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AcDec Economic

THS AcDec Economic Crunch Kit

QuestionAnswer
Automatic Policy Changes in spending that do not require direct action from policy-makers; includes welfare, unemployment benefits, and Medicaid
Contractionary Policy efforts to fight inflation and curb aggregate demand; also known as tight money(for monetary policy)
Discount Rate intrest rate that Fed charges banks for loans
Discretionary Policy changes in spending that require direct action from policy-making; includes changes in taxation and items of government spending
Expansionary Policy efforts to fight recession and stimulate aggregate demand; also known as easy money(for monetary policy)
Federal Funds Rate rate of intrest charged on overnight loans between banks
Open Market Operations buying and selling of government securities to influence the money supply
Reserve Ratio Percent of reserves which banks must keep on hand
Federal Insurance Contributions Act(FICA) Levied a payroll tax on all citizens' paychecks to fund social security and later Medicare
Federal Unemployment Tax Act(FUTA) Levied a tax on employers to fund the state unemployment compensation systems
Medicaid Provides health insurance for the poor
Medicare Provides health insurance for the elderly
Social Security Social insurance program that provides payments to the elderly and disabled
Temporary Assistance to needy families (TANF) Replaced ADFC as the primary U.S. welfare program after the 1996 welfare reform act
Aid to Families with Dependent Children(AFDC) It was the first federal welfare program in the U.S.
Thomas Gresham Gresham's Law says that people hoard good money and spend bad money
John Maynard Keynes did not believe that a free market economy could maintain full employment and growth on its own; advocated government intervention to stimulate demand during recession
Karl Marx attacked the exploitative nature of free market capitalism; associated with command economies
David Recardo introduced the theory of comparative advantage and supported free trade
Jean-Baptiste Say Say's Law holds that "supply creates its own demand" ; prosperity can be attained by stimulating production
Adam Smith His "wealth of nations" described the "invisable hand of the market"; proponent of free market capitalism
European Union (EU) Created by the Maasticht Treaty in 1993; created a European common market and a common currency (the euro)
General Agreement on tariffs and trade (GATT) Established codes of conduct for trade relations in 1947 with the primary goal of eliminating trade barriers; later institionalized with the WTO
International Monetary Fued (IMF) Originally charged with overseeeing the Bretton Woods System of exchange rates; now provides loans to developing countries to cover commercial debts
North American Free Trade Agreement (NAFTA) Created a free trade zone in 1994 linking Canada, the United States, and Mexico
World Bank Provides low-cost loans for developement where private capital is unavailable; includes the IBRD and the IDA
World Trade Organization (WTO) Established in 1995 during the Uruguay Round of GATT negotiations to institutionalize GATT and arbitraded trade disputes
bureau of labor statistics(BLS) Calculates the Consumer Price Index and the unemployment rate
Federal Deposit Insurance Corperation(FDIC) Insures deposits in member banks up to $100,000
Federal Trade Commission (FTC) The current agency that regulates business practice
Interstates Commerce Commission(ICC) First regulatory agency in the U.S. operating from 1887 to 1995
Securities and Exchange Commission (SEC) Regulates trade in stock and bond
Sherman Antitrust Act 1890; first government action to limit monopolies, outlawing collusive agreements that resticted competition
Federal Reserve Act 1913; established the Federal Reserve
Clayton Antitrust Act 1914; outlawed margers that would result in monopolies
National Labor Relations Act 1935; established a social insurance program to provide funds for the elderly and disabled (social security)
Employment Act 1946; set economic stability as an official goal of federal government
Chairman of the Board of Governors The effective head of the Federal Reserve; appointed every four years; the current chairman is Ben Bernanke
Federal Open Market Committee(FOMC) Committtee of 12 people who buy and sell government securities: the Board of governors, the president of New York District Bank, and the presidents of 4 other district banks
Federal Reserve Board of Governors 7 people appointed by the president to 14 year terms; sets discount rate and reserve ratio
Federal Reserve District Banks make up the Federal Reserve System; located in Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco
Production possiblities different combinations of goods or services can be produced with the same resources
Production Possiblity Curve The production of one good decreases the possible production of another good.
Factors of Production land, labor, capital, and entrepreneurial resources
Land Resources (natural resources) come from nature
Labor resources (human capital) skills and knowledge of humans
Capital Resources (real capital) or (captial goods) goods taht are produced to later be used to produce final goods and services for consumption
Entrepreneurial Resources the decision making involved in using resources to produce goods and services
Ceteris Paribus Latin Prase; "all other things being equal" or "all other things being held constant"
Positive Economics economic analysis based on what is
Normative Economics economic analysis based on what ought to be
Microeconomics the study of the individual parts of the economy and the actions of individuals and firms
Macroeconomics the study of the economy as a a whole and focuses on the aggregate behaviors of producers and consumers
Three Major Economic Systems traditional, planning and command, market
Free Enterprise(Market system) (also known as capitalism, private enterprise, or free market) economic systems in which the rights of the individual and private ownership are most highly valued
Command or Planned economic system in which the a group makes economic decisions as a whole, or in which the economic desicions are made by the government in the name of the society
Production Possiblity Curve The production of one good decreases the possible production of another good.
Factors of Production land, labor, capital, and entrepreneurial resources
Land Resources (natural resources) come from nature
Labor resources (human capital) skills and knowledge of humans
Capital Resources (real capital) or (captial goods) goods taht are produced to later be used to produce final goods and services for consumption
Entrepreneurial Resources the decision making involved in using resources to produce goods and services
Ceteris Paribus Latin Prase; "all other things being equal" or "all other things being held constant"
Positive Economics economic analysis based on what is
Normative Economics economic analysis based on what ought to be
Microeconomics the study of the individual parts of the economy and the actions of individuals and firms
Macroeconomics the study of the economy as a a whole and focuses on the aggregate behaviors of producers and consumers
Three Major Economic Systems traditional, planning and command, market
Free Enterprise(Market system) (also known as capitalism, private enterprise, or free market) economic systems in which the rights of the individual and private ownership are most highly valued
Command or Planned economic system in which the a group makes economic decisions as a whole, or in which the economic desicions are made by the government in the name of the society
Traditional Economy Third type of economic system-rarely dominant nowadays-more prevalent within lesser-developed regions, as economic decision-making in asuch areas is more often dominated by the power of tradition
Mercantilism Found in Europe from the 16th through the 18th centuries; characterized by central planning, strong government control, heavy reliance on exports to build wealth in gold and silver reserves
Market resources, goods, services are exchanged
Law of Supply the quantity supplied is directly related to the price, based on the assumption that as the price increases, the willingness of produces to increase the quantity supplied will increase
Law of Demand the quantity demanded is inversely related to the price, based on the assumption that as the price increases, there is is less willingness, because of the higher price, to purchase a good or service
Demand Schedule The quantities that are demanded at each price
Utility A use
Budget Constraint a low income may not allow a person to demand a good or service without giving up other important wants
Substitutes other goods or services that satisfy the same want
Complimentary Goods are two goods for which the demand for one affects the demands for the other
Marginal Utility additional utility of consumption of an additional unit of a good or service
Diminishing Marginal Utility utility may decrease as more of a good is consumed
Inelastic Demand a change in price may not result in any change in the quantity demanded
Elasticity refers to the relationship of the change in price to the change in quantity demanded
Price Elasticity of Demand the percentage of change in the quantity demanded divided by th percentage change in price
Cross-Price Elasticity Involves the relationship between the demand for one product in the price of another
Created by: THSAcDec