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Economics CP > Economics Final Terms > Flashcards

Economics Final Terms Flashcards

1
Q

trade-off

A

an alternative that we sacrifice when we make a decision

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2
Q

production possibilities frontier

A

the line on a production possibilities graph that shows the maximum possible output

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3
Q

law of increasing costs

A

law that states that as we shift factors of production from making one good or service to another, the cost of producing the second item increases

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4
Q

market economy

A

economic system in which decisions on production and consumption of goods and services are based on voluntary exchange in markets

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5
Q

centrally planned economy or command economy

A

economic system in which the central government makes all decisions on the production and consumption of goods and services

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6
Q

Mixed economy

A

market-based economic system with limited government involvement

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7
Q

consumer sovereignty

A

the power of consumers to decide what gets produced

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8
Q

heavy industry

A

industry that requires a large capital investment and that produces items in other industries

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9
Q

free enterprise

A

an economic system characterized by private or corporate ownership of capital goods; investments that are determined by private decisions rather than by state control; and determined in a free market

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10
Q

demand schedule

A

a table that lists the quantity of a good a person will buy at each different price

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11
Q

market demand schedule

A

a table that list the quantity of a good all consumers in a market will buy at each different price

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12
Q

ceteris paribus

A

a Latin phrase that means “all other things held constant”

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13
Q

normal good

A

a good that consumers demand more of when their incomes increase

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14
Q

inferior good

A

a good that consumers demand less of when their incomes increase

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15
Q

elasticity of demand

A

a measure of how consumers react to a change in price

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16
Q

inelastic

A

describes demand that is not very sensitive to a change in price

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17
Q

elastic

A

describes demand that is very sensitive to a change in price

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18
Q

unitary elastic

A

describes demand whose elasticity is exactly equal to 1

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19
Q

total revenue

A

the total amount of money a firm receives by selling goods or services

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20
Q

law of supply

A

tendency of suppliers to offer more of a good at a higher price

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21
Q

supply schedule

A

a chart that lists how much of a good a supplier will offer at different prices

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22
Q

market supply schedule

A

a chart that lists how much of a good all suppliers will offer at different prices

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23
Q

elasticity of supply

A

a measure of the way quantity supplied reacts to a change in price

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24
Q

marginal product of labor

A

the change in output from hiring one additional unit of labor

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25
Q

increasing marginal returns

A

a level of production in which the marginal product of labor increases as the number of workers increases

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26
Q

diminishing marginal returns

A

a level of production in which the marginal product of labor decreases as the number of workers increases

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27
Q

total cost

A

fixed costs + variable costs

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28
Q

marginal cost

A

the cost of producing one more unit of a good

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29
Q

marginal revenue

A

the additional income from selling one more unit of a good; sometimes equal to price

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30
Q

operating cost

A

the cost of operating a facility, such as a store or factory

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31
Q

subsidy

A

a government payment that supports a business or market

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32
Q

excise tax

A

tax on production or sale of a good

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33
Q

price ceiling

A

a maximum price that can be legally charged for a good or service

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34
Q

price floor

A

the minimum price for a good or service

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35
Q

rent control

A

price ceiling placed on rent

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36
Q

shortage

A

situation in which quantity demanded is greater than quantity supplied; also called excess demand

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37
Q

spillover costs

A

costs of production that affect people who have no control over how much of a good is produced

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38
Q

perfect competition

A

a market structure in which a large number of firms all produce the same product

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39
Q

commodity

A

a product that is the same no matter who produces it, such as petroleum, notebook paper, or milk

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40
Q

imperfect competition

A

a market structure that doesn’t meet the conditions of perfect competition

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41
Q

economies of scale

A

factors that cause a producer’s average cost per unit to fall as output rises

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42
Q

natural monopoly

A

a market that runs most efficiently when one large firm supplies all of the output

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43
Q

government monopoly

A

monopoly created by the government

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44
Q

franchise

A

the right to sell a good or a service within an exclusive market

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45
Q

market power

A

the ability of a company to change prices and output like a monopolist

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46
Q

nonprice competition

A

a way to attract customers through style, service, or location, but not a lower price

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47
Q

oligopoly

A

a market in which a few large firms dominate a market

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48
Q

price war

A

a series of competitive price cuts that lowers the market price below the cost of production

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49
Q

collusion

A

an agreement among firms to divide the market, set prices, or limit production

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50
Q

price fixing

A

an agreement among firms to charge one price for the same good

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51
Q

cartel

A

a formal organization of producers that agree to coordinate prices and production

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52
Q

predatory pricing

A

selling a product below cost to drive competitors out of the market

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53
Q

antitrust laws

A

laws that encourage competition in the marketplace

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54
Q

zoning law

A

law in a city or town that designates separate areas for residency and for business

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55
Q

liability

A

the legally bound obligation to pay debts

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56
Q

fringe benefit

A

payment other than wages or salaries

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57
Q

general partnership

A

partnership in which partners share equally in both responsibility and liability

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58
Q

limited partnership

A

partnership in which only one partner is required to be a general partner

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59
Q

limited liability partnership (LLP)

A

partnership in which all partners are limited partners

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60
Q

Uniform Partnership Act (UPA)

A

act ordering common ownership interests, profit and loss sharing, and shared management responsibilities in a partnership

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61
Q

closely held corporation

A

corporation that issues stock to only a few people, often family members

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62
Q

publicly held corporation

A

corporation that sells stock on the open market

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63
Q

bond

A

a formal contract to repay borrowed money with interest at fixed intervals

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64
Q

certificate of incorporation

A

license to form a corporation issued by the state government

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65
Q

dividend

A

the portion of corporate profits paid out to stockholders

66
Q

horizontal merger

A

the combination of two or more firms competing in the same market with the same good or service

67
Q

vertical merger

A

the combination of two or more firms involved in different stages of producing the same good or service

68
Q

royalty

A

share of earnings given as payment

69
Q

cooperative

A

a business organization owned and operated by a group of individuals for their mutual benefit

70
Q

consumer cooperative

A

retail outlet owned and operated by consumers

71
Q

service cooperative

A

cooperative that provides a service, rather than a good

72
Q

producer cooperative

A

agricultural marketing cooperative that helps members sell their products

73
Q

professional organization

A

nonprofit organization that works to improve the image, working conditions, and skill levels of people in particular occupations

74
Q

trade association

A

nonprofit organization that promotes the interests of a particular industry

75
Q

learning effect

A

the theory that education increases productivity and results in higher wages

76
Q

screening effect

A

the theory that the completion of college indicates to employers that a job applicant is intelligent and hardworking

77
Q

featherbedding

A

the practice of negotiating labor contracts that keep unnecessary workers on a company’s payroll

78
Q

collective bargaining

A

the process in which union and company representatives meet to negotiate a new labor contract

79
Q

arbitration

A

a settlement technique in which a third party reviews the case and imposes a decision that is legally binding for both sides

80
Q

commodity money

A

Objects that have value in themselves and that are used as money (gold or silver)

81
Q

bank run

A

Widespread panic which great numbers of people try to take their paper money out of the bank

82
Q

central bank

A

Bank that can lend to other banks in times of need

83
Q

member bank

A

bank that belongs to the federal reserve system

84
Q

demand deposit

A

the money in checking accounts

85
Q

money market mutual

A

A fund that pools money from small savers to buy short term government and corporate securities

86
Q

fraction reserve banking

A

A banking system that keeps only a fraction of funds on hand and lends out the rest

87
Q

default

A

failure to pay back loan

88
Q

interest

A

the price paid for the use of borrowed money

89
Q

financial assets

A

Claim on the property or income of a borrower

90
Q

Financial intermediary

A

An institution that helps channel funds from savers to borrowers

91
Q

mutual fund

A

Fund that pools money in a variety of stocks, bonds, and other financial assets

92
Q

coupon rates

A

The interest that a bond issuer will pay to a bondholder

93
Q

maturity

A

The time at which payment to a bond holder to due

94
Q

par value

A

The amount that an investor pays that to purchase a bond and that will be repaid to the investor at maturity

95
Q

yield

A

The annual rate of return on a bond of the bond were held to maturity

96
Q

savings bond

A

Low-denomination bonds issued by US government

97
Q

municipal bond

A

A bond issues by a state or local government to finance city improvements

98
Q

corporate bond

A

A bond that a corporation issues to raise money to expand its business

99
Q

securities and exchange commission

A

An independent agency of the government that regulates financial markets and investment companies

100
Q

junk bond

A

A lower-rated, potentially higher paying bond

101
Q

capital markets

A

A market in which money is lent for periods longer than a year

102
Q

money markets

A

Market in which money is lent for periods less than a year

103
Q

primary markets

A

Markets for selling financial assets that can only be redeemed by the original holder

104
Q

secondary markets

A

Market for reselling financial assets

105
Q

equities

A

claims of ownership in a corporation

106
Q

stock split

A

The division of a single share of stock into more than one share

107
Q

stockbroker

A

a person who links buyers and sellers of stock

108
Q

broker firm

A

A business that specializes in trading stocks

109
Q

OTC market

A

An electronic marketplace for stocks and bonds

110
Q

Nasdaq

A

American market for OTC securities

111
Q

call option

A

The option to buy shares of stocks at a specified time in the future

112
Q

put option

A

The option to sell shares of stock a specified time in the future

113
Q

speculation

A

The practice of making risky investments in hopes of getting a high return

114
Q

The Dow

A

Index that shows how certain stocks have traded

115
Q

S and P 500

A

Index that shows the price changes of 500 different stocks

116
Q

National Income Accounting

A

A system that collects macroeconomic statistics on production, income, investment, and savings

117
Q

GDP

A

The dollar value of all fail goods and services produced within a country’s border at a given year.

118
Q

intermediate goods

A

Goods used in the produced of final goods

119
Q

nominal GDP

A

Measured in current prices

120
Q

real GDP

A

GDP expressed in constant, or unchanging, prices.

121
Q

GNP

A

The annual income earned by U.S owned firms and U.S citizens.

122
Q

aggregate supply

A

The total amount of goods and services in the economy available at all possible price levels

123
Q

aggregate demand

A

The total amount of goods and services in the economy that will be purchased at all possible price levels.

124
Q

leading indicators

A

Key economic variables that economists se to predict a new phase of a business cycle

125
Q

Real GDP per capita

A

Real GDP divided by the total population

126
Q

capital deepening

A

The process of increasing the amount of capital per worker

127
Q

savings rate

A

The proportion of disposable income that is saved

128
Q

technological progress

A

An increase in efficiency by producing more output without using more inputs.

129
Q

fiscal policy

A

The use of government spending and revenue collection to influence the economy

130
Q

fiscal year

A

a 12 month period that can begin on any day

131
Q

Office of Management and Budget (OMB)

A

Government office that manages the federal budget

132
Q

Congressional Budget Office (CBO)

A

Government agency that provides economic data to Congress

133
Q

Appropriations bill

A

A bill that sets money aside for specific money spending

134
Q

contractionary policies

A

Fiscal policies, like lower spending and higher taxes, that reduce economic growth

135
Q

productive capacity

A

The maximum output that an economy can produce without big increases in inflation.

136
Q

demand-side economics

A

The idea that government spending and tax-cuts help an economic situation by raising demand

137
Q

Keynesian economics

A

A form of demand-side economics that encourages government action to increase or decrease demand and output

138
Q

supply-side economics

A

A school of economics that believes tax cuts can help an economy by raising supply

139
Q

Council of Economic Advisers (CEA)

A

A group of three respected economists that advise the President on economic policy

140
Q

crowding out effect

A

The loss of funds for private investment due to government borrowing.

141
Q

expansionary policies

A

Fiscal policies, like higher government spending and lower taxes, that encourage economic growth.

142
Q

board of governors

A

the seven member board that oversees the federal reserve system

143
Q

monetary policy

A

the actions the federal reserve takes to influence the level of real GDP and the rate of inflation in the economy

144
Q

federal reserve districts

A

the twelve banking districts created by the federal reserve act

145
Q

federal advisory council (FAC)

A

the research arm of the federal reserve

146
Q

federal open market committee (FOMC)

A

federal reserve committee that makes key decisions about interest rates and the growth of the united states money supply

147
Q

check clearing

A

the process by which banks record whose account gives up money and whose account receives money when a customer writes a check

148
Q

bank holding company

A

a company that owns more than one bank

149
Q

federal funds rate

A

interest rate banks charge each other for loans

150
Q

discount rate

A

rate the federal reserve charges for loans to commercial banks

151
Q

net worth

A

total assets - total liabilities

152
Q

money creation

A

the process by which money enters into circulation

153
Q

required reserve ratio

A

ratio of reserves to deposits required of banks by the federal reserve

154
Q

money multiplier formula

A

amount of new money that will be created with each demand deposit, calculated as 1/RRR

155
Q

excess reserves

A

reserves greater than the required amounts

156
Q

prime rate

A

rate of interest banks charge on short term loans to their best customers

157
Q

open market operations

A

the buying and selling of government securities to alter the supply of money

158
Q

monetarism

A

the belief that money supply is the most important factor in macroeconomic performance

159
Q

easy money policy

A

monetary policy that increases the money supply

160
Q

tight money policy

A

monetary policy that reduces the money supply

161
Q

inside lag

A

delay in implementing monetary policy

162
Q

outside lag

A

the time it takes for monetary policy to have an effect

Economics CP (2 decks)

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