Chapter 3

Question 1

Balanced Budget

Answer 1

Situation in which total revenues raised by taxes equal the total proposed spending for the year.

Question 2

Budget

Answer 2

Organization’s plan for how it will raise and spend money during a given period of time

Question 3

Budget Deficit

Answer 3

Situation in which the government spends more than the amount of money it raises through taxes.

Question 4

Budget surplus

Answer 4

Excess funding that occurs when government spends less than the amount of funds raised through taxes and fees

Question 5

Capitalism

Answer 5

Economic system that rewards companies for their ability to perceive and serve the needs and demands of consumers; also called the private enterprise system

Question 6

Consumer Price Index (CPI)

Answer 6

Measurement of the monthly average change in prices of goods and services

Question 7

Core Inflation Rate

Answer 7

Inflation rate of an economy after energy and food prices are removed.

Question 8

Cyclical Unemployment

Answer 8

People who are out of work because of a cyclical contraction in the economy

Question 9

Deflation

Answer 9

Opposite of inflation, occurs when prices continue to fall

Question 10

Demand

Answer 10

Willingness and ability of buyers to purchase goods and services

Question 11

Demand Curve

Answer 11

Graph of the amount of a product that buyers will purchase at different prices

Question 12

Economics

Answer 12

Social science that analyzes the choices people and government make in allocating scarce resources.

Question 13

Equilibrium Price

Answer 13

Prevailing market price at which you can buy an item.

Question 14

Expansionary Monetary Policy

Answer 14

Government actions to increase the money supply in an effort to cut the cost of borrowing, which encourages business decision makers to make new investments, in turn stimulating employment and economic growth.

Question 15

Fiscal Policy

Answer 15

Government spending and taxation decisions designed to control inflation, reduce unemployment, improve the general welfare of citizens, and encourage economic growth.

Question 16

Frictional Unemployment

Answer 16

Applies to members of the workforce who are temporarily not working but are looking for jobs

Question 17

Gross Domestic Product (HDP)

Answer 17

Sum of all goods and services produced within a country’s boundaries during a specific time period, such as a year.

Question 18

Hyperinflation

Answer 18

Economic situation characterized by soaring prices

Question 19

Inflation

Answer 19

Economic situation characterized by rising prices caused by a combination of excess consumer demand and increases in the costs of raw materials, components parts, human resources, and other factors of production.

Question 20

Macroeconomics

Answer 20

Study of a nation’s overall economic issues, such as how an economy maintains and allocates resources and how a government’s policies affect the standards of living of its citizens

Question 21

Microeconomics

Answer 21

Study of small economic units, such as individual consumers, families, and businesses

Question 22

Mixed Market Economies

Answer 22

Economic system that draws from both types of economies, to different degrees

Question 23

Monetary Policy

Answer 23

Government actions to increase or decrease the money supply and change banking requirements and interest rates to influence bankers’ willingness to make loans.

Question 24

Monopolistic Competition

Answer 24

Market structure in which large numbers of buyers and sellers exchange heterogeneous products so each participant has some control over price

Question 25

Monopoly

Answer 25

Market situation in which a single seller dominates trade in a good or service for which buyers can find no close substitutes

Question 26

National Debt

Answer 26

Money owed by government to individuals, businesses, and government agencies who purchase Treasury bills, Treasure notes, and Treasury bonds sold to cover expenditures.

Question 27

Oligopoly

Answer 27

Market situation in which relatively few sellers compete and high start-up costs from barriers to keep out new competitors.

Question 28

Planned Economy

Answer 28

Economic system in which government controls determine business ownership, profits, and resource allocation to accomplish government goals rather than those set by individual firms

Question 29

Privatization

Answer 29

Conversion of government-owned and operated companies into privately held businesses

Question 30

Productivity

Answer 30

Relationship between the number of units produced and the number of human and other production inputs necessary to produce them

Question 31

Pure Competition

Answer 31

Market structure, in which large numbers of buyers and sellers exchange homogeneous products and no single participant has a significant influence on price

Question 32

Recession

Answer 32

Cyclical economic contraction that lasts for six months or longer

Question 33

Regulated Monopolies

Answer 33

Market situation in which a local, state, or federal government grants exclusive rights in a certain market to a single firm

Question 34

Restrictive Monetary Policy

Answer 34

Government actions to reduce the money supply to curb rising prices, overexpansion, and concerns about overly rapid economic growth.

Question 35

Seasonal Unemployment

Answer 35

Joblessness of workers in a seasonal industry

Question 36

Socialism

Answer 36

Economic system characterized by government ownership and operation of major industries such as communications

Question 37

Structure Unemployment

Answer 37

People who remain unemployed for long periods of time, often with little hope of finding new jobs like their old ones

Question 38

Supply

Answer 38

Willingness and ability of sellers to provide goods and services

Question 39

Supply Curve

Answer 39

Graph that shows the relationship between different prices and the quantities that sellers will offer for sale, regardless of demand

Question 40

Unemployment Rate

Answer 40

Percentage of the total workforce actively seeking work by currently unemployed