Study Guide for Free Enterprise
Study Guide for Free Enterprise FER 403 Free Enterprise
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This 5 page Study Guide was uploaded by Samantha Bressler on Saturday October 8, 2016. The Study Guide belongs to FER 403 Free Enterprise at College of the Ozarks taught by Mr. Gary Hiebsch in Fall 2016. Since its upload, it has received 60 views. For similar materials see Free Enterprise in Business Administration at College of the Ozarks.
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Date Created: 10/08/16
Review for Free Enterprise Midterm: Tzedekah: charity and justice at the same time. Charity should recognize the full dignity of another human being and should not harm the person. Work allows you to be independent. If charity is not done well it can make you feel like you can not do it. Adam Smith: Proposed the idea of Free Trade, until it removes barriers to get into the country. This provides people with some degree of competition. Invisible Hand: regulate the economy every individual will pursue his or her own best interest. occasionally there will be an unbalance in the economy people will move to meet the markets demands allowing things to work out. Criticism of the Invisible Hand: It takes too long to put into affect it relies on selfishness and greed the returns can vary dramatically JeanBaptist Say: Downturn or Recession: how do you get out of it? Entrepreneur is the solution. That which was being produced is no longer in demand. People do not desire a certain product as much as they used to. A recession makes the price of things go down because deflation. Entrepreneur: create a new product or service generate demand for that product or service David Ricardo: Created the Corn Model. Promoted free trade, hard money, the law of comparative advantage, and other sound principles of classical economics. Corn Model: Three opposing classes: Capitalists, Landlords, and Workers Labor Theory of Value: the value of the product should be based off the amount of labor put into it. Utility Theory of Value: what you get out of it. Products should be priced by utility value. Specialization and Trade: Specialization refers to the tendency of countries to specialize in certain products which they trade for other goods, rather than producing all consumption goods on their own. Countries produce a surplus of the product in which they specialize and trade it for a different surplus good of another country. The traders decide on whether they should export or import goods depending on comparative advantages. Utilitarianism: Life has two elements: pleasure and pain the purpose of life is to maximize pleasure and minimize pain the ideal government should do this for their citizens the government should share the wealth Revolutionary Socialism: Adovocates the violent overthrow of the government. The state would take ownership of all industries and agriculture. The government centrally plancs the entire economy. All ownership is vested with the state. Examples: Soviet Union, China under Mao Tsetung, Cuba Strengths: can dramatically raise production in a crises. Utopian Socialism: a group of people get together and share their resources and ownership of goods. Private ownership and reward is viewed as selfish and discouraged. All members contribute to the production of goods and share equally any income The US has a long history with such groups: Puritans, Oneida Community, Shakers, and Amana colonies. Strengths: people are free to come or go, start with great enthusiasm, have produced useful and desirable products. Weaknesses: hard to get people to join the group groups promote laziness called social loafing others who work hard feel like they do all the work and being used motivating people to over achieve a lot of the younger generations end up leaving National Socialism: Business, industry, and labor serve the national goals and interests. Large business is given the resources it needs to produce products. It is guaranteed a market (the government), and it is protected from competition. In return the large corporations support the government. regulates where resources are going and coming profit and prices are set by the government Examples: Nazi Germany, Fascist Italy Strengths: very efficient Weaknesses: Not a lot of motivation to innovate Not a lot of resources because so limited, limiting entrepreneurship Created a stagnant economy Could lead to war Democratic Socialism: Advocates government directed redistribution of wealth, some takeover of key industries, and a large social safety net. This advocates the advancement of socialism through democratic means. Government subsidizes major industries Heavy regulation and can't close certain things down nationalized industries Examples: PostWar Great Britain, Scandinavia Strengths: Usually accomplishes its goals through democratic means Karl Marx: believed Capitalism and Socialism would bring about Communism. 10 things that needed to happen according to Marx: 1. There needed to be an abolition of property and land 2. A heavy progressive income tax 3. Abolition of all right of inheritance 4. Confiscation of the property of all emigrants and rebels 5. only the government controls the banks 6. government should run transportation and communication 7. all factories and means of production needed to be owned by the state 8. equal obligation of all to work 9. scatter the factories out into the country side 10. free education provided by the state John Maynard Keynes: The government should spend money on hiring people to fix the community problems The government should spend in recession and save during good times Consumers should also be encouraged to spend Keynes thought moving back to merchantilism may have been a good way to go. Also leave the gold standard Counter Cyclical Spending: Government policy aimed at reducing or neutralizing antisocial effects of economic cycles. Such policies encourage spending during downturns, and tighten credit during inflationary periods. Milton Friedman: Studied the Great Depression What caused the Depression and why did it go on so long? Discovered that during this time, the Federal Reserve contracted the money supply Money Supply: amount of money in the economy Too much money causes inflation Very common in Fiat Currency, when the government just prints a bunch of money Two Friedman advices: The government needed to gradually increase the money supply, like 23% a year. If there was a down turn, the money supply really needed to increase. Quantitative Easing: Increasing the money supply Four terms to define Friedman: Gold Standard vs. Fiat Currency Fiscal Policy vs. Monetary Policy Fiscal Policy: the governments taxing and spending patterns Monetary Policy: how much money is in the economy to circulate typically controlled by a central bank, such as the Federal Reserve Gold Standard: currency backed by a specific quantity of a precious metal. US was on a Gold Standard up to 1971 Fiat Currency: currency where the government requires people to use the currency it issues Ayn Rand: During WWII, she published "The Fountainhead" (1943) Developed a following called the "Collective" Members of the group were: Alan Greenspan: Chairman of federal reserve Nathaniel Brandon: Psychiatrist Wrote second novel "Atlas Shrugged" (1957) Objectivism: Rejects any notion of sin Objective reality is all their is can perceive objective reality with our senses the purpose of life is your own happiness live for yourself you should be able to earn and consume whatever you desire argued against charity proper form government promotes laissez faire Spread Objectivism through the arts Alan Greenspan argued for deregulation people will lookout for their own best interests Nathaniel Brandon: psychiatrist. Ayn Rand's devotee, lover and intellectual heir until the two had a bitter falling out in 1968. widely credited with popularizing Rand's philosophical teachings on the power of the individual and the perils posed by the unfettered state. Freidrich Von Hayek: really focused on price. Two things price does: gives you a choice is a form of information Central planners frequently have to control price the minute you start controling price you start controling choice and information Price: Several ways to control price: Price control: government says this is how it is Government subsidies Licenses or certifications Central Planning: where agencies of the government plan all economic activities for that economy. The Communist Manifesto: 1848 Called upon the workers of the world to unite and over through the capitalist and landlords and liberate yourselves. The end result would be everyone would own everything. Das Kapital: 1867 much thicker, and outlines what needs to take place for revolutionary movement Translated into Russian and to took off. A General Theory of Employment, Interest, and Money: (1936) most important book because of the major influence it created turned upside down the classical model of economics A recession creates a surplus of labor which is a dangerous thing The government will get you out of the problem not the entrepreneur The Road to Serfdom: (1944) military and industrial planning might not disappear afterwards. during the war, there were a lot of price controls Hayek really focused on price. Two things price does: gives you a choice is a form of information Central planners frequently have to control price the minute you start controling price you start controling choice and information Atlas Shrugged John Galt appears 600 pages into the novel Story mainly about a woman who is heir to a railway fortune Brother reeled into the collectivist movement and giving her fortune away Another man creates a better type of metal and get together "Who is John Galt?" Sold really well, surprisingly Taking Care of the Poor: Gleanings: Deuteronomy 24:1932 if you have a field, don't go to the edges of the field and don't pick up the wheat heads. This is left for the poor to come in and feed themselves. Book of Ruth. Jubilee: Leviticus 25:824 family owns a plot of land. they could sell it but can only keep it till the next jubilee. then the land reverts to the original family. price of land is based on how much was left of the jubilee. Genesis 12:13 Abram was asked to do what everyone is asked to do in New Testament. It is not wrong to have wealth, it is about how you use the wealth that matters. Proverbs 31:1031 This woman is industrious, caring, shrewd, not stupid about investments, cares for the poor. The bible does not have a problem with making money, but be smart and generous and do not let it separate you from God.
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