Econ Finals

advantages of incorportion

-limited liability for shareholders

-easier access to capital through stock sales

-enhanced credibility

-perpetual existence for the business

efficient economy

maximizes output and optimizes resource allocation, ensuring that goods and services are produced and distributed effectively

availability of substitutes

consumers can easily switch to a different product or service if the price of the original product increases

elasticity of demand

responsiveness of quantity demanded to price changes

bonds

debt securities issued to raise capital, investors lend money to an entity in exchange for periodic interest payments and the return of principal at maturity.

business cycle

fluctuations in economic activity over time

-peak

-contraction

-trough

calculating profit

determining the difference between total revenue and total costs

cd

certificates of deposit that offer fixed interest rate for set term

mutual funds

programs funded by shareholders that trade in diversified holdings such as stocks, bonds, or other assets.

saving accounts

bank accounts that offer interest on deposited funds, allowing account holders to save money while retaining access to their cash.

command economy/centrally planned economy

government makes all decisions regarding production and distribution of goods and services.

compound interest

interest earned over time is added to the principal, allowing future interest to be calculated on the accumulated total.

simple interest

interest calculated only on the principal amount, not on the accumulated interest.

consumer expectations

predictions that consumers have about future economic conditions

consumer price index

examines the average change in prices paid by consumers for goods and services over time.

credit cards

allow users to borrow funds to pay for purchases, requiring repayment with interest.

debit cards

deduct money directly from a user's bank account when making purchases, without borrowing funds.

credit unions

not-for-profit financial cooperatives that provide members with savings accounts, loans, and other financial services.

commercial banks

for-profit financial institutions that offer a wide range of services including savings accounts, loans, and investment services.

deficit financing

practice of funding government spending by borrowing money rather than through revenue from taxes.

deficit spending

government's expenditures exceed its revenues, leading to borrowing to cover the gap.

demand deposits

bank account balances that can be withdrawn on demand without advance notice.

dow jones industrial average

stock market index that measures the stock performance of 30 large publicly owned companies in U.S

effects of inflation

impact of rising prices on purchasing power, savings, and economic growth.

equilibrium price

quantity of a good demanded by consumers equals quantity supplied by producers

expansionary fiscal policy

government policy aimed at increasing economic growth through increased public spending and tax cuts.

contractionary fiscal policy

government actions intended to reduce spending, increase taxes, or both to decrease inflation and stabilize the economy.

factors of production

land, labor, capital

federal reserve tool for expansionary

lowering interest rates and purchasing government securities.

federal reserve tool for contractionary

raising interest rates and selling government securities.

fdic

federal agency that insures deposits at banks and thrift institutions

fica

federal law that mandates payroll taxes for Social Security and Medicare.

financial advisor

help individuals manage finances, investments, and retirement planning

fractional reserve banking

banks hold only a fraction of their deposits in reserve and lend out the remainder

free market economy

prices and the allocation of resources are determined by supply and demand

free rider problem

individuals benefit from a good or service without paying for it

full employment

no cyclical and 4-6%

gdp

total value of goods and services produced in a country in a year

gnp

total value of goods and services produced by country’s citizens

how demand curves shift

changes in consumer income, tastes, and expectations change where the demand curve lies

why demand curves shift

shift to the right indicates an increase in demand, shift to the left indicates a decrease

income sources for bank

interest on loans, service fees, and investment activities

inflation rate

percentage change in the price index over a specific period, typically a year

investment tools

stocks, bonds, mutual funds, real estate, and commodities.

law of demand

as the price of a good or service increases, the quantity demanded by consumers decreases

law of supply

as the price of a good or service increases, the quantity supplied by producers increases

leading indicators

metrics used to predict future economic activity

lagging indicators

metrics that reflect past economic performance

market failure

consumer demand does not equal the amount of a good or service supplied

medicare

federal health insurance for anyone age 65 and older and under 65 with disabilities

medicaid

joint federal and state program that provides health insurance to low-income individuals and families

mixed economy

one that combines aspects of both capitalism and socialism

monopoly

market structure that consists of a single seller or producer and no close substitutes

mortgages

financial arrangement where a borrower pledges property as collateral for a loan while retaining ownership

new york stock exchange

nyc based public marketplace for trading stock

partnership

relationship between two or more people to do trade or business

patents

exclusive right granted for an invention

per capita

average figures per person

perfect competition

-many sellers

-easy entry and exiting of firms

-products are identical

-sellers are price takers

positive externalitites

third parties benefit from the spill-over effects of production/consumption

negative externalities

cost imposed on a third party, unrelated to the transaction, by the actions of another party

price discrimination

use of different prices charged to various customers for the same product or service

profit motive

desire to make a profit, which is the money earned after covering all costs

progrssive tax

tax rate increases as the taxable amount

prospectus

preliminary printed statement that describes an enterprise

public goods

commodity or service that every member of a society can use without reducing its availability to all others

real gpd

measure of a country's total economic output, adjusted for inflation

nomial gdp

imple measure of a country's economic output, using current prices

regressive tax

percentage of income paid in taxes decreases as income increases

revenue

total income a company or individual receives from selling goods or services, before expenses are deducted

scarcity

individuals must allocate limited resources to satisfy their needs

shortage

there is not enough of something that is needed

socialism

means of production, distribution, and exchange are owned or regulated by the community as a whole

sole proprietorship

someone who owns an unincorporated business by themselves

specialization and its role

focusing on a particular skill, area of expertise, or production type

production

act of creating or making something

stockbroker

products that can be used in place of each other to satisfy the same consumer needs

substitutes

products that can be used in place of each other to satisfy the same consumer needs

complements

demand for one increases when the demand for the other increases

inferior goods

item that becomes less desirable as the income of consumers increases

supply schedules

table that illustrates all the quantities supplied at different prices

supply-side economics

theory that suggests increasing the production of goods and services is the best way to stimulate economic growth

American free enterprise system

businesses operate with minimal government intervention

connection between inflation rate and unemployment rate

examples of lagging indicators

types of employment

-full: works a set number of hours (40 a week) and receives a fixed salary or wage

-part-time: works fewer than standard number of hours per week, often with a proportional salary or wage

goals for economic strength

-achieving full employment

-maintaining price stability

-fostering economic growth

trade-offs

choose one thing and give up another

U.S treasury bonds

debt security, or loan, issued by the U.S. government

types of unemployment

-structural: workers skill dont match with the position

-frictional: temporarily out of work while transitioning between jobs

-seasonal: business slow or shut down for a season

-cyclical: fluctuations in the business cycle

uemployment insurance

provides temporary financial assistance to eligible workers who have lost their jobs through no fault of their own.

unemployment rate

percentage of the labor force that is unemployed and actively seeking employment 4.2%