CHAPTER 38
Money and Profit
LEARNING OBJECTIVES
OUTLINE OF CHAPTER
I. The Conservative View of J.B. Say
II.
III. The Capitalist System
IV. Production for the Market
V. Money
KEY TERMS
aggregate demand
the total dollar amount of goods that consumers, investors, foreigners, and governments plan to
buy at a given price level
aggregate supply
the total output that business produces and plans to sell at a given price level
equilibrium
ANSWERS TO END OF CHAPTER REVIEW QUESTIONS
1.
2. Describe the process that keeps aggregate supply and demand equal.
3. What are three main characteristics of the capitalist economy that make possible cycles
of boom and bust?
4.
how the economy readjusts? Why?
forms policy decisions about the economy.
5.
Why or why not?
Since the economy is assumed to correct any problems automatically, the government
6. How is the economy different today from feudalist society that leads to boom and bust?
law is true in many precapitalist societies but not in capitalism as we see
it today.
7. Did cycles of boom and bust exist under feudalism? Why or why not?
List and describe the four functions of money.
8. What are the four functions of money? Does it serve all functions equally well? –
Explain.
Money is used as a unit of account, a store of value, a medium of exchange and a means
9. How does the use of credit complicate business cycles?