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Econ Final


supply quantity of goods and services producers are willing and able to produce at various possible price
Supply side fiscal policy influence the economy through supply - cut COP = increase AS
Aggregate supply supply of all products in an economy - relationship between price level and aggregate output (real gdp)
savings rate the amount of money or income not used for consumption (for retirement) -the rate at which we save
multiplier change in real gdp / initial change in spending
demand side fiscal policy based on the Keynesian model FP to stimulate AD I = influence business cycle I = multiplier effect (gov steps in to offset multiplier)
aggregate demand total demand for goods and services produced in an economy over a period of time AD = C + I + G + (x-M) relationship: price level and real gdp
economics the study of how individuals an societies satisfy their unlimited wants with limited resources
marginal benefit the benefit and satisfaction gained from using on more unit of a good or service
diversification the practice of distributing investments among different financial assets to maximize return and limit risk
marginal propensity to save fraction of an increase in income saved
marginal cost additional cost of producing one more unit = addition cost / additional units
normal goods goods consumers demand more of when income increases
substitution effect tendency to substitute a similar lower cost product for a more expensive one
needs goods necessary for survival (food, shelter, clothing)
economic independence Producers in the nation depend on others to provide goods and services they do not
productivity amount of goods and services produced per unit input
opportunity cost the value of something that is given up by choosing one alternative over another
consumer influence production and producers by purchasing goods and services
services work that one person does for another for payment
substitutes goods used to replace another good (steak and hamburger)
wants goods above those necessary for survival
deposit multiplier formula tells how much the money supply will increase after a cash deposit
free enterprise system a system under which business conducted with minimal intervention (not a lot of rules or regulation)
trade off an alternative someone gives up when making an economic choice
producer provides goods and services and satisfies individuals wants and needs
good physical objects such as good clothing, that can be purchased
demand amount of goods and services a consumer is willing and able to buy
marginal propensity to consume the fraction of an increase income that is consumed
positive externality benefits accrue (built up by) to others then producer or consumer (park) getting a benefit out of something that you don't pay for that you are a part of
negative enternality when the costs of production are borne by someone other than the producers and consumers ex:pollution. - paying for something that you are not a part of
tariff tax on imports
trade war a succession of trade barriers between nations
specialization (work) specific duties assigned to each partner
specialization (goods) Specific goods that are produced
quota limit (law) on the number of foreign goods
embargo law that cuts all trade with a certain country (cuba, iran, n. korea)
trade deficit exports < imports)
foreign exchange rate value of the currency in relation to another
externalities side effect of a transaction that affects someone other than a producer or consumer
coincident indicators changes at the same time as the economy (GDP)
macroeconomic equilibrium result of interaction between buyers and sellers, interaction of S and D curve. - equal : QD= QS - at same price
reccession contractionary period (period of falling GDP) last 2 months or more quarters
stagflation stagnant buisness activity with inflationary prices
leading indicators changed before the economy changes (ex: stock market returns)
utility Satisfaction received from consumption
scarcity result of limited resources and limited wants - small or scarce amount of resources
total cost fixed + variable
fixed cost costs that do not change with level of production (always the same) ( ex: rent, taxtes, salaries, insurance)
increasing returns each new input adds to total product
marginal product the change in total production that results from adding one more additional worker
added revenue for one more unit output ---> money from each additional unit sold
profit maximizing output marginal + marginal cost = maximizing total profit output
inferior goods goods consumers demand less of when income increases (generic brands, discount clothes)
law of diminishing marginal utility as more of a product is consumed the satisfaction received from consuming one more additional unit declines
compliments things or goods that are commonly used together and go together (hot dogs and buns)
income effect an increase or decrease in consumers purchasing power due to an change in price
prime rate interest rate to "better" costumers
change in demand change in willingness and ability
discount rate interest rate the fed reserve charge to lend money
total revenue income received from selling - TR = P x Q
variable cost costs change with level of production (raw materials, wages)
monetarism an economic theory that suggests that rapid changes in the money supply are the main cause of economic instability (influences economy)
open market operations sale and purchase of gov securities - expand MS = purchase - sellers receive money from fed and deposits them in the bank (bank loans out excess reserves)
expansionary monetary policy (ease money supply) increase MS = more money into circulation = make easier to borrow - stimulate economy and AD - easier to borrow = spend more = more AD = more output - too of an increase in MS = inflation = demand pull inflation
contractionary monetary policy (tight money supply) slow down economy, decrease AD and control inflation - decrease MS - less lending = decrease AD = decrease output (GDP) = decrease price level - decrease MS to much = increase unemployment (
Created by: allisonbauer
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