Define Laws of Economics
the general rules or principles guiding the production, distribution, and consumption of goods
What is a trade balance?
the difference in value of the goods that a country sells abroad to those it purchases from other countries.
What is a tariff?
a tax from the government which only applies to imported goods
What is imperialism?
the establishment of colonies and extensive territories created to benefit the mother countries
What does "laissez-faire" mean?
the economy should be left without government interference.
Who was the founder of modern economics?
Adam Smith
Can you explain the difference between the laws of economics and a law passed by Congress or a state legislature?
A law passed by a government is a written statute or command which is enforced by penalizing those who ignore or defy it. An economic law is a general principle that explains the relationship between an action and its result. Government law have to be art
What do we mean when we say that "every society is limited 'by nature' in its capacity to produce goods?
Answers will vary somewhat by regional location, but the principle is that each society is physically incapable of producing certain goods efficiently. For example, copper is found in Utah, but not in Rhode Island, and Nevada does not have a good timber i
Thomas Jefferson owned large plantations in Virginia, and most of his close friends were planters. Can you suggest any reasons why Jefferson found himself agreeing with du Pont and the other physiocrats?
The physiocrats believed that the basic wealth of a nation comes from agriculture and mining; they were opposed to the mercantilistic development of manufacturing and commerce. According to the physiocrats, manufacturing was useful, but it was far less im
Do you think that the physiocrats were correct when they argued that free labor is more productive than the labor of slaves, serfs, and prisoners? Why or why not? In your response, use illustrations of places in the world where forced labor has been used.
Free labor is more productive for a variety of reasons: workers are motivated by the prospect of keeping their earnings; free laborers often wish to promote the general welfare of their country; free laborers often work hard so that they can provide for t
In opposition to the mercantilists, the physiocrats insisted that gold and silver are not the true sources of a nation's wealth. Money, physiocrats said, is merely a medium of exchange, for a country may have plenty of gold and silver, and yet that countr
The true wealth of a nation is measured no in its money supply, but in its capital and its ability to produce. While gold and silver may be exchanged for capital and consumer goods, unless that exchange is successfully made, a nation with much precious me
The American War for Independence broke out only a year before Smith published his famous "The Wealth of Nations." Can you see any similarity between Smith's ideas and the ideas of the Patriot leaders?
Adam Smith and Patriot leaders shared the conviction that the increase of wealth in a nation results from intelligent work and not from the accumulation of precious metals. Smith's book was the best expression of the new economic concepts that were taking
Certain Arab states enjoy great wealth per capita (per person). Is this because of their efficient division of labor and their intelligent use of the factors of production, or is there some other reason for their wealth?
The wealth of many Arab states centers around their ample oil reserves. However, some rich Arab nations have realized that natural resources are not the true source of real wealth. These countries have used their oil money to build up their stock of capit
Adam Smith was a professor of moral philosophy for several years. Is there any connection between morality and economics? Can there be moral economic systems and immoral economic systems? Can you suggest examples of economic policies that seem to improve
There is a close connection between morality and economics even though some economists try to maintain that theirs is a "value free" science. The economic system of the WWII Nazis, with its well-known production of goods in prison labor camps and forced t
What is a division of labor?
The separation of work into individualized tasks
Define labor.
human activity which results in the creation of goods and services
Define wealth
the value of all things people call their own
define prosperity
economic success, the condition of enjoying many goods, including services
Which one (or ones) of the six methods for satisfying economic needs do you prefer? Which one do you find least desirable? Why?
Answers will vary. Most economists believe the first four to be the most desirable since they actually increase total productivity. In contrast, the last two methods merely use existing resources and methods of production.
Could governments abolish scarcity by making sure everybody has the same income, thereby ensuring that all citizens might buy whatever they need or want? Do you see anything impractical about this proposal? If so, suggest why it might not work well.
No government has unlimited resources to distribute free to everybody. A system that tries to provide ample goods for everyone would have the same problems the Pilgrims encountered with their early form of Communism. People would not work, total productio
Adam Smith wrote that "nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog." Can you think of creatures, other than human beings, that have economic systems? An economic system includes saving, systematic wor
Answers will vary but may include ants and bees. These insects use their homes as capital goods in that they contain workshops, storerooms, and combs in which these busy creatures work to produce and save consumer goods, the foods they save for their futu
Can you suggest occupations in which knowledge of economics might help a person to earn a good living?
Answers will vary. Anyone can benefit by understanding how best to manage his income, saving, and spending.
Why not leave the study of economics to professional economists and focus our attention on the practical business of making money for ourselves? Give reasons for your answer.
Professional economists and political leaders may need to know more about economics than does the average man or woman, but nevertheless, everyone has the responsibility to be informed of what is going on around him. Unless a person has some economic know
Why is Work emphasized in this book? How has America's work ethic contributed to the wealth of the nation?
Goods can only be produced through some amount of labor. America's strong work ethic has led its citizens to develop the technology and methods needed for efficient production of goods.
In what ways has Adam Smith's work influenced the modern nations of the West? Give specific examples in your answer.
Answers will vary but may include division of labor, specialization, private property ownership, individual efficiency, etc.
define laws of economics
the general rules or principles guiding the production, distribution, and consumption of goods
define mercantilism
an economic system that advocates the building up of the state's treasury with the goal of accumulating as much bullion (gold and silver) as possible
define trade balance
the difference in value of the goods that a country sells abroad compared to those it purchases from other countries
define a tariff
taxes that governments apply only to imported goods
define imperialism
the establishment of colonies and extensive territories created to benefit their mother countries