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Intro to Bus. Ch. 2

Chapter 2 Vocab

TermDefinition
Economics The study of how society chooses to employ resources to produce goods and services and distribute them for consumption among various competing groups and individuals.
Microeconomics The part of economics study that looks at the behavior of people and organizations in particular markets.
Macroeconomics The part of economics study that looks at the operation of a nation's economy as a whole.
Resource Development The study of how to increase resources an to create the conditions that will make better use of those resources.
Invisible Hand A phrase coined by Adam Smith to describe the process that turns self-directed gain into social and economic benefits for all.
Capitalism An economic system in which all or most of the factors of production and distribution are privately owned and operated for profit. Ex. United States
State Capitalism Where the state runs some businesses instead of private owners.
Four Basic Rights (Free Market Capitalism) 1. The right to own private property. 2. The right to own a business and keep all that business's profits. 3. The right to freedom of competition. 4. The right to freedom of choice.
Supply The quantity of products that manufacturers or owners are willing to sell at different prices at a specific time.
Demand The quantity of products that people are willing to buy a different prices at a specific time.
Market Price The price determined by supply and demand.
Equilibrium Point or Equilibrium Price The place where quantity demanded and quantity supplied meet.
Perfect Competition The degree of competition in which there are many sellers in a market and none is large enough to dictate the price of a product. Ex. Agricultural Products
Monopolistic Competition The degree of competition in which a large number of sellers produce very similar products that buyers nevertheless perceive as different. Ex. Fast-Food Industry
Oligopoly A degree of competition in which just a few sellers dominate the market. Ex. Cereals and Soft Drinks
Monopoly A degree of competition in which only one seller controls the total supply of a product or service, and sets the price.
Socialism An economic system based on the premise that some, if not most, basic businesses should be owned by the government so that profits can be more evenly distributed among the people. Ex. Sweden
Brain Drain The loss of the best and brightest people to other countries.
Communism An economic system in which the government makes almost all economic decisions and owns all the major factors of production. Ex. North Korea
Free-Market Economies Economic Systems in which the market largely determines what goods and services get produced, who gets them, and how the economy grows.(Capitalism)
Command Economies Economic systems in which the government largely decides what goods and services will be produced, who will get them, and how the economy will grow.(Socialism and Communism)
Mixed Economies Economic systems in which some allocation of resources is made by the market and some by the government. Ex. Germany
Gross Domestic Product (GDP) The total value of final goods and services produced in a country in a given year.
Unemployment Rate The number of civilians at least 16 years old who are unemployed and tried to find a job within the prior four weeks.
Underemployment The unemployment rate plus civilians that are working part time and want to work full time ans those who stopped looking for work.
Inflation A general rise in the prices of goods and services over time.
Frictional Unemployment Refers to people who have quit work because they didn't like the job, the boss, or the working conditions, and haven't yet found a new job. It also refers to people who are entering the labor force for the first time or are returning to the labor force.
Structural Unemployment Refers to unemployment caused by the restructuring of firms or by a mismatch between the skills of job seekers and the requirements of available jobs.
Cyclical Unemployment Occurs because of a recession or a similar downturn in the business cycle.
Seasonal Unemployment Occurs where demand for labor varies over the year. Ex. Harvesting Crops
Disinflation A situation in which price increases are slowing, or the inflation rate is declining.
Deflation A situation in which prices are declining.
Stagflation A situation when the economy is slowing but prices are going up anyhow.
Consumer Price Index (CPI) Monthly statistics that measure the pace of inflation or deflation.
Core Inflation The CPI minus food and energy costs.
Producer Price Index (PPI) An index that measures prices at the wholesale level.
Business Cycles The periodic rises and falls that occur in economies over time.
Economic Boom When business is booming.
Recession Two or more consecutive quarters of decline in the GDP.
Depression A severe recession, usually accompanied by deflation.
Recovery When the economy stabilizes and starts to grow.
Fiscal Policy The federal government's efforts to keep the economy stable by increasing or decreasing taxes or government spending.
National Deficit The amount of money the federal government spends beyond what it gathers in taxes for a given fiscal year.
National Debt The sum of the government or national deficits over time.
National Surplus When the government takes in more than it spends.
Keynesian Economic Theory The theory that a government policy of increasing spending and cutting taxes could stimulate the economy in a recession.
Monetary Policy The management of the money supply and interest rates by the Federal Reserve Bank.
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