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Chapter 3

Physiocrat A believer in the 18th century philosophy that argued that laws created by humans are artificial and unnecessary because they interfere with natural laws, such as an individual's pursuit of self-interest, which would ultimately benefit all of society.
Laissez-faire A french term meaning "leave to do" or "let alone", which became associated with the idea that an economy operates best if individuals are allowed to pursue their own self-interest without government interference.
Mercantilism An economic system that emphasized state control of trade, with the goal of exporting as many goods as possible and importing as few forgein goods as possible.
Protectionist A policy of limiting imports through tariffs.
Tariff A tax on an import levied by a nation; also called custom duty.
Industrial Revolution The period of technological innovation and factory production, beginning in Britian in the late 18th century, that eventually changed the economy from one that was largly agricultural and rural to one that was industrial and urban.
Self-interest An idea, central to the philosophy of Adam Smith, that each individual's strongest drive is to better his or her own condition.
Invisible Hand Adam Smith's notion that the unintended result of an individual proucer's desire for profit is the supply of the whole society with the goods and services it needs, together with resonable price levels ensured by competition.
Division of Labour The specializtion of workers in a complex production process, leading to greater effiency.
Law of Accumulation Adam Smith's theory that businesspeople who invest a percentages of their profits in new capital equipment increase the economy's stock of capital goods, thus ensuring economic growth and future prosperity.
Law of Population Adam Smith's theory that the accumulation of capital by businesspeople requires more workers to operate the equipment, leading to higher wages, which in turn lead to better living conditions, lower mortality rates, and an increase in population.
Geometrical Progression A number sequence that has the same ratio between each number in the sequence; associated with population growth in the pessimistic theories of Thomas Malthus.
Arithmetical Progression A number sequence that has the same difference between each number in the sequence; associated with food production in the pessimistic theories of Thomas Malthus.
Positive Check Thomas Malthus's theory that war, famine, and disese would check population increases to some extent, but not enough to prevent the geometric progression of the world's population to unsustainable levels.
Preventive Check Thomas Malthus's theory that restraints such as late marriages and sexual abstinence would help reduce the birth rate to some extent, but not enough to prevent the geometric progression of the world's population to unsustainable levels.
Corn Laws Early 19th century taxes on grains imported into Britain that drove up the market price of domestic grain in order to benefit the landed classes. These taxes became a focus of opposition for David Ricardo's wage and free trade theories.
Absolute Advantage The capacity of one economy to produce a good or service with fewer resources than another
Comparative Advantage The capacity of one economy to produce a good or service with comparatively fewer resources than another.
Bourgeoisie Term used by Karl Marx for industrial capitalists ho, he theorized would be overthrown by the working class.
Proletariat Term used by Karl Marx to describe the working class who, he theroized would rise up and overthrow the bourgeoisie, or industrial capitalists.
Labour Value Karl Marx's notion that the value of any item is equal to the value of the labour used to produce it.
Surplus Value The difference between the value of a good measured in terms of the labour used to produce it, and its higher selling price, a surplus that Karl Marx, believed was stolen from labour by capitalists.
Monetarist A belief that the most effective way for government to affect the economy is by regulating the money supply.
Hypothesis A speculative theory requiring proof or verification.
Created by: sgreulich



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