| # |
Standards |
| 1 |
Productive resources are limited.
Therefore, people cannot have all the goods and services they want;
as a result, they must choose some things and give up others. |
| 2 |
Effective decision making requires comparing
the additional costs of alternatives with the additional benefits.
Most choices involve doing a little more or a little less of something;
few choices are all-or-nothing decisions. |
| 3 |
Different methods can be used to allocate goods
and services. People, acting individually or collectively through
government, must choose which methods to use to allocate different
kinds of goods and services. |
| 4 |
People respond predictably to positive and
negative incentives. |
| 5 |
Voluntary exchange occurs only when all participating
parties expect to gain. This is true for trade among individuals
or organizations within a nation, and among individuals or organizations
in different nations. |
| 6 |
When individuals, regions, and nations specialize
in what they can produce at the lowest cost and then trade with
others, both production and consumption increase. |
| 7 |
Markets exist when buyers and sellers interact.
This interaction determines market prices and thereby allocates
scarce goods and services. |
| 8 |
Prices send signals and provide incentives
to buyers and sellers. When supply or demand changes, market prices
adjust, affecting incentives. |
| 9 |
Competition among sellers lowers costs and
prices, and encourages producers to produce more of what consumers
are willing and able to buy. Competition among buyers increases
prices and allocates goods and services to those people who are
willing and able to pay the most for them. |
| 10 |
Institutions evolve in market economies to
help individuals and groups accomplish their goals. Banks, labor
unions, corporations, legal systems, and not-for-profit organizations
are examples of important institutions. A different kind of institution,
clearly defined and well enforced property rights, is essential
to a market economy. |
| 11 |
Money makes it easier to trade, borrow, save,
invest, and compare the value of goods and services. |
| 12 |
Interest rates, adjusted for inflation, rise
and fall to balance the amount saved with the amount borrowed, thus
affecting the allocation of scarce resources between present and
future uses. |
| 13 |
Income for most people is determined by the
market value of the productive resources they sell. What workers
earn depends, primarily, on the market value of what they produce
and how productive they are. |
| 14 |
Entrepreneurs are people who take the risks
of organizing productive resources to make goods and services. Profit
is an important incentive that leads entrepreneurs to accept the
risks of business failure. |
| 15 |
Investment in factories, machinery, new technology,
and the health, education, and training of people can raise future
standards of living. |
| 16 |
There is an economic role for government to
play in a market economy whenever the benefits of a government policy
outweigh its costs. Governments often provide for national defense,
address environmental concerns, define and protect property rights,
and attempt to make markets more competitive. Most government policies
also redistribute income. |
| 17 |
Costs of government policies sometimes exceed
benefits. This may occur because of incentives facing voters, government
officials, and government employees, because of actions by special
interest groups that can impose costs on the general public, or
because social goals other than economic efficiency are being pursued. |
| 18 |
A nation's overall levels of income, employment,
and prices are determined by the interaction of spending and production
decisions made by all households, firms, government agencies, and
others in the economy. |
| 19 |
Unemployment imposes costs on individuals and
nations. Unexpected inflation imposes costs on many people and benefits
some others because it arbitrarily redistributes purchasing power.
Inflation can reduce the rate of growth of national living standards,
because individuals and organizations use resources to protect themselves
against the uncertainty of future prices. |
| 20 |
Federal government budgetary policy and the
Federal Reserve System's monetary policy influence the overall levels
of employment, output, and prices. |
