Chapter 2 Terms Flashcards
if you were to total all that households spend on those goods and services, you would have an amount that economists call
Consumption expenditures
Necessary resources
Factors of production
all the natural resources that go into the production of goods
Land
All human effort that goes into the creation of goods or services
Labor
Refers to goods used to produce other goods
Capital
The activity of creatively combining natural resources, human labor, and capital in unique ways to develop new and useful goods and services
Entrepreneurship
the payments business firms make in exchange for the four factors of production
Factor costs
Includes all payments for the use of an owner’s property
Rent
All payments for labor used to produce goods or services
Wages
The payment business firms make on borrowed money
Interest
The difference between the revenues received from the sale of a product and the cost of the land, labor, and capital that went into its production
Profit
payments of money or goods to persons for which the government expects no specific economic repayment
Transfer payments
When governmental spending exceeds the amount it receives in taxes
Budget deficit
If the government receives more in taxes than it is paying out
Budget surplus
the collection of a nation’s financial institutions that receive deposits of excess funds from households and lend those funds to business firms
Financial market
Any time households withdraw money from an account or borrow it
Dissaving
Governmental borrowing leads to this problem
Crowding out
(also known as a schedule) is a popular method of explaining simple relationships between pairs of variables
Tabular model
Provides significantly more data than the tabular model
Line graph
enables the economist to see the maximum feasible amounts of two commodities that a business can produce when those items are competing for that busi ness’s limited resource
Production Possibilities Curve (PPC)
provides a visual explanation of how a complete national economic system functions
Circular flow model
