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Econ Final
N/A
80
Economics
Undergraduate 4
04/22/2013

Additional Economics Flashcards

 


 

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Term
Absolute advantage
Definition
The advantage an individual, business, or country has over another when its product can be produced using fewer resources than would be used by another individual, business, or country.
Term
Aggregate Demand
Definition
The total amount (aggregate quantity demanded) of spending on goods and services that consumers, businesses, government, and other countries want to do at each overall level of prices
Term
Aggregate Supply
Definition
The total amount of production (aggregate quantity supplied) of goods and services that businesses and governments are willing and able to produce at each overall level of prices, given the labor force, the stock of productive capital, and technology.
Term
Allocative efficiency
Definition
Allocating our resources to produce the combinations of goods and services we want the most
Term
Automatic stabilizers
Definition
Our system of income taxes and government transfer payments functions in a manner that reduces the effects on total spending of changes in consumption, investment, government spending on goods and services, and net exports
Term
Autonomous consumption
Definition
The portion of consumption that is independent of changes in disposable income
Term
Balance of payments
Definition
The accounting records for a country's transactions between its residents and businesses and those of all other countries.
Term
Balance of trade
Definition
The difference between the value of our exports and the value of our imports.
Term
Bonds
Definition
Pieces of paper issued by a government or corporation promising to repay the amount borrowed plus make interest payments throughout the term of the bond
Term
Capital and financial account balance
Definition
The balance on that part of the balance of payments accounts that includes flows of funds for real and financial investments
Term
Capital gains
Definition
An increase in the value of an asset
Term
Comparative advantage
Definition
The advantage an individual, business, or country has over another when its product can be produced at a lower opportunity cost (the other goods given up) than if it were produced by another individual, business, or country.
Term
Complementary goods
Definition
Goods that are used together. When the prices of one increases, the demand for the complementary good decreases.
Term
Consumer price index
Definition
A price index that measures changes in average prices of goods and services purchased by a typical consumer.
Term
Current account balance
Definition
The balance of trade plus the net flow of income earned on investments and unilateral transfers
Term
Cyclical unemployment
Definition
Unemployment caused by recessions or slowing growth in total spending in the economy.
Term
Demand for money
Definition
The quantity of money individuals and business want to hold at each interest rate
Term
Diminishing marginal returns
Definition
Increasing one input, while holding all other inputs constant, will eventually result in smaller and smaller additions to output.
Term
Discount rate
Definition
The interest rate the Federal Reserve charges commercial banks when they borrow reserves from the Federal Reserve
Term
Disposable income
Definition
Personal income after taxes are paid
Term
Economic efficiency
Definition
A condition where we are satisfying as many of our wants as we can given our limited resources. We are using all of our resources to produce the goods and services we technically and allocatively efficient manner.
Term
Economic growth
Definition
Economists use the term to refer to continual increases in potential real GDP or full-employment real GDP or aggregate supply. (often used to mean increases in total spending)
Term
Elastic demand
Definition
Demand is elastic when the percentage change in the quantity demanded is greater than the percentage change in the price of the good or service. The price elasticity of demand is greater than one.
Term
Equilibrium price
Definition
The price at which quantity supplied is equal to quantity demanded. The market is in equilibrium, that is, equilibrium price will not change until something else changes.
Term
Equilibrium quantity
Definition
The quantity of a good bought and sold when quantity supplied equals quantity demanded. The equilibrium quantity will not change until something else changes.
Term
Federal budget deficits (surpluses)
Definition
Government spending on goods and services plus transfer payments minus tax receipts. A surplus is experienced when tax receipts are greater than spending and transfer payments.
Term
Federal Reserve System
Definition
A semi-independent arm of government created by Congress. It is responsible for controlling the money supply and the availability of credit and regulating the banking system; acts as the central bank.
Term
Fiscal policy
Definition
Policies that affect the level of federal government spending on goods and services, taxes, and transfer payments.
Term
Fixed exchange rates
Definition
Exchange rates are set at a given level and government policy is aimed at maintaining that fixed level
Term
Frictional Unemployment
Definition
Unemployment caused by workers entering the labor force, voluntarily changing jobs or being temporarily laid off or fired.
Term
Full employment level of real GDP
Definition
The amount of output that would be produced if the labor force is at full employment
Term
Full employment
Definition
The highest employment can be at any one time without causing an acceleration of inflation. Also, the level of unemployment when there is no cyclical unemployment.
Term
Full-employment level of real GDP
Definition
The amount of output that can be produced if we are at a level of full employment. Sometimes also called the potential level of real GDP
Term
GDP deflator
Definition
A price index for all goods and services included in GDP. The measure compares the cost of the present basket of goods and services relative to the cost of that basket in a base year.
Term
GDP price index
Definition
A price index for all goods and services included in GDP. The measure compares the cost of the present basket of goods and services relative to the cost of that basket in a base year. Formerly called the GDP implicit deflator.
Term
GDP
Definition
The market value of all of the final goods and services produced annually within a nation
Term
Government budget deficit and surplus
Definition
Subtract spending on goods and services and transfer payments from revenues. If the result is a negative number, the government has a budget deficit. If positive, the government has a surplus.
Term
Human capital
Definition
The skills and education that make workers more productive
Term
Inelastic demand
Definition
Demand is inelastic when the percentage change in the quantity demanded is less than the percentage change in the price of the good or service. The price elasticity of demand is less than one.
Term
Inferior goods
Definition
A good the demand for which decreases when income increases
Term
Inflation
Definition
An increase in the overall level of prices of goods and services in the economy.
Term
International demand for the dollar
Definition
The international demand for U.S. exports, international demand for U.S. financial assets, and international demand for U.S. investment.
Term
International supply of the dollar
Definition
The U.S. demand for imports into the U.S., for international financial assets, and for international investment.
Term
Investment
Definition
Spending that represents an increase in capacity to produce future output (new buildings, machines, tools, etc.)
Term
Labor force
Definition
The number of individuals who have jobs plus the number who are actively looking for work
Term
Law of demand
Definition
The principle that price and quantity demanded are inversely related.
Term
Long-run equilibrium
Definition
Aggregate quantity demanded equals aggregate quantity supplied at the full-employment level of output.
Term
Monetary policy
Definition
Policies, normally of the Federal Reserve System, that affect the supply of money and credit.
Term
Money creation
Definition
Money can be created through the process of banks making loans.
Term
Money multiplier
Definition
The amount by which the money supply will eventually change as a result of each dollar of reserves that is added to or subtracted form the banking system.
Term
Movements along demand curve
Definition
A change in quantity demanded caused by a change in a good's price.
Term
Movements along the supply curve
Definition
A change in quantity supplied caused by a change in a good's price.
Term
Natural rate of unemployment
Definition
The economy will "naturally" return to this level of unemployment, given sufficient time. Same as full-employment level of unemployment.
Term
Negative supply shock
Definition
A negative supply shock is a reduction in aggregate supply caused by an increase in prices of inputs or a decrease in productivity.
Term
Normal goods
Definition
A good the demand for which increases when income increases
Term
Open market operations
Definition
The purchases or sales of the United States government securities by the Federal Reserve System for the purpose of increasing or decreasing the money supply and changing credit conditions.
Term
Opportunity cost
Definition
The true cost of making a choice is the value of what is given up as a result of that choice; it is the value of the next best alternative.
Term
Output
Definition
REAL GDP; Total production of all final goods and services in an economy in a year.
Term
Potential level of real GDP
Definition
The real GDP that can be produced when we are at the full-employment level of output.
Term
Price ceiling
Definition
The legal maximum price for which a good or service can be sold.
Term
Price floor
Definition
The legal minimum price at which a good or service can be sold.
Term
Principle of increasing costs
Definition
As we increase the production of a good, the opportunity cost eventually increases.
Term
Quota
Definition
A legal limit on the amount of a good or service that can be imported
Term
Reaganomics
Definition
The income tax reductions that were intended to increase productivity and investment, while at the same time not increasing the federal budget deficit.
Term
Recession
Definition
Includes a significant decline in production and employment; the decline is widespread and last for more than a few months
Term
Required reserve ratio
Definition
The percentage of bank deposits that the Federal Reserve System requires banks to keep as reserves
Term
Required reserves
Definition
Banks are required to hold a percentage of their deposits on reserve as currency in their vaults or in deposits with a Federal Reserve Bank.
Term
Restrictive fiscal policy
Definition
A fiscal policy meant to reduce inflationary pressures. Normally an increase in taxes or a reduction in spending and transfer payments
Term
Scarcity
Definition
Our wants seem to be greater than our abilities to satisfy them. This leads to the necessity for making decisions about how we use our resources.
Term
Short-run equilibrium
Definition
Aggregate quantity demanded equals aggregate quantity supplied; does not necessarily occur at full employment.
Term
Spending multiplier
Definition
The change in total spending that will result from a change of a dollar of consumption, investment, government, or net export spending
Term
Stagflation
Definition
Conditions under which both inflation and unemployment are rising
Term
Stimulative fiscal policy
Definition
A fiscal policy meant to reduce unemployment. Normally a decrease in taxes or an increase in spending and transfer payments.
Term
Structural unemployment
Definition
Unemployment resulting from workers skills not matching job openings.
Term
Supply shocks
Definition
An increase in the costs of producing goods and services in the economy, resulting in increasing unemployment and rising inflation
Term
Supply-side tax cuts
Definition
Tax cuts that are intended to increase aggregate supply by increasing work effort, saving, and investment
Term
Tariff
Definition
A tax on an imported good
Term
Trade deficit
Definition
Exports minus imports. If the result is a negative number, it is a trade deficit. If positive, then it is a trade surplus.
Term
Transfer payments
Definition
Government payments to individuals. Social security, unemployment compensation, and welfare payments (transfer of incomes to recipients)
Term
Twin deficits
Definition
The connection between changes in the level of the federal budget deficit and the level of the trade deficit
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