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Economics Final 2k12

QuestionAnswer
economics social science dealing with how people satisfy unwanted need with scarce resources
factor market market where the factors of production are bought and sold
product market market where goods and services are bought and sold
economic growth increase in a nation's total output of goods and services over time
productivity measure of the amount of output produced with a given amount of productive factors
human capital sum of people's skills, abilities, health, knowledge, and motivation
trade-off alternative that is available whenever a choice is to be made
economic model simplified version of a complex concept or behavior expressed in the form of an equation, graph, or illustration
cost-benefit analysis way of thinking about a choice that compares the cost of an action to its benefits
economic system organized way in which society provides for the wants and needs of its people
market meeting place or mechanism that allows buyers and sellers to come together
capitalism economic system in which private citizens own and use the factors of production in order to generate profits
socialism political and economic system in which the government owns and controls some factors of production
communism economic and political system in which all factors of production are collectively owned and controlled by the state
fixed income income that does not increase even though prices go up
voluntary exchange act of buyers and sellers freely and willingly engaging in market transactions
mixed or modified free enterprise economy economy where people carry on their economic affairs freely but are subject to some government intervention and regulation
charter written government approval to establish a corporation
dividend check that transfers a portion of the company profits to stockholders, usually quarterly
common stock most frequently used form of corporate ownership, with one vote per share for stockholders
preferred stock form of corporate ownership without vote, in which stockholders get their investments back before common stockholders
double taxation taxation of dividends both as corporate profit and as personal income
merger combination of two or more businesses to form a single firm
income statement report showing a firm's sales, expenses, net income, and cash flows for a certain period, usually 3 months or a year
net income common measure of business profits determined by subtracting all expenses, including taxes from revenues
credit union nonprofit service
collective bargaining negotiation between union and company representatives over pay, benefits, and other job related matters
professional association nonprofit organization of professional or specialized workers seeking to improve working conditions, skill levels, and public perception of its profession
better business bureau business sponsored nonprofit organization providing information on local companies to consumers
public utility company providing an essential service such as water or electricity to consumers
microeconomics part of economics that studies small units, such as individuals and firms
demand schedule a table that lists how much of a product consumers will buy at all possible prices
demand curve a curve that shows the quantities demanded at all possible prices
law of demand rule stating that consumers will buy more of a product at lower price and less at higher prices
market demand curve a curve that shows how much of a product all consumers will buy at all possible prices
marginal utility additional satisfaction or usefulness a consumer gets from having one or more unit of a product
diminishing marginal utility decrease in satisfaction or usefulness from having one or more unit of the same product
change in quantity demanded movement along the demand curve showing that the amount someone is willing to purchase changes when the price changes
income effect that part of a change in quantity demanded due to a change in the buyer's real income when a price changes
substitution effect that part of a change in quantity demanded due to a price change that makes other products more or less costly
change in demand shift of the demand curve when people buy different amounts at every price
substitues competing products that can be used in place of one another
complements products that increase the use of other products
elasticity a measure of responsiveness that shows how one variable responds to a change in another variable
demand elasticity a measure that shows how a change in quantity demanded responds to a change in price
elastic type of elasticity where a change in price causes a relatively larger change in quantity demanded
inelastic type of elasticity where a change n price cause a relatively smaller change in quantity demanded
unit elastic type of elasticity where a change in price causes a proportional change in quantity demanded
supply amount of a product offered for sale at all possible prices
law of supply principle that more will be offered for sale at higher prices than at lower prices
supply schedule a table showing how much a producer will supply at all possible prices
supply curve a graph that shows the different amounts of a product supplied over a range of possible prices
market supply curve a graph that shows the various amounts offered by all firms over a range of possible prices
quantity supplied amount offered for sale at a given price
change in quantity supplied change in amount offered for sale when the price changes
change in supply situation where different amounts are offered for sale at all possible prices in the market; shift of the supply curve
subsidy government payment to encourage or protect a certain economic activity
supply elastic a measure of how the quantity supplied responds to a change in price
production function a graph showing how a change in the amount of a single variable input changes total output
short run production period so short that the only variable inputs (usually labor) can be changed
long run production period long enough to change the amounts of all inputs
total product total output or production by a firm
marginal product extra output due to the addition of one or more unit of input
stages of production phases of production that consist of increasing, decreasing, and negative marginal returns
diminishing returns stage where output increases at a decreasing rate as more units of variable input are added
price monetary value of a product as established by supply and demand
rationing system of allocating foods and services without prices
ration coupon permit allowing holder to receive a given amount of rationed product
rebate partial refund of a product's original price
economic model a simplified version of a complex behavior expressed in the form of an equation, graph, or illustration
equilibrium price price where quantity supplied equals quantity demanded
surplus situation where quantity supplied is greater than quantity demanded at a given price
shortage situation where quantity supplied is less than quantity demanded at a given price
sin tax relatively high tax designed to raise revenue and discourage consumption of a socially undesirable product
incidence of a tax final burden of a tax
tax loophole exception or oversight in the tax law allowing a taxpayer to avoid paint certain taxes
individual income tax federal tax levied on the wages, salaries, and other income of individuals
sales tax general state or city tax levied on a product at the time of the sale
tax return annual report by a taxpayer filed with the local, state, or federal government detailing income earned and taxes owed
benefit principle of taxation belief that taxes should be paid according to benefice received regardless of income
ability to pay principle of taxation believe that taxes should be paid according to level of income, regardless of benefits received
proportional tax tax in which the percentage of income paid in tax is the same regardless of the level of income
average tax rate total taxes paid divided by the total taxable income
medicare federal health-care program for senior citizen
progressive tax tax in which the percentage of income paid in tax rises as the level of income rises
marginal tax rate tax rate that applies to the next dollar of taxable income
regressive tax tax in which the percentage of income paid in tax goes down as income rises
IRS (interna revenue service) brand of the US Treasury department that collects taxes
payroll withholding system system that automatically deducts income taxes from paychecks on a regular basis
indexing adjustment of the tax brackets to offset the impact of inflation
FICA federal insurance contributions act; tax levied on employers and employees to support social security and medicare
payroll tax tax on wages and salaries deducted from paychecks to finance social security and medicare
corporate income tax tax on corporate profits
excise tax general revenue tax levied on the manufacture or sale of selected items
estate tax tax on the transfer of property when a person dies
gift tax tax paid by the diner on the transfer of money or wealth
customs duty tax on imported products
user fee fee paid of the use of a good or service
intergovernmental revenue funds that one level of government receives from another level of government
property tax tax on tangible and intangible possessions such as real estate, buildings, furniture, stocks, bonds, and bank accounts
tax assessor person who examines and assesses property values for tax purposes
natural monopoly market structure in which average costs of production are lowest when a single firm exists
pork a line-item budget expenditure that circumvents normal budget procedures and benefits a small number of people or businesses
public sector that part of the economy made up of local, state, and federal governments
private sector that part of the economy made up of private individuals and businesses
transfer payment payment for which government receives neither goods nor services in return
grant-in-aid transfer payment from one level of government to another that does not involve compensation
distribution of income way in which the nation's income is divided among families, individuals, or other designated groups
federal budget annual plan outlining proposed expenditures and anticipated revenues
fiscal year 12 mon financial planning period that may not coincide with the calendar year
appropriations bill legislation authorizing spending for certain purposes
budget deficit a negative balance after expenditures are subtracted from revenues
budget surplus a positive balance after expenditures are subtracted from revenues
mandatory spending federal spending authorized by law that continues without the need for annual approvals by congress
discretionary spending spending for federal programs that must receive annual authorization
medicare federal health-care program for senior citizens, regardless of income
medicaid joint federal-state medical insurance program for low-income people
balanced budget amendment constitutional amendment requiring government to spend no more than it collects in taxes and other revenues, excluding borrowing
deficit spending annual government spending in excess of taxes and other revenues
national debt total amount borrowed from investors to finance the government's deficit spending
balanced budget annual budget in which expenditures equal revenues
trust fund special account used to hold revenues designated for a specific expenditure such as social security, medicare, or highways
per capita per person basis (total divided by population)
crowding-out effect higher-than-normal interest rates and diminished access to financial capital faced by private borrowers when they compete with government borrowing in financial markets
pay-as-you-go provision requirement that new spending proposals or tax cuts must be offset by reductions elsewhere
line-item veto power to cancel specific budget items without rejecting the entire budget
spending cap limits on annual discretionary spending
entitlement program or benefit using established eligibility requirements to provide health, nutritional, or income supplements to individuals
macroeconomics part of economics that deal with the economy as a whole and uses aggregate measure of output, income, prices, and employment
Gross Domestic Product (GDP) the dollar value of all final goods, services, and structures produced within a country's national borders during a one-year period
intermediate products products that are components of other final products included in GDP
secondhand sales sales of used goods not included in GDP
nonmarket transaction economic activity not taking place in the market, and therefore, not included in GDP
underground economy unreported legal and illegal activities that do not show up in GDP statistics
base year year serving as point of comparison for other years in a price index or other statistical measure
real GDP gross domestic product after adjustments for inflation
current GDP gross domestic product measured in current prices, unadjusted for inflation
GDP per capita gross domestic product on a per person basis; can be expressed in current or constant dollars
household basic unit of consumer sector consisting of all persons who occupy a house, apartment, or separate living quarters
disposable personal income (DPI) personal income after individual income taxes
personal income (PI) total amount of income going to the consumer sector before individual income taxes are paid
national income (NI) net national product less indirect business taxes
net national product (NNP) GNP less depreciation charges for wear and tear on capital equipment
gross national product (GNP) total dollar value of all final goods, services, and structures produced in one year with labor and property supplied by a country's residents, regardless of where the production takes place
unrelated individual person living alone even though that person may have relatives living elsewhere
family two or more persons living together
output expenditure model macroeconomic model describing aggregate (total) demand by the consumer, investment, government, and foreign sectors
net exports of goods and services net expenditures by the forge in sector; equal to total exports minus total imports
census complete count of population including place of residence (10 yrs)
urban population people living in incorporated cities, towns, and villages with 2,500 or more inhabitants
rural population those persons not living in urban areas
center of population point where the country would balance if it were flat and everyone weighed the same
infrastructure the highways, mass transit, communications, power, water, sewerage, and other public goods needed to support a population
baby boom historically high birthrate years in the US from 1946 to 1964
pyramid population diagram showing the breakdown of population by age and gender
dependency ratio number of children and elderly people in the population for every 100 persons in the 18 to 64 working age bracket
demographer person who studies growth, density, and other characteristics of the population
fertility rate number of births that 1000 women are expected to undergo in their lifetime
life expectancy average remaining life span in years for persons who attain a given age
net immigration net population change after accounting for those who leave as well as enter a country
business cycles regular increases and decreases in real GDP
business fluctuations irregular increases and decreases in GDP
recession decline in real GDP lasting at least two quarters
peak point in time when real GDP stops expanding and begins to decline
trough point in time when real GDP stops declining and begins to expand
expansion period of uninterrupted growth of real GDP
expansion period of uninterrupted growth of a real GDP
trend line growth path the economy would follow if it were not interrupted by alternating periods of recession and recovery
depression state of the economy with large numbers of unemployed people, declining real incomes, overcapacity in manufacturing plants, and general economic hardship
depression scrip currency issued by towns, chambers of commerce, and other civic bodies during the great depression of 1930s
leading economic indicator statistical series that turns down before the economy turns down, or up before the economy turns up
composite index of leading economic indicators (LEI) composite index of 10 economic series that move up and down in advance of changes in the overall economy; statistical series used to predict the turning points in a business cycle
economic model mathematical expression used to describe how the economy is expected to perform in the future
inflation increase in the general level of prices of goods and services
deflation decreases in the general level of prices for goods and services
price index statistical series used to measure changes in the price level offer time
consumer price index (CPI) series used to measure price changes for a representative sample of frequently used consumer items
market basket representative selection fo goods and services used to compile a price index
base year year serving as point of comparison for other years in a price index or other statistical measure
creeping inflation relatively low rate of inflation 1-3% annually
hyperinflation inflation in excess of 500% a year
stagflation period of slow economic growth coupled with inflation
producer price index (PPI) index used to measure prices received by domestic producers
implicit GDP price deflator index used to measure price changes in GDP
demand-pull inflation explanation that prices rise because all escorts of the economy try to buy more goods and services than the economy can produce
cost-pull inflation explanation that rising input costs, especially energy and organized labor, drive up the prices of production
creditor person or institution to whom money is owed
debtor person who borrows and therefore owes money
civilian labor force or labor force non-institutionalized part of the population aged 16 and over either working or looking for a job
unemployed working for less than 1 hour a week for pay or profit in a family-owned business while still being available and looking for a job
unemployment rate percentage of people in the civilian labor force who are classified as unemployed
frictional unemployment unemployment involving workers changing jobs or waiting to go to new ones
structural unemployment unemployment caused by a fundamental change in the economy that reduces the demand for some workers
technological unemployment unemployment caused by technological developments or automation that makes some workers' skills obsolete
cyclical unemployment unemployment directly related to swings in the business cycle
seasonal unemployment unemployment caused by annual changes in the weather or other conditions that reduce the demand for jobs
GDP gap difference between what the economy can and does produce
misery index or discomfort index unofficial statistic that is the sum of the monthly inflation and unemployment rates
federal reserve system privately owned, publicly controlled central band of the US
federal reserve note paper currency issued by the fed in use today
barter economy moneyless economy that relies on trade or barter
commodity money money that has an alternative use as an economic good
monetary unit standard unit of currency in a country's money supply
medium of exchange money or other substance generally accepted as payment for goods and services
measure of value a function of menu that allows it to serve as a common way to express value
store of value a function of money that allows people to preserve value for future use
demand deposit account (DDA) account from which funds can be removed by writing a check and without having to gain prior approval from the depository institution
M1 component of the money supply relating to money's role as a medium of exchange
M2 component of the money supply relating to money's role as a store of value
member bank bank belonging to the federal reserve system
monetary policy actions by the federal reserve system to expand or contract the money supply in order to affect the cost and availability of credit
tight money policy monetary policy that results in higher interest rates and restricted access to credit
open market operations sales or purchases of the US government securities by the Fed
discount rate interest rate that the federal reserve system charges on loans to the nation's financial institutions
prim rate lowest rate of interest that banks charge their best customers
quantity theory of money hypothesis that the supply of money directly affects the price level over the long run
bank holding company company that owns and controls one or more banks
regulation Z provision extending truth-in-lending disclosures to consumers
fiscal policy use of government spending and revenue collection measures to influence the economy
multiplier magnified change in overall spending caused by a change in investment spending
accelerator change in investment spending caused by a change in overall spending
automatic stabilizer program that automatically provides benefits to offset a change in people's incomes
unemployment insurance government program providing payments to unemployed workers
deregulation relaxation or removal of government regulations on business activities
monetarism school of though stressing the importance of stable monetary growth to control inflation and stimulate long-term economic growth
wage-price controls policies and regulations making it illegal for firms to give raises or raise prices without government permission
monetary policy actions by the federal reserve system to expand or contract the money supply in order to affect the cost and availability of credit
council of economic advisers 3-member group that devises strategies and advises the president of the US on economic matters
certificate of deposit document showing that an investor has made an interest-bearing loan to a financial institution
financial asset a stock or other document that represents a claim on the income and property of a borrower, such as a CD, bond, Treasury bill, or mortgage
financial system network of savers, investors, and financial institutions working together to transfer savings for investment uses
financial intermediary institution that channels savings into investors
premium price paid at regular intervals for an insurance policy
nonbank financial institution non depository institution that channels savings to investors
bond contract to repay borrowed money and interest on the borrowed money at regular future intervals
coupon rate state interest on a corporate, municipal, or government bond
maturity life of a bond or length of time funds are borrowed
par value principal of a bond or total amount borrowed
current yield bond's annual coupon interest divided by purchase price; measure of a bond's return
junk bond bond that carries an exceptionally high risk of nonpayment and low rating
municipal bond bond, often tax exempt, issued by state and local governments
savings bond low-demonination, non transferable bond issued by the federal government
treasure note US give obligation with a maturity of 2-10 years
treasury bond US gov bond with a maturity of 10-30 years
treasury bill short-term united states government obligation with a maturity of one year or less in denominations of $1000
individual retirement account (IRA) retirement account in the form of a long-term deposit, with annual contributions not taxed until withdrawn during retirement
capital market market in which financial capital is loaned or borrowed for more than one year
money market market in which financial capital is loaned and or borrowed for one year or less
primary market market in which only the original issuer can sell or repurchase a financial asset
secondary market market in which financial assets can be sold to someone other than the original issuer
equities stocks that represent ownership shares in corporations
efficient market hypothese argument that stocks are always priced about the right because they are closely watched
portfolio diversification strategy of holding different investments to protect against risk
mutual fund company that sells stock in itself and uses the proceeds to buy stocks and bonds issued by other companies
net asset value the market value of a mutual fund share found by dividing the net value of the fund by the number of shares issued
comparative advantage country's ability to produce a given product relatively more efficiently than another country by doing it at a lower opportunity cost
revenue tariff tax place on imported goods to raise revenue
balance of payments difference between money paid to, and received from, other nations in trade
globalization the movement toward a more integrated and interdependent world economy
multinational corporation producing and selling without regard to national boundaries and whose business actives are located in several different countries
subsistence state in which a society produces only enough to support itself
glut substantial oversupply of a product
Created by: ww8123