Term
Okun’s Rule of Thumb |
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Definition
A 1 percentage-point change in the unemployment rate will be associated with a 2 percent change in output in the opposite direction. |
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Term
Keynesians |
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Definition
Macroeconomists who generally favor activist government policy (more government control)
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Term
Behavioral Economics |
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Definition
| Combines psychology and economics to explain why and how investors act and to analyze how that behavior affects the market. |
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Term
Capitalism |
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Definition
An economic system based on the market in
which the ownership of the means of production resides with a small group of individuals called capitalists. |
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Term
Clayton Antitrust Act |
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Definition
A U.S. law that made four specific monopolistic practices illegal: price discrimination, tie-in
contracts, interlocking directorships, and buying stock in a competitor’s company in order to reduce competition. |
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Term
Corporations |
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Definition
A business that is treated as a person, legally
owned by its stockholders. Its stockholders are not liable for the actions of the corporate “person.” |
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Term
Consumer Price Index (CPI) |
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Definition
| A measure of prices of a fixed basket of consumer goods, weighted according to each component’s share of an average consumer’s expenditures. |
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Term
Consumer Surplus |
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Definition
| The difference between what consumers would have been willing to pay and what they actually pay. |
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Term
Economic Decision Rule |
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Definition
If the marginal benefits of doing something exceed the marginal costs, do it. If the marginal costs of doing something exceed the marginal benefits, don’t
do it. |
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Term
Deflation |
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Definition
| A continual fall in the price level. |
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Term
Demand |
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Definition
| A schedule of quantities of a good that will be bought per unit of time at various prices, other things constant. |
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Term
Demand Curve |
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Definition
The graphic representation of the relationship
between price and quantity demanded. |
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Term
Depreciation |
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Definition
A measure of the decline in value of an asset that occurs over time through use. Also: A decrease in the
value of a currency. |
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Term
Direct Regulation |
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Definition
| A program in which the amount of a good people are allowed to use is directly limited by the government. |
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Term
Economic Policy |
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Definition
| An action (or inaction) taken by government to influence economic actions. |
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Term
Economics |
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Definition
The study of how human beings coordinate their wants and desires, given the decision-making mechanisms,
social customs, and political realities of the society. |
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Term
Employment - Population Ratio (Unemployment Line) |
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Definition
| The number of people who are working as a percentage of people available to work. |
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Term
Entrepreneur |
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Definition
| An individual who sees an opportunity to sell an item at a price higher than the average cost of producing it. |
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Term
Federal Open Market Committee (FOMC) Ben Bernanke |
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Definition
| The Fed’s chief body that decides monetary policy. Current head chairman Ben Bernanke |
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Term
Federal Reserve Bank |
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Definition
| The U.S. central bankwhose liabilities (Federal Reserve notes) serve as cash in the United States. |
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Term
Federal Trade Commission Act |
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Definition
| A U.S. law that made it illegal for firms to use “unfair methods of competition” and to engage in “unfair or deceptive acts or practices.” |
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Term
Fiscal Policy |
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Definition
The deliberate change in either government spending or taxes to stimulate or slow down the economy.
Also, the changing of taxes and spending to affect the level of output in the economy. |
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Term
Foreign Aid (Those that benefit :( ) |
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Definition
| Funds that developed countries lend or give to developing countries. |
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Term
Frictional Unemployment |
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Definition
| Unemployment caused by people entering the job market and people quitting a job just long enough to look for and find another one. |
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Term
GDP Deflator |
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Definition
An index of the price level of aggregate output, or the average price of the components of GDP, relative
to a base year. |
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Term
Gross Domestic Product (GDP) |
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Definition
| The total market value of all final goods and services produced in an economy in a one-year period. |
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Term
Gross National Product (GNP) |
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Definition
| The aggregate final output of citizens and businesses of an economy in a one-year period. |
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Term
Hyperinflation |
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Definition
| Inflation that hits triple digits—100 percent or more per year. |
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Term
Friedrich Hayek |
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Definition
| Only a free market could coordinate an efficient allocation of resources into productive industries. |
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Term
Industrial Policy |
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Definition
| A formal policy that government takes toward business. |
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Term
Invisible Hand |
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Definition
| A market economy, through the price mechanism, will tend to allocate resources efficiently. |
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Term
Inflation |
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Definition
| A continual rise in the price level |
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Term
Input |
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Definition
What is put into a production process to achieve
an output. |
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Term
Limited Liability Company (LLC) |
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Definition
| The liability of a stockholder (owner) in a corporation; it is limited to the amount the stockholder has invested in the company. |
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Term
Labor Force |
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Definition
| Those people in an economy who are willing and able to work. |
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Term
Macroeconomics |
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Definition
| The study of the economy as a whole, which includes inflation, unemployment, business cycles,and growth. |
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Term
Marxian Socialism |
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Definition
| A model that focuses on equitable distribution of power, rights, and income among social classes. |
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Term
Monetary Policy |
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Definition
A policy of influencing the economy through changes in the banking system’s reserves that influence
the money supply and credit availability in the
economy. |
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Term
Net Domestic Product (NDP) |
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Definition
| The sum of consumption expenditures, government expenditures, net exports, and investment less depreciation. That is, GDP less depreciation. |
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Term
Net Exports |
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Definition
Spending on goods and services produced in the United States that foreigners buy (exports) minus
goods and services produced abroad that U.S.citizens buy (imports). |
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Term
Price Ceiling |
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Definition
| A government-imposed limit on how high a price can be charged. In other words, a government-set price below the market equilibrium price. |
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Term
Price Flooring |
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Definition
| A government-imposed limit on how low a price can be charged. In other words, a government-set price above equilibrium price. |
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Term
Price Producer Index (PPI) |
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Definition
| An index of prices that measures average change in the selling prices received by domestic producers of goods and services over time. |
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Term
Recession |
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Definition
A decline in real output that persists for more
than two consecutive quarters of a year. |
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Term
Reserves |
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Definition
Currency and deposits a bank keeps on hand or at the Fed or central bank, enough to manage the normal
cash inflows and outflows. |
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Term
Rules of 72 |
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Definition
The number of years it takes for a certain amount to double in value is equal to 72 divided by its annual
rate of interest. |
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Term
Socialism |
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Definition
An economic system based on individuals’ goodwill toward others, not on their own self-interest, and
in which, in principle, society decides what, how, and for whom to produce. |
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Term
Sole Proprietorship |
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Definition
| A business that has only one owner. |
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Term
Stagflation |
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Definition
The combination of high and accelerating inflation
and high unemployment. |
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Term
Sunk Cost |
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Definition
| Cost that has already been incurred and cannot be recovered. |
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Term
Supply Curve |
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Definition
A graphical representation of the relationship
between price and quantity supplied. |
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Term
Variable costs |
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Definition
| Costs that change as output changes. |
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Term
Unemployment Rate |
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Definition
The percentage of people in the economy who are willing and able to work but who are not
working. |
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Term
Value of Marginal Product |
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Definition
| An additional worker’s marginal physical product multiplied by the price at which the firm could sell that additional product. |
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Term
World trade Organization |
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Definition
| Organization committed to getting countries to agree not to impose new tariffs or other trade restrictions except under certain limited conditions. |
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Term
Yield Curve |
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Definition
| A curve that shows the relationship between interest rates and bonds’ time to maturity. |
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