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Thole Economics Final

If you have Mrs.Thole and/or Prentice Hall Economics Principles in Action, you have found the holy grail

Terms

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monetary policy why
to alter the money supply
check clearing
banks record whose account gives up money and whose acount receives money when a customer writes a check
depreciation
decrease in currency value
want
iten desired not essential survival
regressive tax
a tax for which the percentage of income paid in taxes decreases as income increases
food stamps
gov issued coupons that poor use for cheap food
heavy industy
industry that requires large capital investment and that produces items used in other countries
fiscal policy why
aimed at the manipulation of aggregate supply and demand
excess supply
quantity supplied is more than quantity demanded
GDP
Gross Domestic Product-value of all g/s in economy( real per capita GDP=adjustef for inflation) econ ind. 3% or more GDP growth
goods
physical objects
welfare
gov aid to poor
invisible hand
term economists use describe self regulation nature of market place
fiscal year
twelve month period begin any date
foreign market exchange
banks and other financial institutions that facilitate the buying and selling of foreign currencies
increasing marginal returns
level production marginal product of labor increases as workers increases(more workers=done faster
balance of trade
relationship bwtn imports and exports
human capital
skills+knowledge gained by worker through education/experience
factors of production
land labor capital used to make all g/s
cash transfer
direct payments of money to eligible poor people
market demand schedule
quantity of a good all consumers in market buy at prices
inside lag
delay in implementing monetary policy
stagflation
decline in real GDP combined with rise in price level
comparative advantage
produce most efficiently of what you have( lower opportunity cost)
tax
required payment to local state or national gov
easy money policy
monetary policy that increases money supply
3 economic indicators
3% or more growth real per capita GDP, 3% or less inflation(consumer price index), 6% or less unemployment(freak out at 3%)
private sector
part of economy involves indiv. +busin. transactions
guns or butter
trade off nations face: more or less military/consumer goods
specialization
concentration on production of limited number of activities
public disclosure laws
laws requring companies to give info on products
incentive
expectation encourages peeps to behave in certain way
monetary contractionary policy
increase RRR, increase discount rate, sell bonds
operating cost
cost of operating a facility such as a store or factory
patriotism
love of ones country inspires to serve
EU
european union 1957 now expanded with euro
product market
market hjousehold buy g/s firms produce (circular flow top)
elasticity of demand
measure of how consumers react to change in price
discount rate
rate Fed charges for loans to commercial banks
in-kind benefits
g/s provided free or cheap(food stamps, subsidized housing)
competition
struggle btwn producers for costumer dollars
import
good brought from another country for sale
incidence of a tax
the final burden of a tax
EFFESGS
efficiency, freedom, full employment, equity, security, growth, stability(every fine female expects some good....sandwiches)
excess reserves
reserves greater greater than required amounts
enterprise zone
are where companies can locate free of certain taxes and restrictions
production possibilities frontier
line on prod. poss. graph that shows maximum possible output
treasury note
gov bond repaid 2-10 yrs
efficiency
using resources maximize production g/s (on the line/frontier)
legal equality
same legal rights
progressive tax
tax for which the percentage of income paid in taxes increases as income increases
bank holding company
company that owns more than one bank
lorenz curve
curve that illustrates income distribution ( top heavy)
fiscal contractionary policies
lower spending and more taxes to reduce economic growth
light industry
the production of small consumer goods
foreign direct investment(FDI)
the establishment of an enterprise by a foreigner
free contract
people decide what agreements they want to enter into
malnutrition
inadequate nutrician
world bank
largest provider of development assisstance( cure)
thinking at the margin
deciding whether to do or use one additional unit of some resource( not all or nothing)
depresion
recession that is especially long and severe
monetary policy who
the federal reserve(Fed)
infant industry
a new industry
productive capacity
max output that an economy can produce without big inflation
economic growth
steady long term increase in real GDP
classical economics
idea that free markets can regulate themselves
discretionary spending
spending by which gov planners make chioices
balanced budget
revenues equal to spending
industrialization
extensive organization of an economy for the purpose of manufacture
continuum
range with no clear divisions (continuum of mixed econ- north korea left, mexico middle, canade/us right mostly, hong kong right)
per capita gross domestic product(per capita GDP)
GDP divided by population
safety net
gov programs protect people experiencing icky econ. conditions
collective
large farm leased from state to groups of peasant farmers
complements
good bought and used together(bike-helmet)
unitary elastic
demand elasticity equal to one(raise by 50% sell 1/2 as much)
United Nations Development Program(UNDP)
UN program dedicated to elimination of poverty through development
treasury bill
gov bond repaid 3 month-1 year
development
process by which the nation improves economic political and social well being of people
tax base
income property good or service that is subject to a tax
substitutes
goods used in place of one another
treasury bond
gov bond issued as long as 30 yrs
variable cost
cost rises falls depending on how much is produced
export
good sent to another country for sale
rationing
allocating scare g/s using criteria other than price
tight money policy
monetary policy that reduces money supply
supply
amount of goods available
subsidy
gov payment that supports business or market
NAFTA
north american free trade agreement eliminates all tariffs between canada mexico and us
business cycle
period of macro econ expansion followed by contraction/recession
market failure
situation market does not distribute resources efficiently
demand curve
graph of demand schedule( left to right going down) D at bottom right
fiscal expansionary policies
higher spending less taxes that encourage economic growth
open opportunity
concept everyone can compete in market place
supply schedule
how much supplied at diff. prices
block grant
federal funds given to states in lump sums
disequilibrium
and price or quantity not equal to quantity demanded in the market
prime rate
rate of interest banks charge on short term loans to their best customers
fixed cost
cost thatd oes not change no matter how much of good is produced
proportional tax
a tax for which percentage of income paid in taxes remains the same for all income levels
marginal cost
cost producing one more unit of a good
Federal Open Market Comittee
(FOMC) Fed comittee that makes key decisions about interest rates and growth of US money supply
appropriations bill
bill sets money aside for specific spending
firm/ producers of g/s
organization uses resources to produce(circular flow right)
monetary expansionary policy
decrease RRR, decrease discount rates, buy bonds
international free trade agreement
agreement that results from cooperation between at least two countries to reduce restrictions
centrally planned economy
economic system central gov makes all decisions on econ ?'s
keynesian economics
form demand side economics that encourages gov action to increase or decrease demand and output
fixed exchange-rate system
currency where gov trys to keep values of currencies constant
special economic zones
designated regions in china where foreign investment is encouraged, businessezs can make own production decisions and foreign companies are allowed to operate
money multiplier formula
amount of new money that is created by each deposit 1/RRR
budget surplus
gov takes in more than it spends
marginal revenue
additional income from selling one more unit of good sometimes equal to price
outside lag
the time it takes for monetary policy to have an effect
peak
height of economic expansion when GDP stops rising (high inflation low unemployment)
newly industrialized country (NIC)
LDC shown significant improvement int he measures of development
inferior good
good consumers buy less of when income increases
Federal Advisory Council
(FAC) research arm of the Fed
trade deficit
imports more than exports
customs duty
tax on items bought abroad
price floor
minimum price g/s (TOP line on graph)
inelastic
demand not sensitive to price change (pencils "NOT SHOES THOLE")
entrepreneur
ambitious leader combines FOP create new g/s
voluntary exchange
people may decide what they buy and sell
national debt
all money the fed gov owes to bonholders
trade barrier
means of preventing foreign product or service from freely entering a nation's territory
economics
the study of how people seek to satisfy their needs and wants by making choices
International Monetary Fund(IMF)
formed to stabilize international exchange rates and facilitate development(band-aid)
trade subsidies
gov pays production costs
work ethic
system of values to work
self-interest
ones own personal gain
dumping
unfair pricing
market
arrangement allows buyers and sellers to exchange things
excess demand
quantity demanded is more than quantity supplied
profit
financial gain in transaction
communism
centrally planned economy all economic+political pwr in hands of central gov
elasticity of supply
measure of way supplied quantity reacts to price
economic system
method used by society to produce and distribute g/s
Congressional Budget Office
(CBO) gov agency that provides economic data to Congress
private property
property owned by indiv. or companies not by gov or people as a whole
crowding-out effect
loss of funds for private investment due to gov borrowing
total cost
fixed+variable costs
spillover costs
costs of production that affect people who have no control over how much of a good is produced
ceteris paribus
all other things held constant
laissez faire
doctrine states gov generally shoudl not intervene in market place
microeconomics
study economic behavior/ decision making of small units(indiv, families, businesses)
privatization
sale or transfer of state-owned businesses to individuals
land
natural resources
supply shock
sudden shortage of a good
stabilization program
agreement between debtor nation and IMF in which nation agrees to revise economic policy
underutilization
using fewer resources than economy is capable (under line/frontier)
supply-side economics
school of economics that believes tax cuts can help an economy by raising supply
physical capital
all human made goods used to produce:tools, buildings
less developed country
(LDC) nation with low level or material being
work ethic
commitment to value of work
fiscal policy who
the president and congress
traditional economy
economic system relies on habit, custom, ritual to decide 3 econ ?'s
macroeconomics
study of behavior/decision making of entire economies
socialism
social political philosophy based belief democratic means should be used evenly distribute wealth
required reserve ratio
(RRR) ratio of reserves banks must have (Fed tells em)
public interest
concerns of public as a whole
supply curve
graph quantity supplied at prices (left to right going up)S at top right
shortage
situation service or good is unavailable
individual income tax
tax on earnings
market supply schedule
how much all suppliers offer or good at diff. prices
poverty threshold
income level below which income is insufficient ot support a family or household
flexible exchange-rate system
currency that allows exchange rate determ. by supply and demand
infrastructure
services and facilities necessary for an economy to function
basic principles of free enterprise
profit motive, open opportunity, legal equality, private property rights, free contract, voluntary exchange, competition
3 key economic questions
what, how, who consumes g/s
equilibrium
the point where quantity demanded ans supplied are equal(middle of x on graph)
trough
lowest point in economics expansion when GDP stops falling (high unemployment low inflation)
developed nation
nation with a higher average level of material well being
multiplier effect
every one dollar gov spending creates more than one dollar in the economy
voluntary export restraint
(VER) self imposed limitation on the number of productr shipped to a particular country
recession
prolonged economic contraction
glasnost
policy of political openness in russia in the 1980s
debt rescheduling
lengthening time of debt repayment
free rider
one who doesnt pay for g/s but gets teh benefits anyways if it is provided as public good
appreciation
increase in currency value
quantity supplied
amount supplier willing and able to supply at certain price
household
person group of people in residence (circular flow left)
WTO
world trade organization goal is freer trade and lower tariffs, make sure agreements are abided
production possibilities curve
graph shows alternative ways to use economies resources
open market operations
buying and selling gov securities to alter money supply
factor market
market firms purchase FOP from households(circular flow bottom)
income effect
change in comsumption when real income changes
opportunity cost
most desirable alternative given up in decision
demand
desire to own and ability to pay for it
externality
econ side effect of g/s that benefits or costs someone other than the person deciding how much to produce or consume(strip club in negative ex.)
perestroika
soviet leader gorbachev's plan for economic restructuring
federal funds rate
interest rate banks charge each other for loans
Federal Reserve Districts
12 banking districts created by the Red Reserve Act(7)
mixed economy
market-based econ system with limited gov involvement(most popular)
euro
single currency among EU members
corporate income tax
tax on value of company's profits
entitlement
social welfare program people "entitled to" if they meet certain eligibility requirements
capital
any human made resource that is used to create g/s
budget deficit
gov spends more than it takes in
cost
the alternative that is given up because of a decision
free enterprise
economis system where investments are determined in a free market by private decision rather than state control
minimum wage
minimum price employer can pay worker for hour of labor
absolute advantage
the ability to produce more a given product using resources(most efficient)
shortage
quantity demanded is greater than supplied
monetary policy
actions the Fed makes to influence the level of real GDP and the rate of inflation in the economy
trade war
cycle of increasing trade restrictions
law of comparative advantage
idea that nation is better off when is produces g/s fir which it has comparative advantage
private property rights
people have right to control possessions
automatic stabilizer
gov program that changes automatically depending on GDP and income
labor
effort people devote to task for which they are paid
command economy
econ system central authority is in command (centrally planned)
market economy
econ ?'s based on voluntary exchange in markets
standard of living
level of econ prosperity: each generation lives better than the next
substitution effect
consumers react to increase in price by buying something else more and that less
search costs
financial and opportunity cost consumers pay when searching for g/s
services
actions/activities
elastic
demand very sensitive to change in price(lobster)
income distribution
how nations total income is distributed among its population
workfare
program requiring work for temp. assistance
price ceiling
max price that can be legally charged for g/s (BOTTOM line on graph)
foreign investment
investment originating from other countries
rent control
price ceiling on rent
profit motive
force encourages to improve material well being
import quota
a limit on the amount of good that can be imported
technology
process used to produce g/s
law of supply
as price increases supply increases
sales tax
tax on g/s prices
scarcity
limited quantities of resources unlimited wants
natural rate of population increase
difference between death and birth rate
diminishing marginal returns
level production marginal product of labor decreases as workers increase( after needed workers there benefits of specialization end)
property tax
tax on property
literacy rate
proportion of people over 15 who can read and write
total revenue
total money a firm receives by selling g/s
poverty threshold
income level below that which is needed to support fam. or househld
subsistence agriculture
level of farming where person raises enough to feed own family
fiscal policy
use gov spending and revenue collection to influence the economy
monetarism
the belief that money supply is the most important factor in macroeconomic performance
board of governors
seven member board that oversees the Fed Reserve System
red tape
ridiculous standards/rules on exports
Office of Management and Budget
(OMB) gov office that manages the fed budget
excise tax
tax on production/sale of a good(fags)
net worth
total assets minus total liabilities
law of demand
consumers buy more when price is decreased and less whne it increases
need
something: air food shelter necessary for survivial
black market
market where goods are sole illegally
normal good
consumers demand more of when income increases
population growth rate
increase in country's pop in year in % of figure at start of year
arable
suitable for producing crops
competition
rivalry among sellers to attract consumers by lowering costs
exchange rate
value of a foreign nations currency in terms of the home nations currency
law of increasing costs
as we shift FOP from making one g/s to another the cost of producing increases
infant mortality rate
number of deaths that occur in the first year of lifer per 1000
expansion
period of economic growth on bus. cycle
variable
factor that can change
public sector
part of economy involves transactions of gov
internal financing
financing derived from the savings of a country's citizens
authoritarian
strict obedience to an authority like a dictator
revenue
income received from taxes and nontax sources
surplus
quantity supplied exceeds quantity demanded
contraction
period of economic decline by falling real GDP
money creation
process where money enters into circulation
poverty rate
% of people below official poverty line
free-trade zone
region where group of countries agrees to reduce or rid off trade barriers
demand schedule
table that lists quantity of good person will buy at different prices
interest group
(grass root organizations) tries to persuade public officials to act of vote according to group members interests
trade surplus
nation exports more than imports
foreign portfolio investment
entry of funds into a country when foreigners make purchases in bonds and stocks
factor payments
income people receive for supplying FOP(land labor capital)
trade-off
alternative we sacrifice when make a decision
Medicaid
entitlement program that benefits low income families, diable, elderly in nursing homes
protectionism
use of trade barriers to protect a nation's industries from foreign competition
tariff
tax on imported goods
regulation
gov intervention in market that affects production of a good
federal budget
plan for fed gov revenues and spending for coming year
demand-side economics
idea gov spending and tax cuts help an economy by raising demand
life expectancy
average expected life span of an individual
mandatory spending
spending on certain programs that is required by law
consumer sovereignty
pwr of consumers to decide what gets produced

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