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Introduction to Business (Chapter 2)
Basic Key Terms and Definitions
34
Business
Undergraduate 1
02/16/2010

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Term
economics
Definition
the study of how society chooses to employ resources to produce goods and services and distribute them for consumption among various competing groups and individuals
Term
macroeconomics
Definition
looks at the operation of a nation's economy as a whole
Term
microeconomics
Definition
looks at the behavior of peiople and organizations in markets for particular products or services
Term
resource development
Definition
the study of how to increase resources (i.e. getting oil from shale and tar sands) and create conditions that will make better use of them (like recycling and conservation)
Term
invisible hand
Definition
the process that turns self-directed gain into social and economic benefits for all
Term
capitalism
Definition
the economic system under which all or most factors of production are owned by individuals and are operated for profit
Term
supply
Definition
the quantities of products manufacturers or owners are willing to sell at different prices at a specific time
Term
market price
Definition
the price toward which the market will trend according to supply and demand
Term
perfect competition
Definition
the state that exists when there are many sellers in a market and none is large enough to dictate the price of a product such as corn and potatoes, but no true example exists (homogeneous products)
Term
monopolistic competition
Definition
the state that exists when a large number of sellers produce very similar products that buyers nevertheless perceive as different, such as hot dogs and sodas (product differentiation)
Term
oligopoly
Definition
a degree of competition in which just a few sellers dominate a market, such as tobacco, gasoline, automobiles (barriers to entry)
Term
monopoly
Definition
the state in which one seller controls the total supply of a products or service, and sets the price
Term
socialism
Definition
an economic system based on the premise that some, if not most, basic businesses should be owned by the government so that profits can be more evenly distributed among the people
Term
brain drain
Definition
the loss of the best and brightest people to other countries (socialist to capitalist)
Term
communism
Definition
an economic and political system in which the government makes almost all economic decisions and owns almost all the major factors of production
Term
free-market economies
Definition
economies that exist when the market largely determines what goods and services get produced, who gets them, and how the economy grows. Capitalism is the popular term for this economic system.
Term
command economies
Definition
economies that exist when the government largely decides what goods and services will be produced, who gets them, and how the economy will grow. Socialism and communism are variations on this economic system
Term
mixed economies
Definition
economies that exist when some allocation of resources is made by the market and some by the government
Term
Gross domestic product (GDP)
Definition
the final value of goods and services produced in a country in a given year
Term
the unemployment rate
Definition
the percentage of civilians at least 16 years old who are unemployed and tried to find a job withing the prior four weeks
Term
inflation
Definition
a general rise in the prices of goods and services over time
Term
disinflation
Definition
occurs when price increases are slowing (the inflation rate is declining)
Term
deflation
Definition
a general decrease in the price level
Term
stagflation
Definition
state in which the economy is slowing but prices are still increasing
Term
consumer price index (CPI)
Definition
this consists of monthly statistics that measure the pace of inflation or deflation based on a basket of goods including housing, food, apparel, and medical care
Term
producer price index (PPI)
Definition
this statistic measures prices at a wholesale level to check the condition of the economy
Term
business cycles
Definition
periodic rises and falls that occur in economies over time
Term
recession
Definition
two or more consecutive quarters of decline in the GDP
Term
depression
Definition
a severe recession, usually accompanied by deflation
Term
national debt
Definition
the sum of government deficits over time
Term
fiscal policy
Definition
the federal government's efforts to keep the economy stable by increasing or decreasing taxes and/or government spending
Term
Keynesian economic theory
Definition
a theory that suggests a government policy of increasing spending and cutting taxes could stimulate the economy in a recession
Term
monetary policy
Definition
the management of the money supply and interest rates by the Federal Reserve Bank
Term
demand
Definition
the quantity of products that people are willing to buy at different prices at a specific time
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