Econ

AcDec 2021-2022

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

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

Bimetallism

A monetary system in which two metals are simultaneously circulating as money at a fixed exchange rate with each other; in the case of the early United States, this was gold and silver.

Business cycte

Fluctuations in aggregate economic activity

Capital

One of three factors of production; in classical economics, it refers to money or physical assets. Plows or mature tree crops may be considered forms of it in this context

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

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

Comparative advantage

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

Competitive market

A market with many buyers and sellers trading a homogenous good or service in which each buyer and seller is a price taker

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

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

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 in the quantity produced

Discount rate

The interest rate that the Federal Reserve charges banks when they must borrow reserves from it

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

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

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 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

A 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 directly

Frictional unemployment

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

Gains from trade

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

Gini coefficient

A measure of inequality in the distribution of income or wealth, ranging from 0 (perfect equality) to 1 (perfect inequality)

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; it's 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

Indentured servitude

A system used in colonial America to populate the colonies with workers; the system was one in which a person agreed to work for a specific number of years in the future in exchange for transportation to the colonies

Inferior good

A good for which the quantity demanded falls as buyers' income increases

Inflation

A general increase in prices

Institutions

There are the "rules of the game" that structure our interactions in markets. They include formal institutions- like the rules embedded in the Constitution- as well as informal institutions- like the norms of behavior that people follow

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

Lorenz curve

A graphical depiction of inequality in the distribution of income or wealth; the Lorenz curve shows how far away from perfect equality the actual distribution is

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

Marginal product of labor

The additional amount of a product produced by an additional worker

Mercantilism

A set of economic policies that were common among the European powers in the seventeenth and eighteenth centuries; these policies were designed to enhance the gold or silver held by the mercantilist country

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

An asset that is a medium of exchange, unit of account, and store of value

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

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

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

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

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

Opportunity cost

The cost of any choice is what must be given up by making that choice

Output gap

The difference between actual output and potential output

Pareto efficiency

Describes an allocation in which the only way to make any individual or group of individuals better off would require making at least one other person worse off

Per capita

Literally per head, used to denote an average value for a population

Portfolio investment

The purchase of shares of stock or bonds

Positive economics

The use of the tools of economic analysis to describe and explain economic phenomena and to make predictions about what will happen under particular circumstances

Potential output

The quantity of output that would be produced by an economy if all of its resources were being employed at normal rates

Price discrimination

When a business sells the same product to different buyers at different prices

Price elasticity of demand

The amount by which demand for a given product changes in response to changes in price; specifically, the percentage change in demand that corresponds to a one percent change in the price

Producer surplus

The difference between the price that producers receive for supplying a good and their marginal cost of producing it

Production possibility frontier (PPF)

A graphical depiction of the combinations of output that can be produced by an economy

Public good

A good or service for which it is not possible to establish individual property rights

Rationality

When individual choices are made by comparing the benefits and costs of different actions and then selecting the action that produces the greatest benefit

Real GDP

The production of goods and services valued at constant prices

Recession

A period between a peak and a trough in economic activity