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One suggestion - maybe some of you should fill this page in as we proceed throughout the semester...

Here are the terms in economics you will need to know / familiarize yourself with during the duration of the economics course:

need- a requirement, necessary duty, or obligation
want- to feel inclined; wish; like
economics - the study of how people seek to satisfy their needs and wants by making choices
goods- material
services- tasks done by people
scarcity - limited quantities of a resource to meet unlimited wants and needs. always exists
shortage- a situation in which a good or service is unavailable. only exists for a limited time

Circular Flow Chart:

factors of production
land,labor, and capital; the three groups of resources that are used to make all goods and services.
land-any natural resource
labor-effort; man time
capital-money
physical capital-any manufactured asset that is applied production
human capital-skills, knowledge, and experience possessed by an individual or population
entrepreneur-someone who takes a risk
trade-off-an alternative sacrificed when a decision is made
opportunity cost-the most desirable alternative given up as the result of a decision
thinking at the margin-deciding whether to do or use one more unit of some resource
production possibilities-the combination of outputs of different goods that an economy can produce with given resource
efficiency-using resources to maximize the production of goods and sevices
under-utilization-using fewer resources than an economy is capable of using
cost-an amount that has to be paid or spent to buy or obtain something
economic systems-free market, free enterprise, socialist, commant
factor payments-the income people recieve for supplying such things as land, labor or capital
market economy-an economy that relies chiefly on market forces to allocate goods and resources and to determine prices
centrally planned economy-an economic system in which the state directs the economy
mixed economy-an economic system combining private and public enterprise
market-arrangement that allows buyters and sellers to exchange things
specialization-the contration of the productive efforts on a limited number of activities
factor market-markets where the factors of production are bought and sold
profit-the difference between the amount earned and the amount spent in buying, operating, or producing something
product market-where goods and services produced by businesses are sold to households
self-interest-one's own personal gain
incentive-an expectation that encourages people to behave a certain way
competition-the struggle among producers for the dollars of consumers
socialism-political and economic theory of that advocates that the means of production, distribution, and exchange should be owned or regulated
communism-a type of government that relies on collectivization of labor and good to equal out the classes
collective- a cooperative enterprise
laissez faire-the doctrine that government should not interfere in commercial affairs
free enterprise-an economic system in which private business operates in competition and largely free of state control
privatize-transfer from public to private ownership and control
public interest -concerns of the public as a whole

public policy -laws and standards in respnse to interests of the public

interest group -citizens advocates for policy change
poverty threshold-the minimum level of income deemed adequate in a given country
welfare-any program in which the government provides aid to citizens in need
cash transfer- direct payments of money to eligible poor people
in-kind benefits- goods and services provided for free or for greatly reduced prices
market failure- a situation in which the market does not distribute resources efficiently
public good- a shared good or service for which it would be impractical to make consumers pay individually and to exclude nonpayers
private sector -involves transactions of individuals and business
public sector -involves transactions of the government
free rider -someone who would not pay for a good or service unless it is publicly provided
externality -other things that happen while in business; some positive and some negative
macroeconomics-Decisions of the society as a whole.
microeconomics-Decision making in single parts of the economy.
gross domestic product- to dollar value of all final goods and services produced within a country's borders in a given year
business cycle-natural ups and downs of the market measured by GDP
law of demand- economic law that states that consumers buy more of a good when its price decreases and less when its price increases
substitution effect- when consumers react to an increase in a good's price by consuming less of that good and more of other goods
income effect- the change in consumption resulting from a change in real income
demand schedule- a table that lists the quantity of a good a person will buy at each different price
market demand schedule- a table that lists the quantity of a good all consumers in a market will buy at every different price
demand curve- a graphic representation of a demand schedule
normal good- a good that consumers demand more of when their income increases
inferior good- a good that consumers demand less of when their income increases
complements- two goods that are bought and used together
substitutes- goods used in place of each other
elasticity of demand- a measure of how consumers react to a change in price
inelastic- describes demand that is not very sensitive to a change in price
elastic- descibes demand that is very sensitive to a change in price
total revenue- the total amount of money a firm receives form selling goods or services
law of supply- tendency of suppliers to offer more of a good at a higher price
quantity supplied- the amount a supplier is willing and able to produce at a certain price
supply schedule- a chart that lists how much of a good a supplier will offer and different prices
variable- a factor that can change
market supply schedule- a chart that lists how much of a good all suppliers will offer at different prices
supply curve- a graph of the quantity supplied of a good at different prices
market supply curve- a graph of the quantity supplied by all suppliers at every possible price
elasticity of supply- a measure of how consumers react to a change in price
marginal product of labor- the change in output from hiring one additional unit of labor
increasing marginal returns- a level of production in which the marginal product of labor increases as the number of workers increases
diminishing marginal returns- a level of production in which the marginal product of labor decreases as the number of workers increases
fixed cost- a cost that does not change no matter how much is produced
variable cost- a cost that rises of falls depending on how much is produced
total cost- fixed costs plus variable costs
marginal revenue- the additional income from producing one more unit of a good usually equal to price
subsidy- a government payment that supports a business or market
excise tax- a tax on the production or sale of a good
regulation- government intervention in a market that affects the production of a good
equilibrium- the point at which quantity demanded and quantity supplied are equal
disequilibrium- describes any price or quantity not at equilibrium, when quantity supplied is not equal to quantity demanded in a market
excess demand- when quantity demanded is more than quantity supplied
excess supply- when quantity supplied is more than quantity demanded
price ceiling- a maximum price that can be legally charged for a good or service
price floor- a minimum price for a good or service
rent control- a price ceiling placed on rent
minimum wage- a minimum price that an employer can pay a worker for an hour of labor
surplus- situation in which quantity supplied is greater than quantity demanded, also known as excess supply
shortage- a situation in which a good or service is unavailable, or a situation in which the quantity demanded is greater than the quantity supplied
search costs- the financial and opportunity costs consumers pay when searching for a good or service
supply shock- a sudden shortage of a good
rationing- a system of allocating scarce goods and services using criteria other than price
perfect competition- a market structure in which a large number of firms all produce the same product
commodity- a product that is the same no matter who produces it such as petroleum, notebook paper, or milk
monopoly- a market dominated by a single seller
economies of scale- factors that cause a producer's average cost per unit to fall as output rises
patent- a license that gives the inventor of a new product the exclusive right to sell it for a certain period of time
franchise- the right to sell a good or service within an exclusive market
license- a government issued right to operate a business
monopolistic competition- a market structure in which many companies sell products that are similar but not identical
differentiation- making a product different from other similar products
oligopoly- a market structure in which a few large firms dominate a market
price war- a series of competitive price cuts that lowers the market price below the cost of production
collusion- an agreement among firms to divide the market , set prices, or limit production
price fixing- an agreement among firms to charge one price for the same good
cartel- a formal organization of producers that agree to coordinate prices and production
trust- like a cartel, an illegal grouping of companies that discourages competition
merger- combination of two or more companies into a single firm
deregulation- the removal of some government controls over a market
sole proprietorship- a business owned and managed by a a single individual
liability- the legally bound obligation to pay debts
partnership- a business organization owned by two or more persons who agree on a specific division of responsibilities and profits
assets- money and other valuable belonging to an individual or business
corporation- a legal entity owned by individual stockholders
stock- minor ownership in a company
bond- loaning money with a promise to pay back with interest
dividend- the portion of corporate profits paid out to stockholders
horizontal merger- the combination of two or more firms competing in the same market with the same good or service
vertical merger- the combination of two or more firms involved in different stages of producing the same good or service
conglomerate- business combination merging more than three businesses that make unrelated products
multinational corporation- large coorporation that produces and sells its goods and services throughout the world
business franchise- a semi independent business that pays fees to a parent company in turn for the exclusive right to sell a certain product or service in a given area
cooperative- a business organization owned and operated by a group of individuals for their mutual benefit
nonprofit organization- institution that functions much like a business, but does not operate in order to generate profits
professional organization- nonprofit organization that works to improve the image, working conditions, and skill levels of people in particular occupations
trade association- nonprofit organization that promotes the interests of a particular industry
labor union- an organization of workers that tries to improve working conditions, wages, and benefits for its members
strike- an organized work stoppage intended to force an employer to address union demands
closed shop- a workplace that hires only union members
union shop- a workplace that will hire nonunion members but requires them to join the union within a certain period of time
agency shop- a workplace that will hire nonunion workers and does not require them to join the union
collective bargaining- the process in which union and company representatives meet to negotiate a new labor contract
mediation- a settlement technique in which a neutral mediator meets with each side to try to find a solution that both sides will accept
arbitration- a settlement technique in which a third party reviews the case and imposes a decision that is legally binding for both sides
labor force- all nonmilitary people who are employed or unemployed
productivity- value of output produced
unskilled labor- labor that requires no specialized skills, education, or training
semi-skilled labor- labor that requires minimal specialized skills and education
skilled labor- labor that requires specialized skills and education
professional labor- labor that requires advanced skills and education
affirmative action- the use of policies, programs, and procedures to ensure the inclusion of minorities and women in job hiring, college admission, and the awarding of government contracts
glass ceiling- an unofficial, invisible barrier that prevents women and minorities from advancing in bussinesses dominated by white men
money- anything that serves as a medium of exchange, a unit of account, and a store of value
barter- the direct exchange of one set of goods or services for another
currency- coins and paper bills used as money
commodity money- money that has value in and of themselves
representative money- holder can exchange then for something of value
fiat money- has value because the government stands behind it
bank- an institution for receiving, keeping, and lending money
Federal Reserve System- central bank to lend $ to member banks
FDIC- bank holiday, insure deposits, fiat money: Federal Despoit Insurance Corporation
money supply- all the money available in the US economy
liquidity- meausres how available the money is for the saver
money market- a market in which money is lent for periods less than a year
mutual fund- collect small amounds of equities from many sources
fractional reserve banking- a banking system that keeps only a fraction of funds on hand and lends out the remainder
default- failure to pay back a loan
mortgage- a specific type of loan that is used to buy real estate
credit card- promise to pay bill later
interest- the price paid for the use of borrowed money, or money earned by deposited funds
principal- the amount of money borrowed
debit card- withdraw from account
investment- set aside money for when income decreases
mutual fund- collect small amounds of equities from many sources
diversification- spreading out the risk of a portfolio over many different types of investments
portfolio- collection of financial assets
return- the money an investor receives above and beyond the sum of money originally invested
coupon rate- rate of return on the money loaned
maturity- life of the bond
par value- face value
yield- annual rate of return
savings bond- issued by governement
corporate bond- issued by corporation
SEC- Securities and Exchange Commission: private bonds are regulated
junk bond- low price; high yield; cash flow needed
share- part of a stock
equities- shares of stock
stock exchange- markets for the sale of stock
bull market-steady rise of the market
bear market- steady decline of the market
speculation- prices vary and fluctuate
gross domestic product- the dollar value of all final goods and services produced within a country's borders in a given year
nominal GDP- gross domestic product measured in current prices
real GDP- gross demestic product expressed in constant, or unchanging prices
gross national product- the annual income earned by US owned firms and US residents
depreciation- the loss of the value of capital equipment that results from normal wear and tear, or a decrease in the value of currency
aggregate supply- the total amount of goods and services in the economy available at all possible price levels
aggregate demand- the amount of goods and services in the economy that will be purchased at all possible price levels
business cycle- a period of macroeconomic expansion followed by a period of contraction
expansion- a period of economic growth as measured by a rise in real GDP
recession- a prolonged economic contraction
depression- a recession that is especially long and severe
stagflation- a decline in real GDP combined with a rise in the price level
leading indicators- key economic variables that economists use to predict a new phase of the business cycle
real GDP per capita- real gross demestic product divided by the total population
capital deepening- process of increasing the amount of capital per worker
saving- income not used for consumption
savings rate- the proportion of disposable income that is saved
technological progress- an increase in efficiency gained by producing more output without using more inputs
frictional unemployment- unemployment that occurs when people take time to find a job
seasonal unemployment- unemployment that occurs as a result of harvest schedules or vacations, or when industries slow or shut down for a season
structural unemployment- unemployment that occurs when workers' skills do not match the jobs that are available
cyclical unemployment- unemployment that rises during ecomomic downturns and falls when the economy improves
unemployment rate- the percentage of the nation's labor force that is unemployed
inflation- a general increase in prices
purchasing power- the ability to purchase goods and services
Consumer Price Index- a price index determined by measuring the price of a standard group of goods meant to represent the typical market basket of a typical urban consumer
market basket- a representative collection of goods and services
inflation rate- the percentage change in price level over time
creeping inflation- inflation that remains low ( 1 to 3 percent ) for a long time
chronic inflation- inflation that rises steadily from month to month over a long period
hyperinflation- very high inflation
deflation- a sustained drop in the price level
poverty threshold- an income level below which income is insufficient to support families or households
poverty rate- the percentage of people who live in households with incomes below the official proverty threshold
tax- a required payment to a local, state, or national government
revenue- income received by a government from taxes and nontax sources
tax base- income, property, good, or service that is subject to a tax
individual income tax- a tax on a person's income
sales tax- a tax on the dollar value of the good or service being sold
property tax- a tax on the value of a property
corporate income tax- a tax on the value of a corporation's profits
proportional tax- a tax for which the percentage of income paid in taxes remains the same for all income levels
progressive tax- a tax for which the percentage of income paid in taxes increases as income increases
regressive tax- a tax for which the percentage of income paid in taxes decreases as income increases
incidence of a tax- the final burden of a tax
withholding- taking payments out of an employee's pay before he or she receives it
tax return- form used to file one's income taxes
taxable income- income on which tax must be paid; total income minus exemptions and deductions
personal exemption- set amount that you subtract from your gross income for yourself, your spouse, and any dependents
deductions- variable amounts that you can subtract, or deduct, from your gross income
tariff- a tax on imported goods
tax incentive- the use of taxation to encourage or discourage certain behavior
mandatory spending- spending on certain programs that is mandated, or required, by existing law
discretionary spending- spending category about which government planners can make choices
entitlement- social welfare program that pwople are entitled to if they meet certain eligibility requirements
operating budget- budget for day-to-day expenses
capital budget- budget for major capital, or investment, expenditures
balanced budget- budget in which revenues are equal to spending
tax exempt- not subject to taxes
fiscal policy- government use of taxing and spending to stabalize the economy
appropriations bill- a bill that sets money aside for specific spending
classical economics- the idea that free markets can regulate themselves
productive capacity- the maximum output that an economy can produce without big increases in inflation
supply-side economics- a school of economics that believes tax cuts can help an economy by raising supply
Keynesian economics- form of demand side economics that encourages government action to increase or decrease demand and output
multiplier effect- the idea that every dollar of spending creates more than one dollar in economic activity
automatic stabilizer- a government program that changes automatically depending on GDP and a person's income
balanced budget- budget in which revenues are equal to spending
budget surplus- a situation in which the government takes in more than it spends
budget deficit- a situation in which the government spends more than it takes in
national debt- all the money the federal government owes to bondholders
crowding-out effect- the loss of funds for private investment due to government borrowing
monetary policy- the actions the Federal Reserve takes to influence the level of real GDP and the rate of inflation in the economy
federal funds rate- interest rate banks charge each other for loans
discount rate- rate the Federal Reserve charges for loans to commercial banks
required reserve ratio- ratio of reserves to deposits required of banks by the Federal Reserve
prime rate- rate of interest banks charge on short-term loans to their best costumers
open market operations- the buying and selling of government securities to alter the supply of money
monetarism- the belief that the money supply is the most important factor in macroeconomic performance
easy money policy- monetary policy that increases the money supply
tight money policy- monetary policy that reduces the money supply
inside lag- delay in implementing monetary policy
outside lag- the time it takes for monetary policy to have an effect