Economics - GED Social Studies

The Encomienda System was established by the Spanish in the New World chiefly to facilitate the abuse of the Native American population as a source of labor. A Spanish official was granted the right to effectively own a portion of the native population and was free to force them into whichever form of labor was most immediately profitable, at the expense of millions of native lives. In exchange, the Spanish official was supposed to indoctrinate the native population into the Christian faith.

When Franklin D. Roosevelt assumed the Presidency in 1932 America was at the height of the Great Depression. He instituted a massive and sweeping series of programs designed to extend social security to a much larger proportion of the population and to rescue the economy. Collectively this series of programs is called the New Deal. Historians disagree about the success of these programs, but what is clear is that they dramatically changed the responsibilities and duties of the United States government.

Adam Smith is often referred to as “the father of modern economics” for his writings on laissez-faire and free market capitalism. Smith argued in The Wealth of Nations that the government should try and avoid interfering in the economy and that the economy should be almost completely unregulated. His writings and ideas remain deeply influential.

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.

Labor is defined as the factor of production that is directly attributable to human effort and work. Labor is distinct from capital, in that capital describes inanimate goods that are essential to production, while labor describes the human element of production. Ed, Ellen, and Michael all contribute to the production of Sally's business, but they do so through the provision of capital. Stephanie contributes her own effort and work as a laborer for Sally. Meanwhile, Allen, as a customer, isn't directly involved in the production process.

Frictional unemployment is the name given to a situation whereby people quit because they are dissatisfied with their jobs.

"Scab" is used, in a demeaning fashion, to describe someone who renders the effects of a strike less effective by continuing to work during the strike or by taking the job of a striking member of a union.

The Iron Law of Wages is a famous economic term that originated during the eighteenth or nineteenth Century. It is actually difficult to track who first used the terminology or who first wrote about the idea; historians sometimes credit Malthus, Ricardo, Marx, Engels and so on. The law itself is well-understood: it states that the wage of a laborer will always fall to the very minimum needed to keep the worker working. Because of the massive competition in the labor market, employers have the power to pay their workers as little as possible, because if the worker refuses those terms, someone else will simply take the job. To rephrase: the money paid to a worker will always be the very minimum needed to keep the worker alive and working.

In The Communist Manifesto, the working class is referred to by the latin term “proletariat.” Marx argued that the “proletariat” were essentially enslaved by the bourgeoise and the upper class who controlled the means of production and thus all the wealth and property.

Adam Smith was an Enlightenment-era economic philosopher. He is most remembered for laying down the principle of free-market economics called laissez-faire economics. His theory stated that an economy would have the best success if the government does not intervene. His ideas were widely adopted in Europe and America over the next couple of centuries and were an important foundation of the spread of capitalism around the world.

Mercantilism was an important economic theory in the first era of European colonialism, from roughly 1500 until 1800. With mercantilism, the primary goal of a nation, and a government, should be to regulate trade and the means of production in order to encourage a favorable balance of trade. Essentially, for a nation to succeed according to mercantilist theory, it needs to be exporting more than it is importing. This theory drove many of the actions taken by England and France, along with the other colonial powers, during the age of exploration and the age of colonialism.

In economic terms "comparative advantage" refers to a situation where one country can produce some goods or resources at a lower cost than another country.

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.