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Cards In This Set
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Principle 5
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Trade Can Make Everyone Better Off; trade allows each person to specialize in the actives he or she does best and ppl can get a greater variety of goods or services at lower cost
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Principle 6
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Markets are Usually a Good way to Organize Economic Activity;
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Market economy
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An economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services
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Market economy
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Firms and households make the decisions that guide most economic activity
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In a market economy, economic activity is guided by
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Self-interest and prices
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The "invisible hand" directs economic activity through
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Prices
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Principle 7
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Governments Can Sometimes Improve Market Outcomes
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Property rights
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The ability of an individual to own and exercise control over scarce resources
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Market failure
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A situation in which a market left on its own fails to allocate resources efficiently
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Externality
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The impact of one person's actions on the well-being of a bystander
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The government _ and _
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Promotes efficiency and promotes equality
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Principle 8
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A country's standard of living depends on its ability to produce goods and services
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Principle 9
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Prices rise when the government prints too much money
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Inflation
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An increase in the overall level of prices in the economy
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Circular-flow diagram
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A visual model of the economy that shows how dollars flow through the markets among households and firms
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