Economic Incentives and Activity

These flashcards cover key concepts related to economic incentives, activity, and the circular flow of money within an economy.

Incentive

A factor that encourages or motivates economic actors to do something.

Disincentive

A factor that discourages a certain behavior.

Expected Utility

The anticipated satisfaction or benefit derived from a choice.

Expected Cost

The anticipated expense or loss incurred from a choice.

Circular Flow Diagram

A model that illustrates how money flows between economic actors, representing relationships in an economy.

Velocity of Money

The frequency/speed at which a unit of money changes hands in a given time period.

Disposable Income

Income after taxes have been deducted, available for spending or saving.

Economic Activity

The production, consumption, and exchange of goods and services in an economy.

Imports

Foreign products bought by domestic businesses, representing money flowing out of the national economy.

Exports

Domestic products sold to foreign businesses, representing money flowing into the economy.