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Economics Final 2k12
| Question | Answer |
|---|---|
| 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 |
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