medicare.