Economics Final Terms Flashcards
1
Q
trade-off
A
an alternative that we sacrifice when we make a decision
2
Q
production possibilities frontier
A
the line on a production possibilities graph that shows the maximum possible output
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
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
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
6
Q
Mixed economy
A
market-based economic system with limited government involvement
7
Q
consumer sovereignty
A
the power of consumers to decide what gets produced
8
Q
heavy industry
A
industry that requires a large capital investment and that produces items in other industries
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
10
Q
demand schedule
A
a table that lists the quantity of a good a person will buy at each different price
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
12
Q
ceteris paribus
A
a Latin phrase that means “all other things held constant”
13
Q
normal good
A
a good that consumers demand more of when their incomes increase
14
Q
inferior good
A
a good that consumers demand less of when their incomes increase
15
Q
elasticity of demand
A
a measure of how consumers react to a change in price
16
Q
inelastic
A
describes demand that is not very sensitive to a change in price
17
Q
elastic
A
describes demand that is very sensitive to a change in price
18
Q
unitary elastic
A
describes demand whose elasticity is exactly equal to 1
19
Q
total revenue
A
the total amount of money a firm receives by selling goods or services
20
Q
law of supply
A
tendency of suppliers to offer more of a good at a higher price
21
Q
supply schedule
A
a chart that lists how much of a good a supplier will offer at different prices
22
Q
market supply schedule
A
a chart that lists how much of a good all suppliers will offer at different prices
23
Q
elasticity of supply
A
a measure of the way quantity supplied reacts to a change in price
24
Q
marginal product of labor
A
the change in output from hiring one additional unit of labor
25
increasing marginal returns
a level of production in which the marginal product of labor increases as the number of workers increases
26
diminishing marginal returns
a level of production in which the marginal product of labor decreases as the number of workers increases
27
total cost
fixed costs + variable costs
28
marginal cost
the cost of producing one more unit of a good
29
marginal revenue
the additional income from selling one more unit of a good; sometimes equal to price
30
operating cost
the cost of operating a facility, such as a store or factory
31
subsidy
a government payment that supports a business or market
32
excise tax
tax on production or sale of a good
33
price ceiling
a maximum price that can be legally charged for a good or service
34
price floor
the minimum price for a good or service
35
rent control
price ceiling placed on rent
36
shortage
situation in which quantity demanded is greater than quantity supplied; also called excess demand
37
spillover costs
costs of production that affect people who have no control over how much of a good is produced
38
perfect competition
a market structure in which a large number of firms all produce the same product
39
commodity
a product that is the same no matter who produces it, such as petroleum, notebook paper, or milk
40
imperfect competition
a market structure that doesn't meet the conditions of perfect competition
41
economies of scale
factors that cause a producer's average cost per unit to fall as output rises
42
natural monopoly
a market that runs most efficiently when one large firm supplies all of the output
43
government monopoly
monopoly created by the government
44
franchise
the right to sell a good or a service within an exclusive market
45
market power
the ability of a company to change prices and output like a monopolist
46
nonprice competition
a way to attract customers through style, service, or location, but not a lower price
47
oligopoly
a market in which a few large firms dominate a market
48
price war
a series of competitive price cuts that lowers the market price below the cost of production
49
collusion
an agreement among firms to divide the market, set prices, or limit production
50
price fixing
an agreement among firms to charge one price for the same good
51
cartel
a formal organization of producers that agree to coordinate prices and production
52
predatory pricing
selling a product below cost to drive competitors out of the market
53
antitrust laws
laws that encourage competition in the marketplace
54
zoning law
law in a city or town that designates separate areas for residency and for business
55
liability
the legally bound obligation to pay debts
56
fringe benefit
payment other than wages or salaries
57
general partnership
partnership in which partners share equally in both responsibility and liability
58
limited partnership
partnership in which only one partner is required to be a general partner
59
limited liability partnership (LLP)
partnership in which all partners are limited partners
60
Uniform Partnership Act (UPA)
act ordering common ownership interests, profit and loss sharing, and shared management responsibilities in a partnership
61
closely held corporation
corporation that issues stock to only a few people, often family members
62
publicly held corporation
corporation that sells stock on the open market
63
bond
a formal contract to repay borrowed money with interest at fixed intervals
64
certificate of incorporation
license to form a corporation issued by the state government
65
dividend
the portion of corporate profits paid out to stockholders
66
horizontal merger
the combination of two or more firms competing in the same market with the same good or service
67
vertical merger
the combination of two or more firms involved in different stages of producing the same good or service
68
royalty
share of earnings given as payment
69
cooperative
a business organization owned and operated by a group of individuals for their mutual benefit
70
consumer cooperative
retail outlet owned and operated by consumers
71
service cooperative
cooperative that provides a service, rather than a good
72
producer cooperative
agricultural marketing cooperative that helps members sell their products
73
professional organization
nonprofit organization that works to improve the image, working conditions, and skill levels of people in particular occupations
74
trade association
nonprofit organization that promotes the interests of a particular industry
75
learning effect
the theory that education increases productivity and results in higher wages
76
screening effect
the theory that the completion of college indicates to employers that a job applicant is intelligent and hardworking
77
featherbedding
the practice of negotiating labor contracts that keep unnecessary workers on a company's payroll
78
collective bargaining
the process in which union and company representatives meet to negotiate a new labor contract
79
arbitration
a settlement technique in which a third party reviews the case and imposes a decision that is legally binding for both sides
80
commodity money
Objects that have value in themselves and that are used as money (gold or silver)
81
bank run
Widespread panic which great numbers of people try to take their paper money out of the bank
82
central bank
Bank that can lend to other banks in times of need
83
member bank
bank that belongs to the federal reserve system
84
demand deposit
the money in checking accounts
85
money market mutual
A fund that pools money from small savers to buy short term government and corporate securities
86
fraction reserve banking
A banking system that keeps only a fraction of funds on hand and lends out the rest
87
default
failure to pay back loan
88
interest
the price paid for the use of borrowed money
89
financial assets
Claim on the property or income of a borrower
90
Financial intermediary
An institution that helps channel funds from savers to borrowers
91
mutual fund
Fund that pools money in a variety of stocks, bonds, and other financial assets
92
coupon rates
The interest that a bond issuer will pay to a bondholder
93
maturity
The time at which payment to a bond holder to due
94
par value
The amount that an investor pays that to purchase a bond and that will be repaid to the investor at maturity
95
yield
The annual rate of return on a bond of the bond were held to maturity
96
savings bond
Low-denomination bonds issued by US government
97
municipal bond
A bond issues by a state or local government to finance city improvements
98
corporate bond
A bond that a corporation issues to raise money to expand its business
99
securities and exchange commission
An independent agency of the government that regulates financial markets and investment companies
100
junk bond
A lower-rated, potentially higher paying bond
101
capital markets
A market in which money is lent for periods longer than a year
102
money markets
Market in which money is lent for periods less than a year
103
primary markets
Markets for selling financial assets that can only be redeemed by the original holder
104
secondary markets
Market for reselling financial assets
105
equities
claims of ownership in a corporation
106
stock split
The division of a single share of stock into more than one share
107
stockbroker
a person who links buyers and sellers of stock
108
broker firm
A business that specializes in trading stocks
109
OTC market
An electronic marketplace for stocks and bonds
110
Nasdaq
American market for OTC securities
111
call option
The option to buy shares of stocks at a specified time in the future
112
put option
The option to sell shares of stock a specified time in the future
113
speculation
The practice of making risky investments in hopes of getting a high return
114
The Dow
Index that shows how certain stocks have traded
115
S and P 500
Index that shows the price changes of 500 different stocks
116
National Income Accounting
A system that collects macroeconomic statistics on production, income, investment, and savings
117
GDP
The dollar value of all fail goods and services produced within a country's border at a given year.
118
intermediate goods
Goods used in the produced of final goods
119
nominal GDP
Measured in current prices
120
real GDP
GDP expressed in constant, or unchanging, prices.
121
GNP
The annual income earned by U.S owned firms and U.S citizens.
122
aggregate supply
The total amount of goods and services in the economy available at all possible price levels
123
aggregate demand
The total amount of goods and services in the economy that will be purchased at all possible price levels.
124
leading indicators
Key economic variables that economists se to predict a new phase of a business cycle
125
Real GDP per capita
Real GDP divided by the total population
126
capital deepening
The process of increasing the amount of capital per worker
127
savings rate
The proportion of disposable income that is saved
128
technological progress
An increase in efficiency by producing more output without using more inputs.
129
fiscal policy
The use of government spending and revenue collection to influence the economy
130
fiscal year
a 12 month period that can begin on any day
131
Office of Management and Budget (OMB)
Government office that manages the federal budget
132
Congressional Budget Office (CBO)
Government agency that provides economic data to Congress
133
Appropriations bill
A bill that sets money aside for specific money spending
134
contractionary policies
Fiscal policies, like lower spending and higher taxes, that reduce economic growth
135
productive capacity
The maximum output that an economy can produce without big increases in inflation.
136
demand-side economics
The idea that government spending and tax-cuts help an economic situation by raising demand
137
Keynesian economics
A form of demand-side economics that encourages government action to increase or decrease demand and output
138
supply-side economics
A school of economics that believes tax cuts can help an economy by raising supply
139
Council of Economic Advisers (CEA)
A group of three respected economists that advise the President on economic policy
140
crowding out effect
The loss of funds for private investment due to government borrowing.
141
expansionary policies
Fiscal policies, like higher government spending and lower taxes, that encourage economic growth.
142
board of governors
the seven member board that oversees the federal reserve system
143
monetary policy
the actions the federal reserve takes to influence the level of real GDP and the rate of inflation in the economy
144
federal reserve districts
the twelve banking districts created by the federal reserve act
145
federal advisory council (FAC)
the research arm of the federal reserve
146
federal open market committee (FOMC)
federal reserve committee that makes key decisions about interest rates and the growth of the united states money supply
147
check clearing
the process by which banks record whose account gives up money and whose account receives money when a customer writes a check
148
bank holding company
a company that owns more than one bank
149
federal funds rate
interest rate banks charge each other for loans
150
discount rate
rate the federal reserve charges for loans to commercial banks
151
net worth
total assets - total liabilities
152
money creation
the process by which money enters into circulation
153
required reserve ratio
ratio of reserves to deposits required of banks by the federal reserve
154
money multiplier formula
amount of new money that will be created with each demand deposit, calculated as 1/RRR
155
excess reserves
reserves greater than the required amounts
156
prime rate
rate of interest banks charge on short term loans to their best customers
157
open market operations
the buying and selling of government securities to alter the supply of money
158
monetarism
the belief that money supply is the most important factor in macroeconomic performance
159
easy money policy
monetary policy that increases the money supply
160
tight money policy
monetary policy that reduces the money supply
161
inside lag
delay in implementing monetary policy
162
outside lag
the time it takes for monetary policy to have an effect
