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Micro/Macro Economics for Test #1
N/A
90
Economics
Undergraduate 1
10/06/2011

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Term
Pure Capitalism
Definition
one of 4 world market types
Term
The Market
Definition
When buyer and seller come to exchange services
Term
Change in product price
Definition
Causes demand to shift on a demand schedule and supply on Supply schedule
Term
Supply schedule
Definition
must always have a positive intercept
Term
Competition
Definition
essential to the market system
Term
Market economy characteristics
Definition
1. Use advanced technology
2. Specialization
3. Large amounts of capital
Term
Limited government
Definition
Important for the efficient use of scarce resources.
Term
Competitive environment
Definition
essential in a market system/economy
Entrepreneurs will use least cost combination of resources
Term
Federal finance
Definition
federal governement budgetary process
Term
The economizing problem
Definition
Making the most efficient use of scarce resources to satisfy as many needs and wants as possible
Term
Entrepreneur
Definition
Risk taker
Unfulfilled needs/wants is viewed as profit opportunity
Term
Economic growth
Definition
Ability to produce a larger total output in the same period of time
Term
Self-Interest
Definition
Driving force in capitalism
Term
Efficient economy
Definition
Requires minimum government interference
Term
C corporation
Definition
Earnings after taxes are divided into dividends and retained earnings
Term
Economics
Definition
Deals with Scarcity and choice
Term
Micro-Economics
Definition
Economic analysis of the individuals
Term
Macro-Economics
Definition
Deals with Keynesian economics
Lumps the whole economy together
Term
models, theories
Definition
Abstracts
Represent ideal situations, not real world situations
Term
Keynesian economics
Definition
Macro-Economics
Term
Production
Definition
Conversion of resources into consumer products
Term
Labor and Technology
Definition
Substitute goods
If one is more expensive, switch to the other.
Term
Production Possiblity Curve
Definition
Depicts the total output with no inputs
Limits of Efficiency
Obtainable and Efficient if it's there
Term
Division of Labor
Definition
Leads to specialization -> Comparative Advantage -> Specialization achieved from division of labor.
Term
Specialization
Definition
is comparative advantage
Term
Comparative advantage
Definition
specialization achieved from division of labor
Term
Absolute advantage
Definition
Ability to produce a good or service at a lower opportunity cost compared to other producers. Geographical Advantage.
Term
Inferior goods
Definition
Not necesarily inferior in quiality, just not name brand item.
Second-Tier goods.
Term
Normative Economics
Definition
Keynesian Economics
Make valued judgements
Term
Positive economics
Definition
Classical or Austian Economics
Don't make valued judgements
Term
Function of price on the market
Definition
1. Organizes market
2 Rations scarce goods
3. Steers resources into most profitable or efficient use.
Term
Profit
Definition
Drives the market
Term
Price floor
Definition
ABOVE MARKET PRICE
Established by the government or with blessings
Leads to surplus. (Farm Subsidies)
Term
Price ceiling
Definition
BELOW MARKET PRICE
Leads to shortage
Established by government
Term
Property rights
Definition
Essential to the market or price system
Term
Import quotas
Definition
Quanitity restrictions on imports
Term
Externalities - Spillovers
Definition
Mean the same thing
Cost of production is paid by third-party
Also benifits ( Public health )
Term
Public goods
Definition
Not exclusionary
Fire Department/ Police
Can not exclude non payers
Term
Private goods
Definition
Exlusionary goods
Can exclude non payers (Golf courses)
Term
Durable goods
Definition
Service of shelf life of greater than 3 years
Term
Non-durable goods
Definition
Shelf life of less than 3 years
Term
Double taxation
Definition
Major problem for investors in a corporation
Term
Common stockholders
Definition
True owners of a firm
Recieve returns in form of divedens
Term
Bonds
Definition
Debt position
Loaned Money
Term
Dividends
Definition
Payments made to stock holders
Term
Personal income tax
Definition
Governments major source of income
Term
Corporate income tax
Definition
Secondary source of revenue
Term
Leaading trading nations
Definition
GDP - Netherlands
Volume - China
Value - USA
Term
Leading trading partners
Definition
1. Canada
2. Western Europe
3. Japan
4. mexico
Term
Tariffs
Definition
Monetary restriction of imported goods
Excise tax
Term
Subsidies
Definition
tax in reverse
Payments made to a firm so they can remain competitive in the domestic and foreign business
Term
Smoot-Hawley Act
Definition
Major cause of depression in 1930
Term
Derived demand
Definition
refers to labor, but there's only a demand for a resource for the final outcome of the resource.
Term
Full Employment Act, 1946
Definition
Created four things:
Fiscal policy, monetary policy, JEC, CEA.
Term
Subjective valuation
Definition
Makes the market work
Concept in which all exchange is based.
Term
Dollar appreciates
Definition
It goes up in value
Strong dollar buys more foreign exchange
Term
Dollar depreciates
Definition
Goes down in value
Buys less foreign exchange
Term
Foreign exchange risk
Definition
Major problem with international trade
Value of two currencies change before trade takes place.
Term
inputs of production (factors of production)
Definition
Land, Labor, Capital, Entrepunuership
Term
Opportunity cost
Definition
Next best alternative that must be given up in order to satisfy a need or want
Term
Superior goods
Definition
Name brand items
Term
Substitute Goods
Definition
If the price of superior good goes up, switch to an alternative
Term
Equilibrium
Definition
When Quantity supplied and quantity demanded are equal
Term
Progressive Tax
Definition
Income goes up, tax goes up
Vice versa
Term
Voluntary exchange
Definition
Main feature of price or market system
Term
Independent Variable
Definition
Variable that moves first
Term
Dependent Variable
Definition
Variable that changes in value when another value changes
Term
Functional distribution of income
Definition
Payment of factors of production
wages/profits/rent/interest
Term
sole proprietorship
Definition
Most common business form in the country
Term
partnership
Definition
Overcomes some problems of sole proprietorship
Term
Corporation
Definition
Most important business form in the country
Term
Limited liability
Definition
Investors in corporations have this
Term
Unlimited liability
Definition
Sole proprietorships have this
Term
The firm
Definition
The administrative function in a business
Term
the plant
Definition
Where the product is produced
Term
Federal government income source
Definition
Personal income tax
Term
State Government income tax
Definition
Sales or excise tax
Term
Transportation technology
Definition
Main reason of rapid increase in international trade after WWII
Term
Determinants of demand
Definition
Things to make things shift on demand other than price:
Preference/ Personal Taste/ Income
Term
Determinants of supply
Definition
Thing that make supply shift:
Cost of factor of production
Term
GATT
Definition
General Agreement on Tariffs and Trade
Replaced by WTO
Term
WTO
Definition
World Trade Organization
Term
Law of demand
Definition
Prices go up, demand goes down.
Vice Versa.
Term
Law of supply
Definition
Price goes up, supply goes up.
Price goes down, supply goes down.
Term
Government transfer payments
Definition
Non exausted
Government not spending the money itself, just redistributing it.
Term
Inflation
Definition
Expansion of money supply and extension of credit
Term
Government's role in the market
Definition
Maintain a stable currency
Term
Supply and Demand
Definition
If they shift at the same time, Equilibrium can not be determined.
Term
Free rider problem
Definition
Others take the burden of payment, but anyone can use it regardless of payers.
Term
Monopoly
Definition
Firm that produces a good or service which there is no close substitute.
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