Civics and Economics CE.12 Study Guide

HISTORY AND SOCIAL SCIENCE STANDARDS OF LEARNING CURRICULUM FRAMEWORK 2008 (NEW) Reformatted version created by SOLpass www.solpass.org Civics and Economics CE.12 Study Guide STANDARD CE.12A -- BUSINESS ORGANIZATION Types of business organizations and the role of entrepreneurship How do resources, goods and services, and money flow among There are three basic ways that businesses organize to earn individuals, businesses, and governments in a market economy? profits. Economic flow (circular flow) Entrepreneurs play an important role in all three types of • Individual and business saving and investment business organizations. provide financial capital that can be borrowed for What are the basic types of profit-seeking business structures? business expansion and increased consumption. Basic types of business ownership • Individuals (households) own the resources used in • Proprietorship: A form of business organization production, sell the resources, and use the income to with one owner who takes all the risks and all the purchase products. profits. • Businesses (producers) buy resources; make products that are sold to individuals, other • Partnership: A form of business organization with businesses, and the government; and use the profits two or more owners who share the risks and the to buy more resources. profits. • Governments use tax revenue from individuals and • Corporation: A form of business organization that is businesses to provide public goods and services. authorized by law to act as a legal entity regardless of the number of owners. Owners share the profits. Owner liability is limited to the amount of their STANDARD CE.12C investment. -- FINANCIAL INSTITUTIONS What is an entrepreneur? Entrepreneur Financial institutions channel funds from • A person who takes a risk to produce and sell goods savers to borrowers and services in search of profit Private financial institutions act as intermediaries • May establish a business according to any of the between savers and borrowers that include households three types of organizational structures and business investors. STANDARD CE.12B How do financial institutions make the -- CIRCULAR FLOW deposits of savers available to borrowers? Circular flow shows how consumers Private financial (households), businesses (producers ), and institutions markets interact • Include banks, savings and loans, and credit unions • Receive deposits and make loans Resources, goods and services, and money flow continuously among households, businesses, and markets in the United States economy. • Encourage saving and investing by paying interest on deposits TANDARD • global economy: Worldwide markets in which the S buying and selling of goods and CE.12D services by all nations takes place Reasons that states and nations trade LOBAL -- G • To obtain goods and services ECONOMY they cannot produce or cannot produce efficiently themselves The relationship of • To buy goods and services at Virginia and the United a lower cost or a lower opportunity cost States to the global • To sell goods and services to economy, with other countries emphasis on the • To create jobs impact of Virginia and the United States technological specialize in the production of certain goods and services, which promotes efficiency and growth. innovations What is the impact of technological innovation on world trade? Virginia and the United States pursue international trade in order to increase wealth. Impact of technological innovations Innovations in technology (e.g., the Internet) contribute Why do Virginia and the United States trade with other to the global flow of information, capital, goods, and nations? services. Terms to know The use of such technology also lowers the cost of production. .

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