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Comm 1800 Ch 4


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the economic of financial state of a society
study of the financial welfare of an economy and how an economy operates; stud y of how society acquires and uses its financial capital real capital, and human capital
people who study economics
study of how individual people and organizations behave financially--how the work, earn money, and spend money
study of how and overall society behaves financially
full employment
the want for everyone who wants and needs a job to have a job
not having full employment
cyclical unemployment
occurs when the market for a person's laabor is temporarily low
seasonal unemployment
occurs when the demand for employees varies depending on the time of year
stuctural unempoyment
occurs when there are structural barriers that prevent employment and employees from coming together
transitional unemployment
occurs when an employee or employer desires to make a change
have part time job, seeking full time; overqualifed
the use of resources to create income
factors of production
the resources that an econoy needs to operate and prosper (labor, natural resources, knowledge, money)
prices of items go down
demand-pull inflation
occurs when the demand for a product exceeds the avaiable supply of the product
Cost-push inflation
occurs when the cost of an item goes up without an increase in demand (occurs when supply is artificaly and suddenly limited)
nominal income
measure of the income of individuals, businesses, and nations in current year dollars and do not adjust for changing prices
real income
nominal income adjusted for inflation or deflation
economic index
mesures the relative change of an economic factor over time
Consumer Price Index (CPI)
estimates how the average price of consumer goods has changed in a give period. prices often called retail prices
Producers Price Index (PPI)
estimates how the prices of products sold between businesses have changed in a given period. such prices are called wholesale prices
GDP deflator
estimates how the prices of all items have changed in a given period
Adm smith
argued that economies was a win win game (not a zero sum game) (1+1=3)
multiplier effect
when you spend money, you create income for someone else
free market system/ capitalistic ecnomoies
individuals and businesses are free to compete ad free to receive the benefits from winning the competition
supply curve
shows the relationship, high prices=higher supply, lower prices=lower supply
refers to the individuals and businesses that buy products; behavior of custoomers
demand curve
relationship of demand; higher prices=lower demand, lower prices=higher demand
equilibrium point (market price)
price where buyers and sellers agree to bake and exchange
when demand and supply react to price changes they are this (typically when customers ahve alernatives or choices)
when demand and supply do not react to price changes they are this (typically where there are not alternative choices)
perfect competition
numerous buyers and sellers; buyers have alternatives and choices and sellers must supply the buyer with the best product at the lowerst prices
happens when one business controls the entire supply of a product
few businesses control the supply of a product
the challege is when these competing businesses get together and set prices
an economic system in which the government owns selected businesses; typically businesse more critical to the welfare of society
said when the government owns the business
fromed by kar marx and others; no private ownership; evertyhing owned by everything
controlled or regulated economy
economy in which businesses are privately owned by heavily regulated by government
mixed economies
economies modified freee markets with regulation and socialism to abiod abuses
economic cycle/business cycle
cycle as economy goesthrough ups and downs (expansions and contractions)
Gross Domestic Product (GDP)
how the health of the economy is measured; value of goods and services produced in an economy in a given yera
Nominal GDP
price componet of GDP as current price of goods and services produced
Real GDP
nominal GDP with an adjustment of price changes
when individuals buy products that are manuafactured in their home country
Durable goods
goods that have long lives (computers, cars, etc)
nondurable goods
goods that have realtively short lives
when indivduals or businesses spend money on capital items such as buildings and equipment
Government spending
when governments spend money for national defense, roads, services, etc. Includes stae and local governmetns
disposable income
gross earings, less your taxes, equals net paycheck; money we have to spend on thigns
marginal propensity to consume
tendency to spend disposable income
marginal propensity to save
propensity to save disposable income
two consecutive quarters of negative growth in real GDP
very long and severe recession
fiscal policy
relates to governmetn spending and taxation
monetary policy
governmetns management of supply of money to help and economy grow faster or slower
Federal reserve
central bank in the united states that controlles money supply by printing and circulating money, regulating bank lending, influence interest rate s
when governmet spending is greater than tax revenue
leading economic indications
event that can predit future sate of economy to base decisions on (consumer sentiment, claims for unemployent benefits, housing starts, inventories, interest rates, prices of products)

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