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Econ Final
Flashcards
| Term | Definition |
|---|---|
| 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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