AcDec (2024-2025) Econ

Adaptation

the process of adjusting to actual or expected climate changes to moderate harm

Aggregate demand curve

a graphical depiction of the relationship between the level of desired expenditures in an economy and the price level

Aggregate supply curve

a graphical depiction of the relationship between the quantity of goods and services firms wish to supply and the price level

Albedo effect

the reflection of sunlight from light or white surfaces or particles

Average labor productivity

total output divided by the quantity of labor employed in its production

Bank run

a sudden rush of depositors seeking to withdraw funds from the banking system

Barriers to entry

conditions that prevent firms from freely entering or exiting a market

Beta-delta discounting

a split frame or quasi-hyperbolic discount rate in which one rate is applied to nearby decisions and another to decisions farther out in time

Business cycle

fluctuations in aggregate economic activity

Capital

one of three factors of production; in classical economics, capital refers to money or physical assets.

Capital goods

long-lived goods that are themselves produced and are used to produce other goods and services, but are not used up in the production process

Cartel

a group of firms that collude in a given market to restrain competition, often making quota arrangements among themselves

Climate commons

the shared atmospheric environment of the globe

Coase Theorem

the proposition that if private parties can bargain without cost over the allocation of resources, then they can solve the problem of externalities on their own

Collective action

the organization and coordination of multiple agents to achieve a common goal

Comparative advantage

the ability to produce a good or service at a lower opportunity cost than other producers

Complements

two goods for which a rise in the price of one leads to a decline in the demand for the other

Consumer Price Index (CPI)

an index constructed by comparing the cost of purchasing a fixed basket of goods at different times

Consumer surplus

the difference between the amount that a buyer would be willing to pay for a good or service and the price actually paid

Consumption

spending by households on goods and services, with the exception of the purchase of new housing

Cost-effective

achieving a specific goal or objective at least cost

Crowding out

the decrease in private investment that occurs as a result of a reduction in government saving or an increase in government borrowing

Currency

coins and bills in the hands of the public

Cyclical unemployment

unemployment caused by deviations of output from its potential level

Deadweight loss

the reduction in total surplus that results from a market distortion such as a tax

Bond

a certificate of indebtedness that specifies the obligations of the borrower to the holder of the bond.

Principal

the original amount borrowed in a bond

Equity finance

the sale of shares of stock

Debt finance

the sale of bonds

Demand curve

a graphical representation of the quantity of a good or service demanded as a function of the price

Demand schedule

a table showing the relationship between the price of a good or service and the quantity demanded

Depression

a severe recession

Diminishing returns to scale

the property whereby each additional increase in inputs results in a smaller increase int he quantity produced

Discount rate

when this term is used in connection with the Federal Reserve Bank, it refers to the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank’s lending facility; a term used to describe the relative weight attached to present versus future consumption: the higher the rate, the less the future matters relative to the present; also called time preference.

Economic house

a common household shared by multiple individuals who are obligated to make an effort to keep it clean

Economic profit

the difference between the revenue realized by a producer and the opportunity cost of production

Elasticity

the percentage change in quantity demanded or supplied as a result of a one percent change in price

Entrepreneur

an individual who takes on the risk of attempting to create new products or services, establish new markets, or develop new methods of production

Equilibrium

a situation in which the forces in a system are in balance so that the situation is stable and unchanging

Excludable good

a good that an individual can prevent another individual from using

Excludability

the ability to prevent buyers from enjoying the benefits of consuming a good or service without paying for it

Expansion

a period between a trough and a peak in economic activity

Experimental governance

simultaneous top-down and bottom-up management of global climate governance

Externality

when the action of one person affects the well-being of someone else, but where neither party pays nor is paid for these effects

Federal funds rate

the rate that banks charge other banks when they lend reserves

Final goods

goods or services that are purchased by their ultimate user

Financial markets

the institutions through which individuals with savings can supply these funds to persons or firms that wish to borrow money to purchase consumption goods or to invest in physical capital

Fiscal policy

the use of taxes and spending to influence aggregate demand and through it the level of overall economic activity

Fixed cost

the cost of production that is independent of the quantity produced

Foreign direct investment

when a company or individual acquires assets in a foreign country that they will manage actively

Free driver

a person, firm, or country that assumes control and acts to influence a larger group without authorization by “grabbing the wheel“

Free rider

a person, firm, or country that consumes a public good but pays less or none of the cost of its provision

Frictional unemployment

unemployment that results because it takes time for workers to search for the jobs that are best suited for their tastes and skills

Gains from trade

the benefits that both individuals or nations realize from mutually beneficial exchange

Geoengineering

deliberate large-scale intervention in the Earth’s natural systems in an effort to counteract climate change; one of the most controversial examples is the introduction of particulate matter into the atmosphere to reduce global mean temperature

Government purchases

spending on goods and services by federal, state, and local governments

Gross Domestic Product (GDP)

the market value of final goods and services produced in an economy during a specified period of time

Gross Domestic Product (GDP) per capita

estimate of national output (GDP), divided by the population; its key advantage as a measure of economic performance is in giving an average level of income per person, which can be compared between countries

Human capital

skills and experience that are acquired through education, training, and on-the-job experience that increase a worker’s productivity; considered an important factor in facilitating improvements in productivity and economic growth

Imperfect competition

the case of a market with a small number of sellers, so that sellers have market power

Inferior good

a good for which the quantity demanded falls as buyer’s income increases (ex. used cars, cheap frozen meals, etc.)

Inflation

a general increase in prices

Institutions

the “rules of the game“ in a society, which shape the costs and benefits of economic decisions

Intermediary

a third party who acts as a link between two others who wish to transact business

Intermediate good

a good or service that is used in the process of producing other goods and services

Investment

spending on capital equipment, inventories, and structures, including household purchases of new housing

Keynesian model

a model of short-run aggregate economic fluctuations inspired by the analysis of British economist John Maynard Keynes, which attributes short-run deviations in output from potential to variations in the level of aggregate demand or aggregate supply

Labor force

the sum of those individuals who are employed and those who are seeking paid work but have not found it

Labor force participation rate

the fraction of the working-age population who are in the labor force

Law of demand

holding other things equal, the quantity demanded is negatively related to the price

Law of supply

holding other things equal, the quantity supplied is positively related to the price

Liquidity

the ease with which a nonmonetary asset may be converted into money

Logrolling

the practice of elected officials trading votes

Marginal cost

the additional cost of production associated with a small increase in the quantity produced

Marginal revenue

the additional revenue resulting from a small increase in the quantity produced

Market failure

any situation in which a market does not do what market theorists believe it should - allocate goods and services efficiently; externalities and monopoly/oligopoly are two commonly discussed failures; a situation where the allocation of goods and services is not efficient, for instance when too much of a good (e.g., pollution) or too little of a good (e.g., clean air) is provided by the free market

Market power

a situation in which one firm, or a group of them acting as a cartel, can control prices in a market, often by restricting output, and thus have market power; in a theoretical, purely competitive market, this is not possible

Monetary base

the quantity of currency plus bank reserves

Monetary policy

the use of the supply of money in the economy by the Federal Reserve to influence the level of aggregate demand

Money

the use of the supply of money in the economy by the Federal Reserve to influence the level of aggregate demand

Money multiplier

the ratio of the money supply to the monetary base

Money supply

the quantity of money available to the economy

Monopolistic competition

a market in which there is free entry or exit, but every producer supplies a differentiated product and faces a downward-sloping demand curve

Monopoly

a market in which there is a single producer

Natural rate of unemployment

the level of unemployment that would exist if the economy were producing at its potential output

Negative externalities

costs imposed on other agents that are not captured by market prices

Nested public goods

one public good or commons dilemma inside another (like Russian dolls)

Net capital outflow

the difference between the purchases of foreign assets by domestic residents and the purchases of domestic assets by foreign residents

Net exports

the difference between the value of goods and services sold to foreigners and the value of goods and services purchased from foreigners

Neutrality of money

the proposition that in the long run, changes in the quantity of money affect the price level but do not affect any real quantities

Nominal GDP

the production of goods and services valued at current prices

Nonrivalry

Public goods are not rival because one person or firm’s consumption does not take away from another’s.

Normal good

a good or service for which demand is positively related to the buyer’s income

Normative economics

economic analysis used to guide decisions about what should be as opposed to what is the case

No regrets

describes a policy that seeks to accomplish environmental objectives that are aimed at the worst-case outcome and that will be beneficial even if less worse outcomes occur

Oikos

Greek word meaning household and its management

Okun’s law

a relationship identified by Arthur Okun between the output gap and the level of cyclical unemployment

Oligopoly

a market in which there are just a few producers

One-way (unidirectional) externalities

externalities that go from one agent to another but not both ways

Open market operations

a tool used by the Federal Reserve to adjust the money supply by buying or selling U.S. government bonds in the financial market