Part Three Flashcards
Eminent Domain
The right of power of the state to take away private property for public use, usually for adequate compensation.
Empiricism
Extrapolation of the future from the past. The logic of experience.
Entitlement
A unilateral transfer payment form the government to the household sector required by law. (See unilateral transfer payment and welfare)
Entrepreneurial Capacity Constraint
Milton Friedman’s explanation of how decreasing cost industries eventually experience diminishing returns when “ reach exceeds the grasp” of the CEO. When an organization becomes so vertical that a decision to innovate becomes confused in communication, enthusiasm for change lost in translation, and feedback from subordinates too muffled to be heard.
Entrepreneurship
The fourth factor of production (as defined by Joseph Alois Schumpeter) can be pursued in one or more of five ways: 1: Introduction of new products (e.g., Edison), 2: New methods of production (e.g., Ford), 3: Opening of new markets (e.g., Russia), 4: Development of productive factors (e.g., General Motors Institute), and 5: Catalyst of productive factors (e.g., NASA)
Equilibrium Price
The price that clears the market; i.e., the price at which the quantity supplied equals the quantity demanded . The quintessence of supply and demand theory.
Eurodollar
US dollars on deposit at a European bank or banks in the British Caribbean
Excellence
It’s an attitude
Excess Profit
The accounting profit in excess of normal profit
Exchange Control
A form of trade restriction whereby a government controls the foreign currency market by establishing an official rate and location of exchange, and retains the foreign currency for use as determined by the political leadership.
Exchange Rate
The price at which one nation’s currency is traded for another
Expected R/C Ration (E)
In probability theory, the revenue from an event divided by its cost. For example, a savings bond with a maturity value of $100 which may be purchased for $25 has an expected R/C ration of 4; i.e., E=10/25=4. (See fair bet, measure of risk, and Note of Probability Theory)
External Economy vs. External Diseconomy
An autonomous (independent) economic activity with beneficial spreading effects; called an external diseconomy if the effects are detrimental
External Tariff
A customs duty on goods imported into an economic area of business zone from states or political entities not members of that area. (See internal tariff)
Fact
The result of research; unfinished, but presently abandoned. (See theory)
Factor Good
A good used in the production of another good. When a change in the market price of a factor good (e.g., steel), the two goods are said to be interdependent. (See intermediate good, factors or production, substitution good, complementary good, and interdependent markets)
Factor Oriented Industry
A business that reduces cost by locating near a factor of production; e.g., highly skilled labor, specialized land use, or an exceptionally heavy input. (See location theory and weight-subtracting industry)
Factors of Production Land (T), labor (L), and capital (K)
Are the classical factors, land and labor are the primary factors; they exist a priori. Capital is the secondary factory; it is produced by land and labor. Modern economists are also concerned with entrepreneurship, energy and information. (See capital, a priori, and entrepreneurship)
Fair Bet
A risk where the probability of success times the expected R/C ration equals 1; i.e., pxE=1. (See expected R/C ratio, measure of risk, and Note on Probability Theory)
Fallacy of Composition
Assuming what is true for the part to be true for the whole
Featherbedding
Paying an employee to produce nothing; i.e., disguised unemployment
Feudalism
A distribution system based on birthright. (See distribution theory)
Finance
The art of passing currency from hand to hand until it finally disappears.
Fixed Cost (FC)
A cost that is incurred regardless of the level of production; i.e., even if output were zero. The height of the total cost function; i.e., where TC crosses the vertical axis
Fixed Supply
Totally inelastic supply; i.e., the quantity supplied remains the same
Footloose Industry
A business that is located without regard to the factors of production or market but rather to some other rationale such as weather, tax advantage, or quality of community. (See location theory)
Forecast
A direction given to a blindfolded driver by someone looking out the back window
Foreign Exchange
The currency of a foreign country. (See exchange rate and exchange control)
Free Enterprise
A market that permits free entry and free exit by buyers and sellers. A market without artificial barriers to trade. (See free entry and free exit)
Free Entry
The absence of artificial (non-economic) barriers to entering a market; e.g., patents, copyrights, trademarks, crime, tariffs, licenses, etc. (See free enterprise and free exit)
Free Exit
The absence of artificial (non-economic) barriers to entering a market; e.g. patents, copyrights, trademarks, crime, tariffs, licenses, etc. (See free enterprise and free exit)
Free Good
A good which is not scarce and therefore does not command a market price. (See economic good)
Free Trade
Like heaven; everyone wants to get there, but not to soon.
Free Trade Area
A business zone that has either the absence of external tariffs (e.g., Hong Kong), or the absence of internal tariffs (e.g., NAFTA).
FTC
Free Trade Commission
Full-Employment -Unemployment-Rate (FEUR)
The rate of unemployment (abut 4.5%) below, which is inflationary
Fungible
Interchangeable. A good, foodstuff, or product that can be substituted for a like good; e.g., a specific quantity of grain for an equal amount of the same kind of grain without respect to the origin.
Futurist
Someone who creates a paradigm to predict the future or whose intellectual perspective and values are shaped by respect for the future. (See archaist)
Gambling
Making a decision today, the validity of which depends upon a future event.
GATT
General Agreement on Tariffs and Trade. (See WTO)
Geek
A nerd who can’t do the math
General Equilibrium vs. Partial Equilibrium
(See note on Macroeconomic Notation, No 9)
General Theory
(…. Of Employment, Interest, and Money) The foundations of macroeconomic analysis by John Maynard Keynes.
General Theory of Relativity
Albert Einstein’s proposition that space is curved and time slows down near a gravitating mass. (See special theory of relativity)
General Theory of Unemployment
John Maynard Keynes’ explanation that employment is a function of aggregate demand; i.e., consumption, investment, and government expenditures. (See special theory of employment)
Genius
A person whom all idiots oppose
Geometric Progression
A series of numbers increasing at a constant rate; e.g., 1, 2, 4, 8. (See arithmetic progression and rate of increase)
Gestalt
The whole, where the whole is greater than the sum of the parts.
Glamour Stock
A corporation perceived by the market to have enormous growth potential. (See blue chop stocks)
