Term
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Definition
| Rewards for engaging in a particular study |
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Term
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Definition
| The study of how people allocate their limitless recources to satisfy their uimited wants |
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Term
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Definition
| Things used to produce goods and services to satisfy people's wants |
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Term
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Definition
| What people would buy if their incomes were unlimited |
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Term
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Definition
| The study of decision making undertaken by individuals (or households) and by firms |
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Term
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Definition
| The study of behevior of the economy as a whole, including such economywide phenomena as changes in unemployment, the general price level, and national income |
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Term
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Definition
| Total amounts or quantities; aggregate demand, for example, is total planned expenditures throughout a nation |
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Term
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Definition
| The assumption that people do not intentionally make decisions that would leave them worse off |
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Term
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Definition
| Simplified representations of the real world used as the basis for predictions or explanations |
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Term
| Ceteris paribus [KAY-ter-us PEAR-uh-bus] assumption |
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Definition
| The assumption that nothing changes except the factor or factors beings studied |
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Term
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Definition
| Relying on real-world data in evaluating the usefulness of a model |
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Term
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Definition
| An approach to the study of consumer behavior that emphasizes psychological limitations and complications that potentially interfere with rational decision making |
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Term
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Definition
| The hypothesis that people are nearly, but not fully, rational, so that they cannot examine every possible choice available to them but instead use simple rules of thumb to sort among the alternatives that happen to occur to them |
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Term
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Definition
| Analysis that is strictly limited to making either purely descriptive statements or scientific predictions; for example, "if A, then B." A statement of fact |
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Term
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Definition
| Analysis involving value judgments about economic policies; relates to whether things are good or bad. Is a statement of opinion |
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Term
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Definition
| A situation in which the ingredients for producing the things that people desire are insufficient to satisfy all wants at zero price |
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Term
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Definition
| Any activity that results in the conversion of resources into products that can be used in consumption |
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Term
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Definition
| The natural resources that are available from nature. Land as a resource includes location, original fertility and mineral deposits, topography, climate, water, and vegitation |
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Term
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Definition
| Productive contributions of humans who work |
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Term
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Definition
| All manufactured resources, including buildings, equipment, machines, and improvements to land that are used for productions |
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Term
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Definition
| The accumulated training and education of workers |
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Term
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Definition
| The component of human resources that preforms the functions of raising capital, organizing, managing, and assembling other factors of production, making basic business policy decisions, and taking risks |
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Term
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Definition
| Mental or physical labor or help purchased by consumors. Examples are the assistance of physicians, lawyers, dentists, repair personnel, housecleaners, educators, retailers, and wholesalers; items purchased or used by consunors that do not have physical characteristics |
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Term
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Definition
| The highest-valued, next best alternative that must be sacrificed to obtain something or to satisfied a want |
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Term
| Production possibility curve (PPC) |
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Definition
| A curve representing all possible combinations of maximum outputs that could be produced assuming a fixed amount of productive resources of a given quality |
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Term
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Definition
| Society's pool of applied knowledge concerning how goods and services can be produced |
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Term
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Definition
| The case in which a given level of inputs is used to produce the maximum output possible. Alternatively, the situation in which a given output introduced at minimum cost |
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Term
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Definition
| ANy point below the production possibilities curve, at which the use of resources is not generating the maximum possible output |
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Term
| Law of increasing relative cost |
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Definition
| the fact that the opportunity cost of additional units of a good generally increases as society attempts to produce more of that good. This Accounts for the bellowed-out shape of the the production possibility curve |
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Term
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Definition
| The use of goods and services for personal satisfaction |
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Term
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Definition
| The organization of economic activity so that what each person (or region) consumes is not identical to what that person (or region) produces. An individual may specialize, for example, in law or medicine. A nation may specialize in the production of coffee, computers, or digital cameras |
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Term
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Definition
| The ability to produce at a lower opportunity cost than another producer |
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Term
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Definition
| The ability to produce at a lower opportunity cost in all aspects than another producer |
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Term
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Definition
| The segregation of resources into different specific tasks. For example, one automobile worker put puts on bumpers, another doors, ect |
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Term
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Definition
All of the arrangements that individuals
have for exchanging with one another. |
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Term
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Definition
| How much of a good or service people will purchase at a given price. The higher the price, the less people will buy |
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Term
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Definition
| The observation that there is a negative (inverse) relationship between the price of any good or service and the quantity demanded |
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Term
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Definition
| The money price of one commodity divided by the money price of another commodity; the number of units of one commodity that must be sacrificed to purchase one unit of another commodity |
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Term
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Definition
| The dollar amount of a good |
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Term
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Definition
| A graphical representation of the demand of a product |
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Term
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Definition
| The demand of all consumers in the marketplace for a particular good or service. |
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Term
| Ceteris paribus conditions |
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Definition
| Determinants of the relationship between price and quantity that are unchanged along a curve; changes in these factors cause the curve to shift |
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Term
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Definition
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Term
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Definition
| The generic brand, bought when normal goods rise in price |
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Term
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Definition
| A replacement. If the price of a product goes up, the demand for the substitute goes up as well |
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Term
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Definition
| An addition. If the price for something goes down, the demand for the compliment goes up |
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Term
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Definition
| The amount of goods a company produces. |
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Term
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Definition
| The observation that the higher the price of a good, the more of that good sellers will make available over a specified time period |
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Term
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Definition
| The graphical representation of the supply schedule. Slopes upwards on the supply/demand curve |
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Term
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Definition
| A negative tax. Money given to a business to encourage positive production. Usually in the form of a grant |
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Term
| Market clearing (equilibrium) price |
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Definition
| The price that clears the market, at which quantity demanded equals quantities supplied. The price at which the supply and demand curve meets |
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Term
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Definition
| The situation when quantity supplied equals quantity demanded at a particular price |
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Term
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Definition
| When the quantity demanded is greater than the quantity supplied at a particular price point |
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Term
|
Definition
| When the quantity supplied is greater than the quantity demanded |
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Term
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Definition
| An economic system in which relative prices are constantly changing to reflect the changes in supply and demand for different commodities |
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Term
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Definition
| An act of trading, done on an elective basis, in which both parties to the trade expect to be better off after the exchange |
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Term
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Definition
| The conditions under which tradings take place. Usually, the terms of exchange are equal to the price at which a good is traded |
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Term
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Definition
| All of the costs associated with an exchange. Price, quality, service record, ect. |
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Term
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Definition
| Government-mandated minimum or maximum prices that may be charged on a good or service |
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Term
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Definition
| A set limit that stops the price of a product from rising above a certain level |
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Term
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Definition
| A set limit that stops the price of a product from lowering below a certain leve |
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Term
| Non-price rationing devices |
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Definition
| All methods used to ration scare goods that are price-controlled |
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Term
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Definition
| A market at which goods are traded at prices above the legal maximum. Or a market in which illegal goods are sold |
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Term
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Definition
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Term
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Definition
| A wage floor, legislated by the government, setting the lowest hourly wage that firms may legally charge |
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Term
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Definition
| A physical supply restriction on imports of a particular good. Foreign exporters are unable to sell in the USA more than the quantity specified in the import quota |
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Term
|
Definition
| A situation in which the market economy leads to too few or too many resources going to a specific economic activity |
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Term
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Definition
| When there is economic activity that spills over to a 3rd party |
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Term
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Definition
| Parties who are not directly involved in a given activity or transaction |
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Term
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Definition
| The rights of an owner to use and to exchange property rights |
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Term
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Definition
| When there is a negative impact on a third party. The government tries to regulate negative externalities by regulating higher taxes on companies that produce negative externalities |
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Term
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Definition
| When there is a positive impact on a third party. The government will try to encourage positive externalities by subsidizing companies that produce positive externalities |
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Term
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Definition
| When companies trade their allocated positive externality in order for another company to produce a higher externality |
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Term
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Definition
| The government can make laws dictating what you can and cannot do |
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Term
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Definition
| A charge to a polluter that gives the right to discharge into the air and water a certain amount of pollution. Also called a pollution tax |
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Term
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Definition
| Laws that restrict the formation of monopolies and regulate certain anti-competitive business practices |
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Term
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Definition
| A firm that can determine the market price of a good. In the extreme case, a monopoly is the only seller of a good or service |
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Term
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Definition
| Goods that can be consumed by only one individual at a time. private goods area subject to the principle of rival consumption |
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Term
| Principle of rival consumption |
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Definition
| The recognition that individuals are rivals in consuming private goods because once person's consumption reduces the amount available for others to consume |
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Term
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Definition
| Goods that are available to everyone at no opportunity cost. There is an unlimited supply of public goods. (ex. the military, police, etc.) |
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Term
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Definition
| A problem that arises when people presume that others will pay for public goods, so that they do not have to pay for them |
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Term
| Government-sponsored good |
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Definition
| A good that has been deemed socially desirable through the political process. The government can produce, distribute, reimburse and subsidize these “desirable” goods |
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Term
| Government-inhibited goods |
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Definition
| Goods that the government has deemed socially undesirable. The government can tax, regulate and prohibit these goods |
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Term
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Definition
| Money payments made by the government to individuals who don’t give back to the economy: Ex: social security, unemployment |
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Term
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Definition
| Payments in the form of a good or service: Ex. Food stamps |
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Term
| Collective decision making |
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Definition
| How voters, politicians, and other interested parties act and how these actions influence non-market decisions |
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Term
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Definition
| The study of collective decision making |
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Term
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Definition
| The system of regards and punishments individuals face with respect to their own actions |
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Term
| Government (political) goods |
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Definition
| Goods and services provided by the public sector of the government: they can be either private or public goods |
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Term
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Definition
| A collective decision-making system in which group decision are made on the basis of more than 50 percent of the vote. |
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Term
|
Definition
| A decision-making process in which actions are based on the proportion of the votes cast and are in proportion to them. Ex: If 10 percent of the vote is for blue cars, then 10 percent of the cars produced would be blue |
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Term
| Government budget constraint |
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Definition
| The limit on government spending. It cannot spend more than the total amount of explicit fees (fees for services), taxes (main source of income), and borrowing |
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Term
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Definition
| The value of goods, services, wealth, or incomes subject to taxation |
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Term
|
Definition
| The proportion of a tax base that must be paid to a government as taxes |
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Term
|
Definition
| The change in the tax payment divided by the change in income. The percentage of additional dollars that must be paid in taxes. |
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Term
|
Definition
| A specified interval of income to which a specific and unique marginal tax rate is applied |
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Term
|
Definition
| The total tax payment divided by total income. It is the proportion of total income paid in taxes |
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Term
|
Definition
| Everyone is charged the same tax rate |
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Term
|
Definition
| The higher the income, the higher the tax |
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Term
|
Definition
| The higher the income, the lower the tax |
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Term
|
Definition
| A positive difference between the purchase price and the sale price of an asset. Ex: a good bought for $5, sold for $15, the capital gain is $10 |
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Term
|
Definition
| A negative difference between the purchase price and the sale price |
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Term
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Definition
| Earnings that a corporation saves, or retains, for investment in other productive activities; earnings that are not distributed to stockholders |
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Term
|
Definition
| The distribution of tax burdens among various groups in society |
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Term
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Definition
| Taxes assessed on the prices paid on most goods and services |
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Term
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Definition
| Assessing taxes by charging a tax rate equal to a fraction of the market price of each unit purchased |
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Term
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Definition
| The belief that a change in the tax rate would not affect the tax base.Not true: if the tax rises, less people will buy and there will most likely be less tax revenue |
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Term
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Definition
| A belief that a change in the tax rate will affect the tax base |
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Term
|
Definition
| The value of goods, services, wealth, and incomes subject to taxation |
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Term
|
Definition
| A tax levied on purchases of a particular good or service |
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Term
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Definition
| A constant tax assessed on each unit of a good that consumers purchase |
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Term
| Social security contributions |
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Definition
| The mandatory taxes paid out of workers' wages and saleries |
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Term
|
Definition
| The proportional annual benefit that results from making an investment |
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Term
| Inflation-adjusted return |
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Definition
| A rate of return that is measured in terms of real goods and services; that is, after the effects of inflation have been factored out |
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Term
|
Definition
| The total number adults (16+) who are willing to work, but cannot find a job |
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Term
|
Definition
| People who are 16 or older and either have jobs or are looking for jobs. (The number of unemployed + employed) |
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Term
|
Definition
| The quantity of something: IE. an inventory of goods or a bank account. |
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Term
|
Definition
| A quantity measured per unit of time; something that occurs over time, such as the income you make per week or per year or the number of individuals who are fired every month |
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Term
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Definition
| Someone who is fired involuntarily |
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Term
|
Definition
| Someone who was employed, left the labor force, and is now looking for a job |
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Term
|
Definition
| Someone who voluntarily leaves a job |
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Term
|
Definition
| Someone who never had a job, but is now looking for a job |
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Term
|
Definition
| People who have stopped looking for a job because they could not find work |
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Term
| Labor force participation rate |
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Definition
| The percentage of non institutionalized, working age individuals who are employed or seeking employment |
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Term
|
Definition
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Term
|
Definition
| When the skills people have, do not match the required skillset |
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Term
|
Definition
| Unemployment resulting from business recessions that occur when aggregate demand is insufficient to create full employment |
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Term
|
Definition
| Jobs only available during a certain season. Not counted in the unemployment rate |
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Term
|
Definition
| An arbitrary level of unemployment (%5 is the US) at which all people (not counting frictional and seasonal) are employed |
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Term
| Natural rate of unemployment |
|
Definition
| The rate of unemployment that is estimated to prevail in long-run macroeconomic equilibrium, when all workers and employees have fully adjusted to any changes in the economy |
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Term
|
Definition
| A continued increase in the price of products |
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Term
|
Definition
| A continued decrease in the price of products |
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Term
|
Definition
| The value of money for buying goods and services. |
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Term
|
Definition
| The cost of today’s market basket of good expressed as a percentage of the cost of the same market basket during the base year |
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Term
|
Definition
| The year that is chosen as the point of reference for comparison of prices in other years |
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Term
| CPI (Consumer Price Index) |
|
Definition
| The average of prices purchased by average consumers in an urban area (Food, houses, appeal, oil, transportation, Medicare) |
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Term
| PPI (Producer Price Index) |
|
Definition
| The average price of products a producer buys |
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Term
|
Definition
| A price index measuring the changes in prices of all new goods and services produced in the economy |
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|
Term
| PCE (personal consumption expenditure index) |
|
Definition
| A statistical measure of average prices that uses annually updated weighs based on surveys of consumer spending |
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Term
|
Definition
|
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Term
|
Definition
| The dollar amount of money |
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Term
|
Definition
| The inflation rate that we believe will occur |
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Term
|
Definition
| Inflation at a rate that is unexpected |
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Term
|
Definition
| The market rate of interest observed on contracts expressed in today's dollars |
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Term
|
Definition
| The nominal rate of interest minus the anticipated rate of inflation |
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Term
| COLA (cost of living adjustment) |
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Definition
| Clauses in contracts that cause people’s salaries will go up along with inflation |
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Term
| Repricing (menu) cost of inflation |
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Definition
| The cost associated with recalculating prices and printing new price lists when there is inflation |
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Term
|
Definition
| The ups and downs in business activity throughout the economy |
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Term
|
Definition
| A business fluctuation in which the pace of national economic activity speeds up |
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Term
|
Definition
| A business fluctuation during which the pace of national economic activity is slowing down |
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Term
|
Definition
| A period of time during which the rate of growth of business activity is consistently less than its long-term trend, or is negative |
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Term
|
Definition
| An extremely severe recession |
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Term
|
Definition
| Events that have been found to occur before changes in business activity |
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Term
| National income accounting |
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Definition
| A measurement system used to estimate national income and is components; one approach is measuring an economy's aggregate performance |
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Term
|
Definition
| The yearly amount earned by the nation's resources (factors of production). Includes wages, rent, interest payments, and profits |
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Term
|
Definition
| Goods and services that are at their final stage of production and will not be transformed into anything else |
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|
Term
| GDP (gross domestic product) |
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Definition
| The total market value of all final goods and services produced during a year within a nation's borders |
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Term
|
Definition
| Goods used up entirely in the production for final goods |
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Term
|
Definition
| The dollar value of an industry's sales minus the value of intermediate goods used in production |
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Term
|
Definition
| Computing GDP by adding up the dollar value at current market prices of all final goods and services |
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Term
|
Definition
| Measuring GDP by adding up all the components of national income, including wages, interest, rent, and profits |
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Term
|
Definition
| Consumer goods that have a lifespan of more than 3 years |
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|
Term
| Nondurable consumer goods |
|
Definition
| Consumer goods that are used up withing 3 years |
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Term
|
Definition
| Mental or physical labor or help purchased by consumers. Ex: Physicians, lawyers, dentists, educators, retailers, etc. |
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Term
| Gross private domestic investment |
|
Definition
| The creation of capital goods, such as factories and machines, that can yield production and hence consumption in the future. |
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Term
|
Definition
| Any use of today's resources to expand tomorrow's production or consumption |
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|
Term
| Producer durables (capital goods) |
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Definition
| Durable goods having an expected service life of more than three years that are used by business to produce other goods and services |
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Term
|
Definition
| Purchases by business of newly produced producer durables, or capital goods, such as production machinery and office equipment |
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Term
|
Definition
| Changes in the stocks of finished goods and goods in process, as well as changes in the raw materials that business keep on hand. |
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Term
|
Definition
| Reduction in the value of capital goods over a one-year period due to physical wear and tear |
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|
Term
| NDP (net domestic product) |
|
Definition
|
|
Term
| Capital consumption allowance |
|
Definition
| Another name for depreciation, the amount that business would have to save in order to take care of deteriorating machines and other equipment |
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|
Term
| GDI (gross domestic income) |
|
Definition
| The sum of all income - wages, interest, rent, and profits - paid to the four factors of production |
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Term
|
Definition
| All business taxes except the tax on corporate profits. Includes sales and business property taxes |
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|
Term
| Non-income expenses items |
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Definition
| The total of indirect business taxes and depreciation |
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Term
|
Definition
| The total of all factor payments to resource owners. It can be obtained from net domestic product (NDP) by subtractioning indirect busness taxes and transfers and adding net US income earned abroad and other business income adjustments |
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Term
|
Definition
| The values of variables such as GDP and investment expressed in current dollars, also called money values. Measured in terms of the actual market prices at which goods and services are sold |
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Term
|
Definition
| Measurement of economic values after adjustments have been made for changes in the average of prices between years |
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Term
|
Definition
| Dollars expressed in terms of real purchasing power using a particular year as the base or standard of comparison, in contrast to current dollars |
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Term
|
Definition
| The price of one currency in terms of another |
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Term
|
Definition
| Adjustment in exchange rate conversions that takes into account differences in the true cost of living across countries |
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Term
|
Definition
| Increases in per capita real GDP measured by its rate of change per year |
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Term
|
Definition
| A rule stating that the approximate number of years required for per capita real GDP to double is equal to 70 divided by the average rate of economic growth |
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Term
|
Definition
| Total real domestic output (real GDP) divided by the number of workers (output per worker) |
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Term
|
Definition
| A theory of economic growth that examines the factors that determine why technology, research, and the like are undertaken and how they interact |
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Term
|
Definition
| A government protection that gives an inventor the exclusive right to make, use, or sell an invention for a limited period of time (currently 20 years) |
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Term
|
Definition
| Transforming an invention into something that is useful to humans |
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Term
|
Definition
| The study of factors that contribute to the economic growth of a country |
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Term
|
Definition
| The total of all planned production for the economy |
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|
Term
| Long-run aggregate supply curve (LRAS) |
|
Definition
| A versatile line representing the real output of goods and services after full adjustment has occurred. It can also be viewed as representing the real GDP of the economy under conditions of full employment - the full-employment level of real GDP |
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|
Term
|
Definition
| The value of a current sim expressed in terms of prices in a base year |
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|
Term
|
Definition
| The various resources in an economy, including both physical resources and such human resources as ingenuity and management skills |
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Term
|
Definition
| The total of all planned expenditures in the entire economy |
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|
Term
|
Definition
| A curve showing planned purchase rates for all final goods and services in the economy at various price levels, all other things help constant |
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Term
|
Definition
| The change in expenditures resulting from a change in the real value of money balances when the price level changes, all other things held constant; also called the wealth effect |
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Term
|
Definition
| One of the reasons that the aggregate demand curve slopes downwards: higher price levels increase the interest rate, which in turn causes business and consumers to reduce desired spending due to the higher cost of borrowing |
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Term
|
Definition
| One of the reasons that the aggregate demand curve slopes downward: higher price levels result in foreign residents desiring to buy fewer US made goods, while US residents now desire more foriegn-made goods, thereby reducing net exports. This equivalent to a reduction in the amount of real goods and services purchased in the US |
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|
Term
|
Definition
| A persistent decline in prices resulting from economic growth in the presence of stable aggregate demand |
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Term
|
Definition
| A dictum of economist J.B. Say that supply creates its own demand; producing goods and services generates the means and the willingness to purchase other goods and services |
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Term
|
Definition
| Reacting to changes in money prices rather than relative prices. If a worker whose wages doubles when the price level also doubles thinks he is better off, that worker is suffering from money illusion |
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|
Term
| Keynesian short-run aggregate supply curve |
|
Definition
| The horizontal portion if the aggregate supply curve in which there is excessive unemployment and unused capacity in the economy |
|
|
Term
| Short-run aggregate supply curve |
|
Definition
| The relationship between total planned economy wide production and the price level in the short run. If prices adjust incompletely in the short run, the curve is positively sloped |
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|
Term
|
Definition
| Any event that causes the aggregate demand curve to shift inward or outward |
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|
Term
|
Definition
| Any event that causes the aggregate supply curve to shift inward or outward |
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|
Term
|
Definition
| The gap that exists whenever equilibrium real GDP per year is less than full-employment real GDP as shown by the position of the long-run aggregate supply curve |
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Term
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Definition
| The gap that exists whenever equilibrium real GDP per year is greater than full-employment real GDP as shown by the position of the long-run aggregate supply curve |
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Term
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Definition
| Inflation caused by decreases in short-run aggregate supply |
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Term
| Real disposable income (RDI) |
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Definition
| Real GDP minus net taxes (after-tax real income) |
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Term
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Definition
| Spending on new goods and services to be used up out of a household's current income. Whatever is not consumed is daved. Consumption includes such things as buying food and going to a concert |
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Term
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Definition
| The act of not consuming all of one's current income. Whatever is not consumed out of spendable income is, by definition, saved |
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Term
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Definition
| Goods bought by households to use up, such as food and movies |
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Term
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Definition
| Spending on items such as machines and buildings, which can be used to produce goods and services in the future |
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Term
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Definition
| Producer durables; non-consumable goods that firms use to make other goods |
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Term
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Definition
| The relationship between amount consumed and disposable income. A consumption function tells you how much people plan to consume at various levels of disposable income |
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Term
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Definition
| Negative savings. A situation in which spending exceeds income |
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Term
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Definition
| The line along which planned real expenditures equal real GDP per year |
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Term
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Definition
| The part of consumption that must be consumed at all levels of income |
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Term
| APC (average propensity to consume) |
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Definition
| Real consumption divided by real disposable income |
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Term
| APS (average propensity to spend) |
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Definition
| Real saving divided by real disposable income |
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Term
| MPC (marginal propensity to consume) |
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Definition
| The ratio of the change in consumption to the change in disposable income |
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Term
| MCS (marginal propensity to spend) |
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Definition
| The ratio of the change in saving to the change in disposable income |
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Term
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Definition
| The stock of assets owned by a person, household, firm, or nation. For a household, wealth can be a house, cars, personal belongings, stocks, bonds, bank accounts, and cash |
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Term
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Definition
| A tax that does not depend on income. An income example is a $1000 tax must pay, irrespective of its economic situation |
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Term
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Definition
| The ratio of the change in the equilibrium level of real GDP to the change in autonomous real expenditures |
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Term
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Definition
| The tendency of expansionary fiscal policy to cause a decrease in planned investment or planned consumption in the private sector; this decrease normally results from the rise in interest rates |
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Term
| Ricardian equivalence theorem |
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Definition
| The proposition that an increase in the government budget deficit has no effect on aggregate demand |
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Term
| Direct expenditure offsets |
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Definition
| Actions on the part of the private sector in spending income that offset government fiscal policy actions. Any increase in government spending in an area that competes with the private sector will have some direct expenditure offset |
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Term
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Definition
| The suggestion that creating incentives for individuals and firms to increase productivity will cause the aggregate supply curve to shift outward |
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Term
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Definition
| The time required to gather information about the current slate of the economy |
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Term
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Definition
| The time between recognizing an economic problem and implementing policy to solve it. The action time lag is quite long for fiscal policy policy, which requires congressional approval |
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Term
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Definition
| The time that elapses between the implementation of a policy and the results of that policy |
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Term
| Automatic (built in) stabalizers |
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Definition
| Special provisions of certain federal programs that cause changes without the action of Congress and the president. Examples are the federal progressive tax system and unemployment compensation |
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