summer vocab

Question 1

appreciation

Answer 1

an increase in the value of a currency as measured by the amount of foreign currency it can buy

Question 2

deprecation

Answer 2

a decrease in the value of a currency as measured by the amount of foreign currency it can buy

Question 3

substitutes

Answer 3

two goods for which an increase in the price of one leads to an increase in the demand for the other

Question 4

complements

Answer 4

two goods for which an increase in the price of one leads to a decrease in the demand for the other

Question 5

capital

Answer 5

the equipment and structures used to produce goods and services

Question 6

investment

Answer 6

spending on business capital, residential capital, and inventories

Question 7

budget deficit

Answer 7

a shortfall of tax revenue from government spending

Question 8

real GDP

Answer 8

the production of goods and services valued at constant prices

Question 9

recession

Answer 9

a period of declining real incomes and rising unemployment

Question 10

inflation

Answer 10

an increase in the overall level of prices in the economy

Question 11

stagflation

Answer 11

A period of falling output and rising prices

Question 12

scarcity

Answer 12

the limited nature of society’s resources

Question 13

utility

Answer 13

a measure of happiness or satisfaction

Question 14

opportunity cost

Answer 14

whatever must be given up to obtain some item

Question 15

net exports

Answer 15

spending on domestically produced goods by foreigners (exports) minus spending on foreign goods by domestic residents (imports)

Question 16

factors of production

Answer 16

the inputs used to produce goods and services

Question 17

free market economy

Answer 17

economic system based on supply and demand with little or no government control

Question 18

fiscal policy

Answer 18

the setting of the level of government spending and taxation by government policymakers

Question 19

monetary policy

Answer 19

the setting of the money supply by policymakers in the central bank

Question 20

inferior good

Answer 20

a good for which, other things being equal, an increase in income leads to a decrease in demand

Question 21

normal good

Answer 21

a good for which, other things being equal, an increase in income leads to an increase in demand

Question 22

mixed economy

Answer 22

An economy in which private enterprise exists in combination with a considerable amount of government regulation and promotion.

Question 23

command economy

Answer 23

An economic system in which the government controls a country’s economy (production, investment, prices, and incomes)

Question 24

crowding out

Answer 24

a decrease in investment that results from government borrowing

Question 25

frictional unemployment

Answer 25

unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills

Question 26

structural unemployment

Answer 26

unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one

Question 27

equity

Answer 27

a situation in an economy in which the distribution of resources or goods among people is considered fair

Question 28

cyclical unemployment

Answer 28

the deviation of unemployment from its natural rate

Question 29

efficiency

Answer 29

the property of a resource allocation of maximizing the total surplus received by all members of society

Question 30

budget surplus

Answer 30

an excess of tax revenue over government spending

Question 31

nominal GDP

Answer 31

the production of goods and services valued at current prices

Question 32

GDP

Answer 32

Gross Domestic Product- the total market value of all final goods and services produced within a country in a given period of time