Economics COPY Flashcards
This economist wrote An Inquiry into
the Nature and Causes of the Wealth of
Nations.
Adam Smith
This economist pioneered the idea that
self-interest individuals make up the
economy.
Adam Smith
This field of study analyzes the choices
that consumers make.
economics
Economists estimate that the average
supermarket carries around this
number of items.
33,000
One of the key principles of economics
is that individuals primarily act in this
manner.
self-interested
This field of study allows us to
understand how the economy functions
smoothly or why it breaks down.
economics
Economics is primarily about the way in
which individuals make choices about
allocating these services or assets.
(scarce) resources
In economics, individuals make choices
to satisfy this unlimited quantity.
human wants
Economists make these five basic
assumptions.
scarcity, trade-offs,
opportunity cost, rationality,
and gains from trade
This economic assumption refers to the
limited amount of time, work, energy,
knowledge, and capital in society.
scarcity
Economic choices about how much to
spend on healthcare, national defense,
and education fall under this economic
assumption.
scarcity
This economic assumption refers to the
fact that every choice we makes
requires us to give up something in
return for something else.
trade-offs
Because of this economic assumption,
every choice requires a trade-off.
scarcity
The time spent watching television
instead of studying exemplifies this
economic assumption.
trade-offs
This term refers to what we give up in
order to get our preferred choice.
opportunity cost
This economic assumption refers to the
best alternative we have when making
a decision.
opportunity cost
This activity is the opportunity cost of
watching television when you have an
upcoming test.
studying
This value is the most important
opportunity cost of attending college.
time
When people compare the benefits of
each action and choose the one that
produces the greatest benefit, they are
engaging in this activity.
cost-benefit analysis
This economic assumption refers to
selecting the action that produces the
greatest benefit.
rationality
These two adverbs describe the way in
which most people perform cost-benefit
analysis.
intuitively and approximately
This term refers to individuals
maximizing in areas where they are
better than others.
specialization
This economic assumption refers to
trade based on specialization.
gains from trade
This economic activity must be
voluntary for the benefits to outweigh
the costs for both parties.
trade
Economic analysis mainly relies on
these three skills.
observation, description, and
measurement
These economic tools allow
economists to compare interactions
between economic values.
models
Economic models have this degree of
simplicity.
high
Economists mainly use these two types
of representations in their models.
diagrams and formulas
This type of economics explains
economic phenomena and allows
economists to make predictions based
on situations.
positive
This type of economics focuses on
cause-and-effect relationships.
positive
Positive economics is meant to be free
of this human factor.
judgment
This type of economics can predict the
way in which a price decrease will
affect the consumption of gasoline.
positive
This type of economics focuses on
what should be the case as opposed to
what is the case.
normative
Normative economics relies on this
human quality.
judgement
Normative economics uses this form of
analysis to consider different possible
outcomes.
cost-benefit analysis
This type of economics would
recognize the ways that increasing the
minimum wage would affect different
economic groups.
positive
This type of economics would use a
value judgment to determine whether to
raise the minimum wage.
normative
This outcome arises if there is no way
to improve the well-being of one person
without reducing the well-being of
another.
Pareto efficiency
This economist argued that an outcome
is efficient if there is no way to improve
the well-being of one person without
reducing the well-being of another.
Vilfredo Pareto
Vilfredo Pareto was born in this
country.
Italy
If goods and services are not fully
distributed, then the outcome does not
meet this type of efficiency.
Pareto
Deciding which distribution is best to
meet Pareto efficiency is an example of
this type of economics.
normative
Economists consider this economic
principle to be the first step to maximize
overall well-being.
efficiency
This branch of economics focuses on
individual behavior.
microeconomics
Microeconomics concentrates on
individual behavior as well as the
behavior of these economic institutions.
markets
This branch of economics focuses on
the performance of the economy at a
national level.
macroeconomics
Macroeconomics concentrates on this
scale of the economy.
national
Both microeconomics and
macroeconomics share basic
assumptions about this consumer
aspect.
human behavior
The two main branches of economics
differ in these two aspects.
scales and modes of
analysis
Many economists separate these two
branches of economics because of
their different modes of analysis.
microeconomics and
macroeconomics
Economic coordination stems from the
interaction between these two
economic principles.
supply and demand
The action of buyers and sellers in a
market influence these two economic
values of a good.
price and quantity
This branch of economics deals with
the interaction of supply and demand.
microeconomics
Economists see this type of market
competition as the ideal model for
economic analysis.
perfect
The effects of taxation and other
government policies fall under this
branch of economics.
microeconomics
This term refers to all the buyers and
sellers of a particular good or service.
market
This Chicago market is highly
organized.
Chicago Mercantile
Exchange
This economic intermediary helps to
set a price at an exchange.
auctioneer
Local gas stations fulfill this economic
role in the market for gasoline.
suppliers
The vehicle owners in a community
fulfill this economic role in the market
for gasoline.
buyers
The market for gasoline has this
degree of competition.
high
No one buyer or seller can influence
this economic value in a perfectly
competitive market.
price
The actions of these two economic
groups determine market price and
quantity.
buyers and sellers
This type of market occurs when a
good or service is highly standardized
with many market participants, and all
participants are well informed about the
market price.
perfectly competitive
The goods and services in a perfectly
competitive market must have this
degree of standardization.
high
Economists often assume this level of
market competition to analyze trends.
perfect
This term refers to the amount of a
good that consumers are willing to
purchase.
quantity demanded
This economic value is the most
important determinant of the quantity
demanded of a good.
price
This economic law states that
consumers will demand less of a good
if the price of the good is higher.
law of demand
Because of the law of demand, this
relationship exists between a good’s
price and quantity demanded.
law of demand
The law of demand centers on these
two factors.
price and quantity demanded
The law of demand is a result of this
economic analysis used by rational
decision-makers.
cost-benefit analysis
The opportunity cost of consuming a
good increases as this economic factor
increases.
price
The law of demand relates this
economic factor to the quantity
demanded of a good.
price
The law of demand relates this
economic factor to the price of a good.
quantity demanded
This type of economic diagram records
consumer demand for a good.
demand schedule
The demand curve of a diagram slopes
in this direction.
downward
This term refers to the diagram of a
demand schedule.
demand curve
This economic factor of demand is
often plotted on the horizontal axis of a
diagram.
quantity demanded
This economic factor of demand is
often plotted on the vertical axis of a
diagram.
price
Economists can move in these two
directions along the demand curve to
change the quantity demanded of a
good.
up and down
Adding multiple demand curves in this
direction gives the market demand.
horizontally
This market curve depicts the
relationship between quantity
demanded and price.
demand
Creating new bicycle lanes in a city will
shift the demand curve for gasoline in
this direction.
leftward
As you move to the left along a
demand curve, this economic factor will
decrease.
quantity demanded
As you move to the right along a
demand curve, this economic factor will
decrease.
price
The demand curve of a good will shift
for these four main reasons.
income, tastes, expectations,
and number of buyers
This term refers to the money an
individual receives from employment.
income
For most goods, demand and income
have this type of relationship
positive
For normal goods, this economic factor
rises as income rises.
demand
This term refers to goods for which
income and quantity demanded have a
positive relationship.
normal goods
This term refers to goods for which
income and quantity demanded have a
negative relationship.
inferior goods
For inferior goods, this economic factor
decreases as income rises.
quantity demanded
Bus rides are an example of this type of
good.
inferior
Gasoline is an example of this type of
good.
normal
According to the law of demand, as the
price of airline tickets decreases, this
economic factor will increase.
quantity demanded
A good that can suitably replace
another is this type of good.
substitute
This term refers to goods for which the
decrease in the price of one good leads
to a decrease in the quantity demanded
of another.
substitutes
Airline travel and travel by car are
these types of goods.
substitute
This term refers to goods for which a
decrease in the price of one good leads
to an increase in quantity demanded of
another.
complements
Automobile insurance and car
ownership are these types of goods.
complements
Consumers hold these opinions and
interests.
tastes
Concerns about the environmental
impact of driving exemplify this aspect
of consumer behavior.
tastes
Consumers hold these beliefs about
how the market will change in the
future.
expectations
Cutting back on spending because you
fear losing employment exemplifies this
aspect of consumer behavior.
expectations
Economists calculate market demand
by adding the demands of this group.
individual consumers
This term refers to the amount of a
good that sellers are willing to produce.
quantity supplied
This relationship exists between price
and quantity supplied.
positive
This law relates price and quantity
supplied.
law of supply
According to the law of supply, as price
increases, this economic factor will
increase.
quantity supplied
The law of supply relates quantity
supplied to this economic factor.
price
The law of supply relates price to this
economic factor.
quantity supplied
This type of economic analysis
determines the law of supply.
cost-benefit analysis
According to the law of supply, as the
price of gasoline rises, this economic
factor will rise.
quantity supplied
According to the law of supply, at lower
prices of gasoline, suppliers will be less
willing to produce this economic factor.
quantity
This economic curve reflects the
relationship between price and quantity
supplied.
supply curve
The supply curve reflects this
relationship between price and quantity
supplied.
positive
This economic factor is on the
horizontal axis of the supply curve.
quantity supplied
This economic factor is on the vertical
axis of the supply curve.
price
To determine the market supply curve,
economists add individual supply
curves in this direction.
horizontally
The supply curve shifts for these four
main reasons.
input prices, technology,
expectations, and number of
sellers
This term refers to the goods and
services that sellers must purchase to
supply a product.
inputs
An increase in input costs decreases
this economic factor at every price for
suppliers.
quantity supplied
If input prices fall, the supply curve of a
good will shift in this direction.
right
If input prices rise, the supply curve of
a good will shift in this direction.
left
Changes in this branch of knowledge
can affect how efficiently businesses
operate and how advanced their
products are.
technology
Improvements in technology have this
effect on the quantity of goods
supplied.
increase
Suppliers will reduce this quantity if
they expect prices to increase in the
future.
quantity supplied
As the number of sellers that enter the
market increases, this quantity
increases.
quantity supplied
The intersection between the demand
curve and the supply curve of a market
occurs at this point.
equilibrium
This term refers to the most efficient
combination of both price and quantity
of a good.
equilibrium
A market’s equilibrium point is the
intersection between the supply curve
and this market curve.
demand
This term refers to the point at which
forces at work in a system are
balanced.
equilibrium
At this point in the market, no
participant has a reason to alter their
behavior.
equilibrium
The market demand curve and supply
curve have this number of
intersections.
one
Buyers and sellers of a good are
satisfied at this point on a market
diagram.
equilibrium
Market equilibrium consists of these
two economic factors.
price and quantity
This situation arises when suppliers
would like to sell a greater amount of a
good than consumers are willing to
purchase.
excess supply
In cases of excess supply, this market
participant wants a greater amount of
supply than the other.
suppliers
In cases of excess supply, this market
participant has an incentive to lower
their asking price.
suppliers
If suppliers would like to sell a lesser
amount of a good than consumers are
willing to purchase, this type of demand
arises.
excess demand
In cases of excess demand, this market
participant wants a greater amount of
demand than the other.
buyers
In cases of excess demand, this market
participant has an incentive to raise
their asking price.
buyers
This type of market tends to gravitate
toward the equilibrium price and
quantity.
competitive
This type of market allocates resources
efficiently.
competitive
This type of market ensures that goods
and services go to the buyers who
value them most highly.
competitive
A competitive market ensures that
supplies provide goods with the lowest
of this type of cost.
input
The competitive market equilibrium
maximizes the benefits between these
two parties.
buyers and sellers
The height of a market demand curve
represents this type of buyer’s
willingness to pay.
marginal
This adjective describes the marginal
buyer’s attitude towards buying a good
or service.
indifferent
This term refers to the surplus value
that consumers receive from a certain
market price and quantity.
consumer surplus
Adding up the total surplus of all buyers
gives this type of surplus.
consumer surplus
Subtracting the height of the market
price from the height of this market
curve gives consumer surplus.
demand
Total consumer surplus equals the area
below the demand curve and above
this economic factor.
market price
The height of a market supply curve
represents this type of seller’s
willingness to supply.
marginal
This term refers to the combined
surplus of all suppliers.
producer surplus
Producer surplus is the area above this
market curve and below the market
price.
supply
This type of surplus is the sum of
consumer surplus and producer
surplus.
total surplus
A social planner’s primary economic
goal is to maximize this economic
value.
total surplus
Maximizing total surplus ensures that
this economic efficiency is met.
Pareto
This term refers to the total benefits
that market participants receive from
their interactions.
total surplus
Market points left or right of the
equilibrium lack this economic
standard.
efficiency
Synthetic Bovine Growth Hormone is
an example of this type of advance.
technological
Dairy farmers used this synthetic
development to increase milk
production by 10 to 15 percent.
Bovine Growth Hormone
These market participants benefited the
most from the development of synthetic
Bovine Growth Hormone.
consumers
Public health campaigns against
cigarette smoking reduce this market
factor.
demand
Public efforts to reduce smoking shift
the demand curve in this direction.
left
This term expresses the way in which
changes in price affect the demand for
a good.
price elasticity
This term refers to changes in the
quantity demanded of a good in
response to changes in price.
price elasticity of demand
Dividing the percent change in this
economic factor by the percent change
in price gives the price elasticity of
demand.
quantity demanded
Price elasticity of demand will never be
this type of number.
negative
The greater this economic value, the
greater the change in the quantity
demanded.
elasticity
If a one percent change in price leads
to a greater than one percent change in
the quantity demanded, the demand
can be described with this term.
elastic
If a one percent change in price leads
to a less than one percent change in
the quantity demanded, the demand
can be described with this term.
inelastic
If a one percent change in price leads
to a one percent change in the quantity
demanded, the demand can be
described with this term.
unit elastic
These four main factors influence the
price elasticity of demand.
substitutes, necessities,
market definition, and time
horizon
Goods with close substitutes have this
degree of price elasticity of demand.
high
Cola drinks typically have this degree
of price elasticity of demand.
high
Necessities tend to have this degree of
price elasticity of demand.
low
Gasoline tends to have this degree of
price elasticity of demand.
low
The broader this factor, the fewer close
substitutes a good will have.
market definition
Over time, goods shift closer to this
degree of elasticity.
elastic
Given two demand curves that pass
through the same point, the flatter
curve will have this degree of elasticity
compared to the other.
higher
The slope of a linear demand curve
must have this mathematical property.
constant
As you move down and to the right
along a demand curve, this economic
value decreases.
elasticity
This type of elasticity appears as a
vertical line on a market diagram.
perfectly inelastic
This type of elasticity appears as a
horizontal line on a market diagram.
perfectly elastic
This term refers to the ease with which
suppliers can change their quantity
supplied.
price elasticity of supply
This term refers to the percent change
in quantity supplied divided by the
percent change in price.
price elasticity of supply
The price elasticity of supply relates
these two economic factors.
quantity supplied and price
These three main factors affect the
price elasticity of supply.
ease of entry and exit,
scarce resources, and time
horizon
This type of elasticity occurs when new
suppliers can enter or exit a market
easily.
elastic
This type of elasticity occurs when new
suppliers cannot enter or exit a market
easily.
inelastic
The supply of airline flights tends to
have this degree of elasticity.
high
If the inputs of a good are scarce, then
the good will have this type of elasticity.
inelastic
The supply of beachfront properties
has this degree of elasticity.
low
The elasticity of supply changes in this
manner as the time horizon increases.
increases
Given two supply curves that pass
through the same point, the flatter
curve will have this degree of elasticity
compared to the other.
higher
Van Gogh paintings have this type of
elasticity of supply.
perfectly inelastic
Multiplying these two factors at the
equilibrium point gives total revenue.
price and quantity
Total revenue is calculated at this
specific market point.
equilibrium
This type of elasticity will cause total
revenue to increase down a demand
curve.
elastic
This type of elasticity will cause total
revenue to decrease down a demand
curve.
inelastic
The demand for milk tends to have this
type of elasticity.
inelastic
Governments use these controls to set
minimum and maximum prices.
price controls
The United States government typically
established this type of pricing on major
food crops.
minimum
The United States minimum wage is an
example of this type of government
economic policy.
price controls
The federal government imposed a
price ceiling on this Middle Eastern
good in 1979.
oil
Government intervention in the form of
price controls creates this type of cost.
social
This type of government economic
policy establishes a maximum on the
price of a good.
price ceiling
Rent control reduces this type of
surplus.
total
In a competitive market, this economic
factor rations goods.
price
Over time, supply and demand of
apartments shifts to this type of
elasticity.
elastic
This type of market demand will occur
when landlords lower rent.
excess demand
Minimum pricing on crops reduces
these two types of surpluses.
consumer and producer
Governments use this form of
economic payment to raise revenue for
public spending.
taxes
This political entity has the right to
enforce taxes.
government
A tax on consumers shifts the market
demand curve in this direction.
downward
These two market participants share
the burden of a tax.
suppliers and buyers
Taxes on consumers usually lower this
type of surplus, preventing mutually
beneficial exchange.
total
A tax on suppliers shifts the market
supply curve in this direction.
upward
This economic gap arises between the
amount consumers pay and the
amount producers receive.
price wedge
Price wedges reduce this economic
factor, regardless of who pays the tax.
quantity
models A tax will cause this type of reduction in
social welfare.
deadweight loss
Deadweight loss takes this shape on
market diagrams.
triangle
The burden of a tax depends on these
two elasticities.
supply and demand
The less elastic this market curve, the
greater the burden of the tax the buyers
must pay.
demand
The less elastic the supply and demand
curves, the lower this tax value will be.
deadweight loss
This term refers to the benefits that
trade participants receive.
gains from trade
Economic specialization in certain
fields leads to this economic activity.
trade
This model helps economists measure
the trade-off that producers face when
deciding on how much of a certain
good to produce.
production possibility frontier
All points along this economic line are
efficient for production.
production possibility frontier
This situation occurs when one
producer’s PPF is above and to the
right of another’s at every point.
absolute advantage
This situation arises when one
producer can carry out an activity more
efficiently and at a lesser cost than
another.
comparative advantage
Trading partners need to differ in this
economic advantage in order to
improve their overall well-being through
trade.
comparative
This type of trade can expand the size
of the economy and increase the size
of different industries.
free
If a country’s cost of supply is less than
world price, then the country will
become this type of trade participant.
exporter
The difference between these two
economic factors is exported via world
trade.
domestic consumption and
quantity supplied
For countries that export goods, this
economic surplus decreases as price
rises.
consumer
For countries that export goods, this
economic surplus increases as price
rises.
producer
These market participants benefit most
when a country becomes an exporter of
a good.
producers
These market participants benefit least
when a country becomes an exporter of
a good.
consumers
This type of welfare increases when a
country becomes an exporter.
social
For countries that import goods, this
economic surplus increases as price
rises.
consumer
For countries that import goods, this
economic surplus decreases as price
rises.
producer
These market participants benefit most
when a country becomes an importer of
a good.
consumers
These market participants benefit least
when a country becomes an importer of
a good.
producers
This economic factor rises when trade
is allowed and domestic price falls to
the world price.
quantity consumed
Domestic producers lower this quantity
as a response to lower world prices.
quantity supplied
The difference between these two
economic factors is imported in world
trade.
quantity produced
domestically and quantity
consumed domestically
who supply goods and services in the
economy.
firm
According to this economic law, firms
will supply a greater quantity of a good
as the price rises.
law of supply
This goal is the main priority of a firm.
maximizing profits
A company’s profit is the difference
between these two economic values.
total revenue and total costs
To calculate total revenue, multiply the
total quantity of output by this economic
value.
price
This type of cost includes the
opportunity cost of the resources used
in production.
economic
This type of cost includes only actual
monetary expenditures.
accounting
This type of cost cannot be changed in
the short run.
fixed
This type of cost can be changed in the
short run.
variable
This type of cost is the increase in
costs from producing an additional unit
of output.
marginal
Dividing the increase in total costs by
this economic value gives marginal
cost.
increase in quantity
This phenomenon occurs when the
addition of more workers leads to less
and less additional output.
diminishing returns to scale
This term refers to the additional
revenue gained from producing an
additional unit of output.
marginal revenue
If diminishing returns to scale apply,
this type of economic cost will increase
as output increases.
marginal
A profit-maximizing firm’s supply curve
will have this type of slope.
upward
More producers added to a market will
shift the market supply curve in this
direction.
outward
Producers will continue to enter the
market as long as they are making this
type of economic profit.
positive
Producers will stop entering the market
when economic profits reach this value.
zero
In a competitive market, business
owners earn this amount of economic
profit.
zero
This economic concept is a way of
allocating productive resources
between different activities.
price
Markets for commercial airplanes,
automobiles, and cereals share this
type of market competition.
imperfect
This term refers to markets with one or
few suppliers.
imperfectly competitive
Firms in imperfectly competitive
markets want to maximize this
economic concept.
profit
Firms in imperfectly competitive
markets face demand curves with this
type of slope.
downward
Firms with downward-sloping demand
curves possess this economic trait.
market power
This term refers to the ability of firms to
choose market prices.
market power
This type of market features only one
supplier.
monopoly
This term refers to the obstacles
preventing new competitors from
entering a market.
barriers to entry
This economic phenomenon is the
primary reason for the creation of a
monopoly.
barriers to entry
The market for diamonds is an example
of this type of market.
monopoly
The DeBeers company owned this
percentage of the world’s diamonds.
80
This type of monopoly occurs when the
government provides rights to a single
supplier to supply a product.
government-created
Patents and copyright laws are
examples of this type of monopoly.
government-created
Under patent law, the inventor of a new
technology earns the exclusive right to
use the technology for this number of
years.
20
This type of monopoly occurs when a
single supplier can supply the market at
a lower cost compared to multiple other
firms.
natural
Railroads, pipelines, and cable
television are examples of this type of
monopoly.
natural
Natural monopolies primarily occur
when a firm has a high number of these
costs.
fixed
The profit-maximizing strategy for every
firm is to increase supply until marginal
cost is equal to this economic value.
marginal revenue
Increasing supply beyond the
intersection of marginal revenue and
marginal cost causes this economic
value to decline.
profit
Market equilibrium generally occurs at
a lower price and higher quantity for
this type of market.
monopoly
A transfer of this type of surplus occurs
in a monopoly.
consumer
This 1890 law required the government
to review large mergers and
acquisitions.
Sherman Anti-Trust Act
Anti-trust laws helped split up this
technology company in 1984.
AT&T
This technology company was forced to
separate its Internet browser from its
operating system.
Microsoft
Public utilities such as electric power
companies must have their rates
approved by this external party.
public oversight agencies
This type of government often controls
local water, sewer, and sanitation
services.
municipal
This form of ownership is commonly
used to solve the problem of a
monopoly.
public
This term refers to a situation in which
companies charge a customer based
on the value the customer places on its
service.
price discrimination
With price discrimination, a firm’s
marginal revenue curve will be identical
to this curve.
market demand
When companies offer different
packages of television channels, they
are employing this economic strategy.
price discrimination
Under price discrimination, the greater
value a customer places on a product,
the greater this economic value will be.
price
These two groups of movie-going
consumers generally have a lower
willingness to pay.
children and senior citizens
College need-based financial aid is an
example of this economic strategy.
price discrimination
Price discrimination especially benefits
firms in these types of market.
monopolies
Price discrimination moves the market
closer to this economically desirable
quality.
Social efficiency
This term refers to markets with only a
few sellers.
Oligopoly
Manufacturers of tennis balls, washing
machines, and cigarettes compete in
this type of market.
Oligopoly
Firms in oligopolies must consider the
choices that these firms make.
other suppliers
This term refers to the situation that
arises when suppliers in a market
decide to cooperate and act as a
monopolist.
Cartel
Cartels are illegal under this United
States law.
anti-trust
Marginal revenue will be greater than
this economic value if a cartel restricts
output.
marginal cost of production
This organization controls the prices of
oil worldwide and acts as a cartel.
Organization of Petroleum
Exporting Countries
OPEC raised oil prices to this dollar
amount per barrel in 1981.
$35
In April of 2020, OPEC drastically
reduced oil output due to this crisis.
COVID-19
OPEC’s 2020 reduction of oil supply
affected oil prices in this manner.
increasing prices
This form of imperfect competition is
the most common for a market.
monopolistic
Monopolistically competitive markets
merge aspects of these two types of
markets.
perfectly competitive and
monopoly
Book publishing is an example of this
type of market.
monopolistic
Firms in monopolistically competitive
markets face this type of demand
curve.
downward-sloping
Monopolistically competitive firms
produce at the point at which marginal
cost is equal to this economic value.
marginal revenue
New firms will continue to enter
monopolistically competitive firms as
long as firms earn this type of profit.
positive
Demand curves will shift in this
direction as more choices become
available to consumers.
left
Entry or exit in monopolistically
competitive markets will occur until this
economic value is reached.
equilibrium
Social inefficiency exists in
monopolistically competitive markets
because price exceeds this economic
value.
marginal cost
This economic phenomenon increases
the range of choices available to
consumers.
diversification
Producers in imperfectly competitive
markets can earn economic profits by
erecting these economic phenomena.
barriers to entry
Firms that develop new technologies
are using this economic strategy.
innovation
Firms can gain this type of economic
control through innovation.
market power
This term refers to individuals who take
the risk of creating new products or
services.
entrepreneurs
Entrepreneurs can obtain a legal
monopoly using this government
process.
patent
Innovation helps break down this type
of inefficiency.
market imperfections
This economist created the phrase
“creative destruction.”
Joseph Schumpeter
This term refers to the viewpoint that
the benefits of innovation outweigh the
inefficiencies of resource allocation.
creative destruction
This economic concept ensures that
goods and services go to the
consumers who value them the most
highly.
market price
This term refers to the situation that
arises when competitive markets do not
produce socially desirable outcomes.
market failures
This economic phenomenon arises
when the actions of one party affect
another, but neither party pays nor is
paid for the effects.
externality
This term refers to a beneficial
externality.
positive externality
This term refers to a harmful
externality.
negative externality
This type of good arises when private
property rights cannot be established
for that good.
public
When bees pollinate apple trees,
increasing their size and value, they
cause this type of externality.
positive
Pollution is a common example of this
type of externality.
negative
Generally, there will be too much of an
activity that generates this type of
externality.
negative
Increasing production will increase
marginal costs if a supply curve takes
this form.
upward sloping
Competitive market equilibrium occurs
at the intersection between these two
curves.
supply and demand
Market equilibrium does not factor in
this type of cost.
social
The social cost of a product equals the
cost of treating an externality plus this
economic value.
marginal cost
The optimal level of a negative
externality is never this number.
zero
Given a positive externality, total
revenue would increase if this
economic value increased.
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This method of solving externalities
combines externality-producing
activities into one company.
internalization
Netflix uses this method to prevent the
production of externalities.
internalization
This theorem states that negotiation in
the private market should be able to
solve externality-created inefficiencies.
Coase Theorem
This economist developed the Coase
Theorem.
Ronald Coase
Ronald Coase’s theorem serves as a
solution to this economic inefficiency.
externalities
For the Coase theorem to apply,
parties must engage in this kind of
interaction.
negotiation
Ronald Coase believed that regardless
of this condition, socially efficient
solutions can arise.
initial distribution of rights
These rights must be clearly defined in
order to guarantee an efficient solution,
according to the Coase Theorem.
property rights
When these types of rights are not
clearly defined, the Coase Theorem
does not apply.
property rights
This entity can step in to resolve
externalities when private negotiations
fail.
government
Governments frequently use these two
economic methods to correct
externalities.
taxes and subsidies
This United States city became the first
to approve traffic congestion pricing in
2019.
New York City
New York City approved congestion
pricing in April of this year.
2019
This type of vehicle must pay traffic
congestion fees already in some cities
of the United States.
for-hire
This method of solving externalities is
most effective when the value of an
externality can be estimated.
taxes
This economic strategy is established
when the value of an externality cannot
be easily estimated.
quota
Governments can create markets in
which drivers can buy or sell this
product to reduce the effects of
externalities.
permits
This United States organization uses
permits to reduce sulfur dioxide
emissions.
Environmental Protection
Agency
The EPA distributed rights to emit
sulfur dioxide through this type of
market.
auction
This United States state implemented
an emissions trading system in 2013.
California
The California emissions trading
system limits the emission of this type
of gas.
greenhouse
This government institution is essential
to the market economy and is not a
natural occurrence but rather a social
innovation.
property rights
This economic phenomenon arises
when no individual addresses the
negative externalities of a jointly owned
resource.
tragedy of the commons
A tragedy of the commons can occur
as overuse causes this type of
externality.
negative
Creating this political institution can
solve the tragedy of the commons.
property rights
This type of ownership can help
address the tragedy of the commons.
private
With this type of good, one individual’s
consumption reduces the amount of
that good available to others.
rival
Because one slice consumed is one
less slice available to other consumers,
pizza is this type of good.
rival
Because one consumer listening to the
radio does not diminish the ability of
other listeners, the radio is this type of
good.
non-rival
This quality of goods describes the
ability of a seller to control who
consumes the good.
excludability
In terms of excludability, national
defense can be described with this
term.
non-excludable
In terms of excludability, the
consumption of pizza can be described
with this term.
excludable
Private goods have these degrees of
rivalry and excludability.
high rivalry and high
excludability
Pizza falls under this category of
goods.
private
Common resources have these
degrees of rivalry and excludability.
high rivalry and low
excludability
This type of good is most likely to suffer
from the tragedy of the commons.
common resources
Fish in the ocean exemplify this type of
good.
common resources
Rival goods that are not owned are the
primary source of this market
inefficiency.
externalities
These degrees of rivalry and
excludability characterize collective
goods.
low rivalry and high
excludability
Satellite radio and pay-per-view
television are examples of this type of
good.
collective
Governments often regulate this type of
good so monopolies do not limit supply.
collective
These degrees of rivalry and
excludability characterize public goods.
low rivalry and low
excludability
The marginal cost of public goods is
close to this number.
zero
This institution controls most public
goods.
government
The radio, tornado sirens, and national
defense are examples of this type of
good.
public
This type of good has a high degree of
rivalry and a low degree of
excludability.
common resources
This type of good has a high degree of
rivalry and a high degree of excludability.
private
This type of good has a low degree of
rivalry and a low degree of
excludability.
public
This type of good has a low degree of
rivalry and a high degree of
excludability.
collective
A websites is this type of good.
collective
The environment is considered to be
this type of good.
common resource
City streets are considered to be these
types of goods.
common resources
A haircuts is this type of good.
private
Gasoline is this type of good.
private
Radio broadcasts have this degree of
excludability.
low
National defense has this degree of
rivalry.
low
Satellite radio has this degree of
excludability.
low
Fish in the ocean have this degree of
rivalry.
high
Tornado sirens have this degree of
rivalry.
low
Haircuts have this degree of
excludability.
high
The market converts the desires and
actions of individuals into this type of
outcome.
socially desirable
Economists believe that differences in
standards of living arise from variations
in this skill.
decision-making
This term refers to the formal and
informal rules of human interaction.
institution
Most markets are considered these
types of structures.
institutions
This term refers to formal rules and
structures.
organization
Institutions and organizations require
this type of interaction to function.
voluntary cooperation
Incentives to cheat on voluntary
agreements exist especially in this type
of market.
cartel
The government has the unique power
to require this payment from its
citizens.
taxes
Citizens are free to perform this action
if they dislike taxation levels in one
area.
migrate
Members of this European organization
are free to move from one country to
another.
European Union
The United States imposes strict
restrictions on this type of movement.
immigration
In the United States, only this political
entity has a monopoly on the legitimate
use of force.
government
In the United States, the government
has a monopoly on this form of power.
force
The government’s ability to restrain
criminals, compel military service, and
protect national security make up this
legal monopoly.
legitimate use of force
The government has the right to use
force in these four areas.
policing, national security,
taxation, and military service
These formal documents express
voluntary agreements between two
parties.
contracts
Without these institutions, individuals
would be more reluctant to agree to
contracts.
courts
The actions of both elected officials and
government employees can best be
described with this adjective.
self-interested
This term refers to the tendency of
elected officials to support projects that
bring money into their communities.
pork barrel politics
Pork barrel politics has this primary
outcome.
increasing the cost of the
government
Elected officials participating in pork
barrel politics want to increase the cost
of this political entity.
government
This term refers to vote trading
activities among elected officials.
logrolling
United States policy about price
supports for domestic sugar producers
can be described with this political
term.
rent seeking
Inefficiencies will arise if government
programs are concentrated but these
economic values are spread widely.
costs
Price supports for domestic sugar
producers keeps United States sugar
prices this number of times greater
than word levels.
two
A 2017 report estimated that domestic
sugar price supports caused
households to lose money in this
range.
2.4 billion to 4 billion dollars
Sugar growers have strong motivations
to hire these individuals to convince
legislators to spend money for price
supports.
lobbyists
This term refers to socially
unproductive activities that seek to
redirect economic benefits to one party
rather than another.
rent seeking
Competition determines this aspect of
federally supported rent-seeking
activities.
location
Determining how the government
should function is considered this type
of economic judgment.
normative
This field of study helps answer the
questions of how the government
should function and how big it should
be.
economics
Many consumers accept the loss of this
freedom in exchange for the
government’s protection.
individual autonomy
Microeconomics primarily focuses on
the interactions of these two economic
phenomena.
supply and demand
This point on a supply and demand
graph maximizes the combined
benefits of all market participants.
equilibrium
Firms primarily have this role in a
market economy.
suppliers
Because of the entry and exit of firms in
a market, firms earn this amount of
economic profit.
zero
Imperfect competition takes the form of
one of three types of markets.
monopoly, oligopoly, and
monopolistic
Barriers to entry are the primary reason
for this type of competition.
imperfect
Total surplus in an imperfectly
competitive market tends to be lower
than it would be in this type of market.
competitive
Economic profits incentivize these
individuals to develop new goods and
services.
entrepreneurs
Externalities occur when economic
interactions take place outside these
entities.
markets
These two dimensions categorize all
goods and services.
rivalry and excludability
This factor distinguishes institutions
from organizations.
formality
This branch of economics focuses on
the performance of the national
economy.
macroeconomics
Issues of national unemployment rates
fall under this branch of economics.
macroeconomics
Macroeconomics explores short-run
fluctuations in these two economic
indicators.
unemployment and inflation
This branch of economics is concerned
with the long-run growth of the
economy and the standard of living.
macroeconomics
These three economic indicators
measure the performance of the
aggregate economy.
gross domestic product, cost
of living, and unemployment
Macroeconomics focuses on the
performance of this type of economy.
national
Economics often use this economic
indicator to measure national output.
gross domestic product
This economic indicator measures the
total amount of goods and services
produced in the economy.
gross domestic product
Economists adjust gross domestic
product to remove the effects of this
economic situation.
inflation
The total real output of the United
States economy has increased this
number of times since 1900.
40
United States output declined most
notably during this historical period.
Great Depression
United States output increased most
notably during this world event.
World War II
Overall, the output of the United States
economy has followed this direction.
upward
This economic activity is the primarily
limiter of consumption.
production
The growth of this measure has
primarily driven the United States’
increase in output.
population
The population of the United States has
increased by this factor since 1900.
four
The average output per person in the
United States has increased by this
factor since 1900.
eight
The phrase “per capita” translate to this
English phrase.
per head
The phrase “per capita” translate to this
English phrase.
per head
The phrase “per capita” originates from
this language.
Latin
This term refers to the average amount
of output per worker.
average labor productivity
Average labor productivity equals the
total output divided by this value.
total number of workers
The average output per person in the
United States was around this number
of dollars in 2019.
65,000
This country has five times the United
States’ population.
China
China’s population is this number of
times greater than the United States
population.
five
China’s production is this factor of the
United States’ production.
two-thirds
China’s per capita output is this
percentage of the United States’ per
capita output.
15
The countries with the lowest output
per capita are mainly located in these
two regions.
South Asia and Africa
This Asian country has a GDP similar
to the United States and Western
Europe.
Japan
This region of Europe has higher GDPs
compared to the other regions.
western
Because of this economic indicator,
poorer citizens living in advanced
economies have access to better
material goods.
standard of living
Quality of life changes in this manner
as output per person increases.
increases
Higher levels of this economic activity
ensure longer life, broader access to
education, better healthcare, and a
cleaner environment.
production
The decline in real output of the Great
Depression is almost equal to the
increase in real output during this
event.
World War II
This twenty-first century year was most
notable for a great recession.
2008
This term refers to the economic period
between a trough and a peak in
economic activity.
expansion
This term refers to the period between
a peak and a trough in economic
activity.
recession
This term refers to a particularly severe
recession.
depression
The most severe recession in United
States history occurred between these
two years.
1929 and 1933
This term refers to the alteration
between expansion and recession.
business cycle
This type of economic period features
declining employment and slower wage
growth.
recession
This branch of economics is concerned
with reducing the severity and duration
of recessions.
macroeconomics
This term refers to the percentage of
the labor force that seeks but cannot
find work.
unemployment rate
The labor force consists of these two
types of workers.
employed and unemployed
The unemployment rate rises during
this type of economic period.
recession
Unemployment can never reach this
number.
zero
This situation arises when all prices
rise together.
inflation
This situation arises when a country’s
exports exceed its imports.
trade surplus
This situation arises when a country’s
exports are less than its imports.
trade deficit
This term refers to the combination of
different factors into a single economic
variable.
aggregation
aggregation
Economists use aggregation to study
the behavior of this type of economy.
national
This branch of economics uses
economic aggregates.
macroeconomics
This term refers to the aggregate of the
value of all final goods and services
produced within a country during a
specific period.
gross domestic product
Gross domestic product only includes
this type of goods and services.
final
Higher-priced goods will have more of
an influence on this economic indicator
than lower-priced goods.
gross domestic product
Market prices reflect the value that this
type of customer places on a specific
good.
marginal
These goods are used to produce a
final good.
intermediate goods
This macroeconomic indicator does not
include intermediate goods.
gross domestic product
Gross domestic product excludes
intermediate goods so that this type of
integration does not affect GDP.
vertical
These long-lasting goods are used to
produce other goods and services.
capital goods
Machinery and factory buildings are
examples of this type of good.
capital
GDP only includes capital goods in this
year.
year they are produced
This word indicates that gross domestic
product only considers goods produced
within a country.
domestic
Economists usually measure GDP in
these two frequencies.
annual and quarterly
GDP would include a house only in this
year.
year it was produced
Economists developed methods to
measure GDP during this decade.
1930s
This British official was one of the first
to attempt to measure national output.
Sir William Petty
Sir William Petty attempted to measure
national output during this century.
mid-seventeenth
Sir William Petty wanted to assess the
ability of people in this country to pay
taxes.
Ireland
This United States organization sought
to develop a system to measure
national output in 1932.
Department of Commerce
The United States Department of
Commerce commissioned this
economist to create a system to
measure national output.
Simon Kuznets
Kuznets received this award in
economic science for his developments
in the measurement of national
production.
Nobel Prize
Kuznets believed that national defense
should be considered this type of good.
intermediate
This economic indicator excludes
goods that are exchanged outside
markets.
gross domestic product
This demographic has increasingly
entered the labor force in the past 60
years.
women
This economic indicator does not
address the depletion of natural
resources or pollution of the
environment.
gross domestic product
This measurement is the total value of
all expenditures within a country.
gross domestic product
Purchases fall into these four economic
categories.
households, firms,
government, and foreign
This term refers to household
purchases.
consumption expenditures
Consumption expenditures fall into
these three main categories.
consumer durables,
nondurables, and services
This term refers to long-lasting
consumer goods.
consumer durables
Automobiles, washing machines, and
furniture are examples of these types of
household purchases.
consumer durables
This term refers to goods that are used
up faster than durable goods.
consumer nondurables
Food and clothing are examples of
these types of household purchases.
consumer nondurables
These intangible goods are considered
household purchases.
services
Education and insurance are examples
of these types of household purchases.
services
This term refers to any spending by
firms on final goods and services and
purchasing of new houses.
investment
This type of investment includes
factories, offices, machinery, and
equipment.
business fixed investment
This type of investment includes new
homes and apartment buildings.
residential fixed investment
This type of investment includes unsold
goods and company inventories.
inventories
Investments fall into these three
categories.
business fixed investment,
residential fixed investment,
and inventories
This term refers solely to the purchase
of new capital goods.
investment
Shares of stock or bonds are often
confused with this type of expenditure.
investment
These types of purchases include all
goods and services bought by federal,
state, and local governments.
government
The wages of firefighters and teachers
fall under this category of expenditures.
government purchases
Social Security benefits fall under this
category of payment.
transfer
This term is the difference between
exports and imports.
net exports
This term refers to domestically
produced goods sold to foreigners.
exports
Adding these four purchases gives
gross domestic product.
consumption, investment,
government spending, and
net exports
Economists view income as equal to
this economic indicator.
gross domestic product
These three terms can interchangeably
describe gross domestic product.
production, expenditures,
and income
Economists use these two economic
values to calculate gross domestic
product.
quantity and price
Economists seek to separate changes
in this value from changes in the
quantity of goods and services
produced.
price
This type of gross domestic product
uses prices from a single year to
measure production in each year.
real
This economic value remains constant
in calculations of real gross domestic
product.
price
This version of gross domestic product
is calculated with current year prices.
nominal GDP
This United States organization
calculates the Consumer Price Index.
Bureau of Labor Statistics
The Bureau of Labor Statistics
calculates the Consumer Price Index
with this frequency.
monthly
The Consumer Price Index was created
to measure this economic indicator.
inflation
This statistic measures the cost of a
certain basket of goods and services
representing the consumption of a
typical consumer.
Consumer Price Index
The Bureau of Labor Statistics collects
data through this method.
surveys
The Bureau of Labor Statistics
oversees this survey.
Consumer Expenditure
Survey
The Consumer Price Index is
expressed as this type of number.
index
To arrive at the Consumer Price Index,
economists divide the cost of bundle
each year by the cost of the bundle in
this year and then multiply by 100.
base
The benefits of this government
program are adjusted based on the
Consumer Price Index.
Social Security
The Consumer Price Index is intended
to reflect changes in this cost.
cost of living
Employers adjust wages based on this
economic indicator.
Consumer Price Index
This economic statistic will often
overstate the true cost of living.
Consumer Price Index
These three factors cause the upward
bias of the Consumer Price Index.
substitution bias,
unmeasured quality change,
and new goods and services
This bias in the Consumer Price Index
occurs as households consume less
expensive goods.
substitution bias
Consumers switching from beef to less-
expensive chicken is an example of this
bias.
substitution bias
This bias in the Consumer Price Index
occurs when goods and services get
more advanced over time.
unmeasured quality change
The development of increased
processor speeds and greater storage
of computers is an example of this bias.
unmeasured quality change
This bias in the Consumer Price Index
occurs because of new technological
innovations.
new goods and services
The development of the cell phone is
an example of this bias in the
Consumer Price Index.
new goods and services
This economic project reviewed the
methods used to calculate the
Consumer Price Index and determined
that the index overstated the rate of
price inflation.
Boskin Commission
This economist led the Boskin
Commission.
Michael Boskin
The Boskin Commission determined
that the Consumer Price Index
overstates the rate of price inflation by
this percentage each year.
1.3
This economic indicator measures the
relationship between real and nominal
GDP.
GDP deflator
The GDP deflator is a ratio of these two
values.
nominal and real GDP
This economic indicator is considered
less volatile than the Consumer Price
Index.
GDP deflator
This type of good has a larger effect on
the Consumer Price Index than the
GDP deflator does.
foreign-produced
In the 1970s, rises in prices of this
good in had a major impact on the
Consumer Price Index.
oil
The GDP deflator weighs prices by
production in this year.
current year
Workers feel secure about their jobs
when this economic indicator is low.
unemployment rate
This rate is the percentage of the labor
force that cannot find employment.
unemployment rate
This government agency measures the
unemployment rate in the United
States.
Bureau of Labor Statistics
The Bureau of Labor Statistics surveys
this number of households to measure
the unemployment rate.
60,000
The Bureau of Labor Statistics surveys
households with this frequency to
determine the unemployment rate.
monthly
Interviewers categorize individuals
above this age to determine the
unemployment rate.
16
Someone working part-time for pay is
in this employment category.
employed
Someone on sick leave is in this
employment category.
employed
Someone who tried unsuccessfully to
find employment during the past four
weeks is in this employment category.
unemployed
Someone who did not work during the
past week and did not seek
employment the past four weeks is in
this employment category.
out of the labor force
According to the Bureau of Labor
Statistics estimates, approximately this
number of working-age individuals live
in the United States.
260 million
According to the Bureau of Labor
Statistics estimates, the United States
labor force has approximately this
number of individuals.
160 million
This ratio relates the individuals in the
labor force to those in the working-age
population.
labor force participation rate
The United States labor force
participation rate is approximately this
percentage.
61.4
As of July 2020, economists estimate
that this number of people were
unemployed in the U.S.
16.3 million
As of July 2020, the unemployment
rate in the United States was
approximately this percentage.
10.2
The unemployment rate of the United
States in 2019 was approximately this
percentage.
3.4
This demographic has the highest
unemployment rate compared to other
age groups.
teenagers
Unemployment is divided into these
three subcategories.
frictional, structural, and
cyclical
This type of unemployment involves
delay in matching employers and
employees.
frictional
This type of unemployment occurs
when workers are unemployed for short
amounts of time.
frictional
This type of unemployment involves a
mismatch between the skills of
jobseekers and the requirements of
employers.
structural
This United States industry’s collapse
in the 1980s is an example of structural
unemployment.
steel
A decrease in unemployment, an
increase in layoffs, and a decrease in
new hires characterize this type of
economic period.
recessions
Recessions cause this type of
unemployment.
cyclical
Economists estimate that GDP per
capita in the United States grew by this
factor from 1900 to 2019.
nine
This term refers to the improvement in
living standards due to the developing
economy.
economic growth
These two world regions have seen
sustained economic growth in the past
200 years.
United States and Western
Europe
This model shows the flow of money
throughout the economy.
circular flow model
The circular flow model includes these
three sets of economic actors.
households, firms, and
government
Households in the circular flow model
receive this type of payment for
providing labor.
income
The factors of production in the circular
flow model can be broken down into
these three categories.
labor, capital, and land
In the circular flow model, households
use their income to perform these three
economic activities.
purchase goods and
services, pay taxes, and
save through financial
markets
Firms earn this type of economic gain
from selling their goods and services.
revenue
The government receives money from
households through this form of
payment.
taxes
Economists calculate real GDP per
capita by multiplying the fraction of the
population that is employed by this
economic value.
real GDP per worker
The average quantity of goods and
services available primarily depends on
this economic value.
average labor productivity
Labor force participation rates have
increased as this demographic has
entered the labor force in the last
century.
women
The twentieth-century increase in
output per person rests primarily on the
increase of this economic value.
average labor productivity
Average labor productivity depends on
these five categories.
physical capital, human
capital, natural resources,
technological knowledge,
and political and legal
environment
This category of labor productivity
refers to the advancement of tools,
machinery, and other manufacturing
methods.
physical capital
In order to increase future capital stock,
economic actors must give up this
economic activity.
consumption
This term refers to the skills that
workers gain through education and
work experience.
human capital
This category of labor productivity is
based on the resources that countries
or regions possess.
natural resources
This category of labor productivity
refers to specialized information about
new technological innovations.
technological knowledge
This category of labor productivity is
considered the most important factor to
increase average labor productivity.
technological knowledge
The moving assembly line is an
example of this category of labor
productivity.
technological knowledge
The political and legal environment
governs the way in which the
government spreads this type of
knowledge.
technological
The government’s promotion of
technological innovation allowed these
three Asian countries to experience
rapid growth in standards of living.
Japan, South Korea, and
China
In this Asian country, the government
has not exploited the full potential of
modern manufacturing techniques.
North Korea
This development sector focuses on
creating new technological knowledge.
research and development
This term refers to an individual’s
possession of more income than they
desire to spend.
saving
This term refers to the purchase of new
capital equipment.
investment
Individuals can supply investment
funding to other parties through these
institutions.
financial markets
Corporations can sell this economic
asset to borrow directly from the public.
bonds
The loan on a bond must be repaid
before this date.
date of maturity
This certificate of indebtedness states
the obligations of the borrower.
bond
A bond loans this original amount.
principal
The risk of price changes in a bond
rises with the length of this property.
maturity
This situation arises when a borrower
fails to pay some or all the principal or
interest on a bond.
default
This property of a bond increases as
the risk of defaulting increases.
interest rate
This entity is an especially safe credit
risk for bonds.
United States government
Companies sell these shares for part
ownership in a business.
stocks
This type of finance involves the sale of
shares of stock.
equity
This type of finance involves the sale of
bonds.
debt
Companies typically pay their
shareholders through this form of
quarterly payment.
dividends
This type of expenditure includes new
issues of stock.
investment
This term refers to a third party that
links two other parties.
intermediary
These two financial intermediaries are
considered the most important.
banks and mutual funds
This financial intermediary accepts
deposits from individuals who wish to
save money and allows individuals to
borrow money.
banks
Banks provide this type of account to
facilitate purchasing goods and
services.
checking
This financial intermediary purchases a
wide variety of stocks and bonds and
sells its shares to savers.
mutual funds
This financial intermediary allows
people to access the skillsets of
professional money managers.
mutual funds
In a closed economy, this economic
value is zero.
net exports
In a closed economy, savings always
equals this expenditure.
investment
Subtracting government spending from
net taxes gives this economic value.
government saving
A government with negative savings
runs this type of budget.
budget deficit
This term refers to the difference in the
purchase of foreign assets by domestic
residents and the purchase of domestic
assets by foreigners.
net capital outflow
These two types of investment make
up international capital flows.
foreign direct investment and
portfolio investment
Net capital outflows exactly equal this
economic value in an open economy.
net exports
Domestic saving equals domestic
investment plus this economic value.
net capital outflows
Adjusting this economic value can
equalize the supply and demand for
savings.
interest rate
The interest rate functions as this
aspect of a loan in a financial market.
price
This type of relationship exists between
the interest rate and quantity of
savings.
positive
The demand curve for savings has this
slope.
downward
Interest rates above equilibrium would
produce an excess of this economic
value.
funds
This term refers to the tendency of
government deficits to reduce private
investment.
crowding out
The supply of savings curve will shift in
this direction if the government wants
to encourage savings.
rightward
This economic innovation allows
individuals to exchange goods in our
economy, without having to barter.
money
This economic phenomenon occurs
when too much money circulates in an
economy.
inflation
Economists believe that money has
these three main functions.
medium of exchange, unit of
account, and store of value
This term refers to an item that
consumers can use when purchasing
goods and services.
medium of exchange
Money that consumers hold even
though it earns no interest serves this
function.
medium of exchange
This term refers to a yardstick used to
establish the value of goods and
services.
unit of account
This term refers to an item that
consumers can use to transfer
purchasing power from the present to
the future.
store of value
Money that consumers hold for weeks
or months before purchasing goods is
serving this function.
store of value
Economists use this term to describe
all the different methods of storing
value in an economy.
wealth
This term refers to the ease with which
an asset can be converted into a
medium of exchange in an economy.
liquidity
Economists consider this asset to be
the most liquid.
currency
Money typically falls into these two
categories.
fiat and commodity
This term refers to money with intrinsic
value, such as gold or silver.
commodity money
This term refers to money with no
intrinsic value, such as a dollar bill.
fiat money
This term refers to bills and coins to
which the public has access.
currency
Currency and demand deposits fall
under this economic measure.
M1
Savings deposits and all M1 fall under
this economic measure.
M2
This economic system is the central
bank of the United States.
Federal Reserve System
This economic system is the central
bank of the United States.
Federal Reserve System
These economic institutions act as
lenders of last resort when a member
bank cannot obtain funds from other
sources.
Federal Reserve banks
This economic committee oversees the
money supply of the United States.
Federal Open Market
Committee
The Fed can adjust the money supply
through this type of economic
operation.
open market
The Fed will purchase this economic
asset if it wishes to increase the money
supply.
government bonds
This term refers to the money that the
banking sector creates from each dollar
of reserves.
money multiplier
Calculating the reciprocal of this
economic value gives the money
multiplier.
reserve ratio
This term refers to the amount of
currency added to reserves.
monetary base
This phrase is an alternate term for the
monetary base.
high-powered money
This federal requirement sets the
minimum amount of reserves banks
must hold.
reserve requirement
This term refers to the interest rate that
the Federal Reserve charges on loans
it makes to banks.
discount rate
This term refers to the rate banks
charge when they lend reserves to
other banks.
federal funds rate
This term refers to a rush of
withdrawals at a bank.
bank run
Banks whose assets exceed their
liabilities are in this state.
solvent
The Consumer Price Index has
increased by this factor from 1960 to
2019.
8.6
Interaction between these two
economic principles determines the
value of money.
supply and demand
As this economic value increases,
consumers need less money to buy a
given amount of goods and services.
value of money
This economic principle expresses the
fact that changes in the quantity of
money do not affect real quantities in
the economy.
neutrality of money
This type of quantity is measured in
physical units, such as bushels of
wheat.
real
This term refers to the average number
of times a dollar bill is used in one year.
velocity of money
The number of dollars in circulation
multiplied by this economic value
equals the price level multiplied by the
real GDP.
velocity of money
This economic phenomenon reduces
the value of money in the economy.
inflation
Inflation often distorts this economic
value.
price
Macroeconomics focuses on these
short-term economic issues.
fluctuations
This economic organization officially
defined recessions and expansions in
the United States economy.
National Bureau of
Economic Research
This term refers to a particularly severe
recession that occurs for a prolonged
period.
depression
Industrial societies have experienced
business cycles since this century.
late eighteenth
Recessions occur when real GDP
declines for at least this number of
consecutive quarters.
two
The Great Depression featured an
economic decline that lasted this
number of months.
43
The actual GDP of an economy
consists of these two economic
properties.
potential output and output
gap
This term refers to the output that an
economy can produce when resources
are used at normal rates.
potential output
The type of output is the difference
between actual output and this
economic value.
potential output
This term refers to unemployment that
arises from frictional and structural
issues.
natural rate of
unemployment
The natural rate of unemployment
occurs when potential output equals
this economic value.
potential output
This economist determined that every
one percent change in cyclical
unemployment correlated with a two
percent change in the output gap.
Arthur Okun
Arthur Okun was chief economic
advisor to this president.
John F. Kennedy
In the short run, firms adjust this
economic activity before adjusting
prices to respond to changes in
demand.
production
This term is the total spending on final
goods and services by all consumers in
an economy.
aggregate demand
In the long run, firms will adjust this
economic value to respond to
variations in demand.
price
This economist wrote the 1936 book
The General Theory of Employment,
Interest, and Money.
John Maynard Keynes
John Maynard Keynes developed this
macroeconomic model of the economy
to account for economic depressions.
Keynesian model
The Keynesian theory states that short-
run fluctuations in the economy result
from the interaction between these two
macroeconomic values.
aggregate demand and
aggregate supply
This type of relationship exists between
aggregate demand and aggregate price
level.
negative
Aggregate demand and aggregate
price level have a negative relationship
primarily for these three reasons.
wealth effects, interest rate
effects, and foreign
This economic principle expresses the
fact that lower prices increase
consumer wealth and encourage
spending.
wealth effects
This economic principle expresses the
fact that at a lower domestic price level,
domestic goods will become less
expensive relative to foreign goods,
causing net exports to increase.
foreign exchange effects
A reduction in consumer spending will
shift the AD curve in this direction.
leftward
The aggregate supply curve slopes in
this direction.
upward
The short-run aggregate supply curve
shifts mainly for these two reasons.
expected price level changes
and aggregate supply
shocks
Changes in weather and climate
conditions are these types of shocks.
aggregate supply shocks
Cyclical unemployment equals this
value when actual output is equal to
potential output.
Zero
In 1973, a shortage of petroleum and
higher prices of gasoline shifted the
short-run aggregate supply curve in this
direction.
Leftward
In the United States, the aggregate
price level has followed an upward
trend since this historical event.
World War II
In the Keynesian model, an increase in
money supply shifts the aggregate
demand curve in this direction.
rightward
This term refers to increased
government spending.
expansionary fiscal policy
Fiscal policy can be used to increase
spending through these types of
actions.
Tax Cuts
This economic organization can vary
the money supply to control the interest
rate.
Federal Reserve
Economists can calculate initial
estimates of GDP in about this number
of months.
three
Most economists believe that these
types of policies are counterproductive
in mitigating the effects of a recession.
activist
