Chapter 2 - Economic Challenges Facing Business Today

balanced budget

a situation in which total revenues raised and fees equal the total proposed spending for the year.

budget

an organization's plan for how it will raise and spend money during a given period of time.

budget deficit

a situation in which the government spends more than the amount it raises through taxes and fees.

budget surplus

excess funding that occurs when the government spends less than the amount of funds raised through taxes and fees.

communism

an economic system in which all property is shared equally by the people of a community under the direction of a strong central government.

Consumer price index (CPI)

a measurement of the monthly average change in prices of goods and services.

Core inflation rate

the inflation rate of an economy after energy and food prices are removed.

cyclical unemployment

people who are out of work because of a cyclical contraction in the economy.

deflation

the opposite of inflation; occurs when prices continue to fall.

demand

the willingness and ability of buyers to purchase goods and services at different prices.

demand curve

a graph of the amount of a product that buyers will purchase at different prices

economics

a social science that analyzes the choices people and governments make in allocating scarce resources.

equilibrium price

the current market price for an item.

expansionary monetary policy

government actions to increase the money supply in an effort to cut the cost of borrowing, which encourages business decision makers to make new investments, in turn stimulating employment and economic growth.

fiscal policy

government spending and taxation decisions designed to control inflation, reduce unemployment, improve the general welfare of citizens, and encourage economic growth.

frictional unemployment

applies to members of the workforce who are temporarily not working but are looking for jobs.

funflation

economic trend where consumers prefer spending money on enjoyable entertainment experiences over purchasing tangible goods, leading to increased demand and prices for such experiences.

gross domestic product (GDP)

the sum of all goods and services produced within a country's borders during a specific time period, such as a year.

hyperinflation

an economic situation characterized by soaring prices.

inflation

an economic situation characterized by rising prices caused by a combination of excess consumer demand and increases in the costs of raw materials, component parts, human resources, and other factors of production.

Macroeconmics

the study of a nation's overall economic issues, such as how an economy maintains and divides up resources and how a government's policies affect its citizens' standards of living.

microeconomics

the study of small economic units, such as individual consumers, families, and businesses.

mixed market economics

economic systems that draw from both types of economies, to different degrees.

monetary policy

government actions to increase or decrease the money supply and to change banking requirements and interest rates to influence bankers' willingness to make loans.

monopolistic competition

a market structure in which large numbers of buyers and sellers exchange heterogeneous products, so each participant has some control over price.

monopoly

a market situation in which a single seller dominates trade in a good or service for which buyers can find no close substitutes.

national debt

money owed by the government to individuals, businesses, and government agencies who purchase Treasury bills, Treasury notes, and Treasury bonds sold to cover expenditures.

oligopoly

a market situation in which relatively few sellers compete and high start-up costs form barriers to keep out new competitors.

planned economy

an economic system in which government controls determine business ownership, profits, and resource allocation to accomplish government goals rather than those set by individual firms.

Privitization

the conversion of government-owned and operated companies to privately held businesses.

producer price index (ppi)

a measurement of the average change in prices of goods and services received by domestic producers.

productivity

the relationship between the number of units produced and the number of human and other production inputs necessary to produce them.

pure competition

a market structure in which large numbers of buyers and sellers exchange homogeneous products and no single participant has a significant influence on price.

quantitative easing

an expansionary monetary policy whereby a central bank buys back predetermined amounts of government bonds or other financial assets to increase liquidity and stimulate the economy.

recession

a cyclical economic contraction that lasts six months or longer.

regulated monopoly

a market situation in which a local, provincial, or federal government grants exclusive rights in a certain market to a single firm.

restrictive monetary policy

government actions to reduce the money supply to curb rising prices, overexpansion, and concerns about overly rapid economic growth.

season unemployment

joblessness of workers in a seasonal industry.

socialism

an economic system characterized by government ownership and operation of major industries, such as communications.

structural unemployment

people who remain unemployed for long periods of time, often with little hope of finding new jobs like their old ones.

supply

the willingness and ability of sellers to provide goods and services at different prices

supply curve

a graph that shows the relationship between different prices and the amount of goods that sellers will offer for sale regardless of demand.

unemployment rate

the percentage of the total workforce actively seeking work but currently unemployed.