Economics Lecture Review Flashcards

Vocabulary flashcards based on lecture questions covering fundamental economic principles, macroeconomics, microeconomics, and personal finance.

Aggregate

Total; often used in economic terms such as aggregate expenditure or aggregate supply.

Public Good

A good, such as national defense spending, that is provided for by the government in an economic context.

Absolute Advantage

The ability to make something using fewer resources than other producers require.

Mixed Economies

The type of economic system that describes most modern economies, including the United States.

Resource Complements

Pairs of resources that are used together, such as cab drivers and cabs.

Invisible Hand

Adam Smith's concept that market forces coordinate production as if guided by an unseen force.

Opportunity Cost

The value of the best alternative you must pass up when making a choice.

Collateral

Assets, such as owning a house, that help an individual obtain a loan.

Capital Goods

Productive resources including factories, tools, trucks, machines, and computers.

Perfectly Competitive Market

A market where the amount one producer sells has no effect on the market price, such as the market for farmers.

Consumer Price Index (CPI)

A measure used to track changes over time in the cost of a fixed market basket of goods and services purchased by a typical family.

Index Mutual Fund

A type of mutual fund that might purchase only stocks in the $500$ largest corporations in the United States.

Law of Diminishing Marginal Utility

Economics principle stating that the value of succeeding units of the same product decreases for the consumer, such as being willing to pay less than $\$50$ for a second sweater.

Partnership

A type of business organization that ends if one partner dies or leaves the business.

Capital (Three Cs of Credit)

The value of the items you own that could be sold or cashed in to repay a loan.

Underemployed

A worker, such as a mother working a part-time job selling cosmetics during school hours, who is not working to their full capacity or at their skill level.

Copyright

A legal protection used to secure the intellectual property rights of a song writer.

Aggregate Expenditure

The sum of consumption, investment, government purchases, and net exports.

Underground Economy

Production that takes place without being reported to the government, such as being paid $\$10$ to watch a neighbor's baby.

Human Capital

The knowledge and skills workers possess; it is the reason surgeons typically earn more than barbers.

Recession

A decline in total production lasting at least $6$ months.

Price Floor

A government regulation that, to have an effect, must be set above the equilibrium price.

Economic System

The set of mechanisms and institutions that resolves the questions of what, how, and for whom products are produced.

Umbrella Policy

Additional insurance used to increase liability protection to amounts like $\$1$ million or $\$2$ million.

Scarcity

A condition that arises because all societies have limited productive resources to satisfy unlimited wants.

Commodity

A basic good or product, such as a bushel of wheat.

Benefits-Received Principle

A tax principle where those who benefit from government services pay for them, such as a fee to enter a national park.

Price Ceiling

A government-imposed maximum price, such as rent-controlled housing prices.

Right-to-Work Law

A law that reduces union membership by allowing workers to not join a union.

Shortage

A market condition that results whenever a price is set below the equilibrium price, forcing the price to rise.

Oligopoly

A market structure comprised of a few large firms.

Law of Supply

The rule stating that the quantity of a good supplied is usually directly related to its price.

Specialization

An organizational method occurring when individual workers focus on single tasks.

Credit History

A person's record of paying bills and debts over time.

Cartels

Groups of firms that work together and usually earn more profit than competing firms.

Social Insurance Program

A government program such as Medicare.

Monetary Policy

Economic policy involving the regulation of the money supply.

Comprehensive Insurance

Insurance that helps pay for a replacement if a car is destroyed by non-traffic accidents like fire.

Troubled Asset Relief Program (TARP)

A government program implemented with the purpose to stabilize banks.

Elasticity

An economic term used as another word for responsiveness.

Rational Consumer Choice

A choice that results in the greatest possible satisfaction per dollar spent.

Production Possibilities Frontier (PPF)

A curve showing efficient production combinations; points inside it are considered inefficient.

Innovation

The process of turning an invention into a marketable product.

Horizontal Merger

A joining of firms in the same industry, such as Exxon and Mobil or General Motors, Ford, and Daimler-Chrysler.

Double Counting

The problem avoided by excluding the sale of intermediate goods and services from GDP.

Law of Diminishing Returns

The principle illustrated when total product increases at a decreasing rate as more workers are hired.

Entrepreneur

An individual who attempts to earn profit by developing new products or better production methods.

Not-for-Profit Organizations

Organizations such as the Red Cross, National Education Association, and National Museum of Natural History.

Basic Research

A search for knowledge without regard for how that knowledge will be used.

Dividends

A portion of after-tax profit paid by corporations to their shareholders.

Expansion

The period in a business cycle between a trough and the subsequent peak.

Securities and Exchange Commission

The federal body responsible for regulating the stock and bond markets.

Stagflation

A period of recession and inflation that occurred specifically in the $1970s$.

Equilibrium Price

Also known as the market clearing price.

Franchiser

A company that supplies a retailer with a brand name, production techniques, and marketing experience.

Structural Unemployment

A condition where unemployment remains high because local residents lack the skills needed for available jobs.

Economics

The study of how people use their scarce resources to satisfy their unlimited wants.

Depreciation

The decline in value of an asset over time, such as a car bought for $\$22,000$ selling for $\$18,000$ two years later.

Excise Tax

A tax levied on specific goods, such as gasoline.

Inferior Goods

Types of goods for which demand decreases as money income increases.

Cost-Push Inflation

Inflation resulting from a leftward shift of the aggregate supply curve, such as rising prices of imported oil.

Public Utility

A government-owned and regulated monopoly.

Circular-Flow Model

A model describing the flow of resources, income, and revenue among economic decision-makers.

Negative Externalities

By-products of production or consumption that impose costs on third parties.