Studied by 2 peopleSunk Cost
money that has already been spent and cannot be recovered
Diminishing Marginal Utility
the phenomenon that each additional unit of gain leads to an ever-smaller increase in subjective value
Disposable Income
Money after deduction of taxes and other mandatory charges
Absolute Advantage
Being able to produce using fewer resources than other producers
Comparative Advantage
Being able to produce something with a lower opportunity cost (trading something off) than other producers
Efficiency
producing the maximum possible output from available resources
The largest source of revenue for local governments is from
state and federal aid
Of the 25 million businesses in the U.S, most
a. consist of one self-employed person
b. will grow into larger businesses
c. employ more than 25 people
d. will become corporations
a. consist of one self-employed person
Frictional Unemployment
due to moving from one job to another
Structural Unemployment
due to technological change, no longer need for certain skill
Cyclical Unemployment
Dependent on the condition of the economy (recessions/expansions)
Phases of the Economic Cycle
expansion, peak, contraction, recovery
Deregulation
the removal of regulations or restrictions, especially in a particular industry
Input Costs
the set of costs incurred to create a product or service
Current Account Deficit
the country is importing more goods and services than it is exporting
Discretionary Fiscal Policy
Fiscal policy that is the direct result of deliberate actions by policymakers rather than automatic adjustments
Public Good
A commodity or service that is provided without profit to all members of society at everyone at anytime
GDP Deflator
how much a change in GDP relies on changes in the price level
Real GDP
The total value of all final goods and services produced in the economy during a given year, calculated using the prices of a SELECTED BASE YEAR (adjusted for inflation)
Nominal GDP
GDP shown in current prices, without adjustment for inflation
Seasonal Unemployment
Losing jobs on a specific season, then becoming employed once again on another season
Cost Push Inflation
Persistently rising general price levels caused by increasing production costs
Economic Boom
Economy working at full/near-full capacity with a low level of unemployment and aggregate demand, sales and profits at or near their peak, often accompanied by rising inflation
The Consumer Price Index
A measure of inflation based on the cost of a fixed “market basket”
Market Basket
A selected group of consumer goods and services whose prices are tracked for calculating a consumer price index and measuring the cost of living
Monopolistic Competition
when many companies offer competing products or services that are similar, but not perfect, substitutes.
Aggregate Expenditure
Total of spending for final goods and services in an economy
GDP Equation
Consumption + Investment + Government + Net Exports
Bond
Financial security in which a borrower (business or gov.) is contracted to pay amount invested + specified interest rate on a specific maturity date
Balance of Trade
The difference in value between a country’s imports and exports
Laissez-Faire System
A system where government interference in the economy is minimal
Free Enterprise System
the right of individuals to make their own choices in the purchase of goods, the selling of their products and their labor, and their participation in business structure
Developing Country
a country with a lower GDP than developed countries, with a less mature and sophisticated economy
Money Market Account
A form of interest-bearing savings account
Credit Union
Member-owned nonprofit financial cooperative. Provides services to members similar to retail banks.
Commercial Bank
Controls the most money and offers the widest range of services
Interest rates for all types of credit are regulated by..
state and federal law!
The Federal Deposit Insurance Corporation insures
Commercial Bank Accounts
The saving of money by an individual
benefits the whole economy
A major benefit of a private or personal pension plan is
deferred federal income tax
Guns or Butter
Choosing between military goods (guns) and civilian goods (butter)
Traditional Economy
A system that relies on customs, history, and time-honored beliefs
Which of following is a condition that most people would NOT expect the safety net of the government of provide for?
a. injuries
b. joblessness
c. natural disasters
d. low income
d. low income
Interest Group
organized primarily for economic reasons but that engage in political activity in order to seek favorable policies from government
What is the difference between an increase in supply and an increase of quantity supplied
An INCREASE IN SUPPLY will shift the supply curve to the right
An INCREASE OF QUANTITY SUPPLIED will be along the supply curve itself
Free Trade
international trade without quotas, tariffs, etc.
Fiscal Policy
use of government revenue collection & expedition to influence the economy, action of Congress to stabilize the economy
Monetary Policy
Set of actions to control a nation’s overall money supply and achieve economic growth
Monetary vs. Fiscal Policy
Monetary policy refers to actions of CENTRAL BANKS
Fiscal policy refers to the tax/spending policies of FEDERAL GOVERNMENT
Current Dollars
A currency in the current time period
Constant Dllars
A currency in the current time period
Price Discrimination
selling of a good or service at different prices to different buyers/classes in the absence of any differences in the costs of supplying it
Oligopoly
A state of limited competition, small number of shared producers or sellers
Keynesian Theory
Theories about how in the short run (especially during recessions), economic output is influenced by AGGREGATE DEMAND
What kind of changes would be expected in the demand of a country that has a growing population?
a. a rise in the demand for recreation
v. a shift in the demand for high-quality food
c. a rise in the demand for shelter
d. a lowering in the demand for automobiles
c. a rise in the demand for shelter
What affects inelasticity (not much change in reaction to price)
necessities
low-cost items
Government Substidies
financial grants from government to stimulate economic activity or promote activities in PUBLIC GOOD
Non-perishable Good
Any good that can’t spoil (canned goods, dried fruit)
Note 
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