Unit 5 EPF Vocab Notes

Scarcity

The economic condition that exists because there are not enough resources to produce everyone’s wants

Balance of Trade

The difference between a country’s total exports and imports. Also known as “net exports”

Business Cycle

The fluctuating levels of economic activity in an economy over a period measured from the beginning of one recession to the start of the next.

Command Economy

An economic system in which the government owns the resources and decides what goods and services to produce, as well as the prices.

Comparitive Advantage

The ability to produce at a lower opportunity cost than another producer.

Contractionary Policy

Actions taken by the Federal Reserve to increase interest rates and discourage spending by consumers and businesses.

Consumer Price Index (CPI)

A measure of the average change over time in prices paid by urban consumers for a market basket of consumer goods/services.

Cyclical Unemployment

Unemployment is associated with recessions in the business cycle

Demand

The quantity of a good or service that buyers are willing and able to buy at all possible prices during a certain time period.

Embargo

A government order that limits or prohibits trade with a particular country or group of countries.

Equilibrium Price

The price at which the quantity supplied and the quantity demanded are equal. The point at which supply and demand curves intersect.

Expansionary Policy

Actions taken by the Federal Reserve to lower interest rates and thereby encourage spending by consumers and businesses

Globalization

The process of increasing economic, social, and cultural connections and exchanges across national borders

Inflation

A general, sustained upward movement of prices for goods and services in an economy.

Fiscal Policy

Spending and taxing policies of the federal government to influence the economy.

Frictional Unemployment

Unemployment that results when people are new to the job market, ex. recent graduates or those transitioning from one job to another

Keynesian Economics

A macroeconomic theory emphasizing government intervention to stabilize the economy, particularly during recessions by influencing demand through fiscal and monetary policy.

Market Economy

An economic system where decisions about goods and services produced, how they are produced, and who gets them are decided by buyers and sellers. They also decide prices for all of this.

Mixed Economy

Economic systems where decisions about goods and services produced, how they are produced, and who gets them are decided by buyers and sellers, but some are also controlled and determined by the government.

Monetary Policy

Central bank actions that involve the use of interest rates of money supply tools to achieve such goals as maximum employment and stable prices.

National GDP

The total market value of all final goods and services produced in an economy in 1 year, expressed using the current year’s prices for goods and services. This is also known as current-dollar GDP

Opportunity Cost

The value of the next-best alternative when a decision is made; the value of what’s given up

Per Capita GDP

GDP divided by the total population in a country.

Production Possibility Curve

A graphical representation of the maximum combinations of two goods an economy can produce with given resources and technology.

Real GDP

The total market value of all final goods and services produced in an economy for 1 year; calculated using a base year’s prices for goods and services; adjusted for inflation.

Recession

A period of declining real income and rising unemployment. It’s a significant decline in economic activity over a period of time.

Sanction

Punitive measures, involving commercial and financial restrictions imposed on one or more countries on another entity to influence behavior or policy.

Socialist Economy

A system of production where goods and services are produced for use, in contrast to capitalist economies, where they only produce for profit and efficiency. In this economy, the government often controls resources and distribution.

Structural Unemployment

Long-term unemployment is caused by a mismatch in skills held by those looking for work and skills demanded by those seeking workers.

Supply

The quantity of a good or service that producers are willing to sell at all possible prices during a period of time.

Supply Side Economics

A theory advocating that economic growth is best achieved through boosting production rather than increasing demand.

Tariff

A tax that must be paid before a good can be brought into a country.

Traditional Economy

Economic structure where production, distribution, and consumption are guided by customs, traditions, and passed-down beliefs rather than market forces.