Untitled Flashcards Set

Trade

The exchange of goods and services between different parties.

Specialization

Each worker or country focuses on producing specific goods or services.

Exchange Rates

The value of one currency for the purpose of conversion to another.

Double Coincidence of Wants

The situation in a barter system where two parties must want what the other has.

Characteristics of Money

Includes divisibility, portability, durability, recognizability, and scarcity.

Medium of Exchange

Money used to swap goods and services.

Unit of Account

Money that provides a consistent measure of value for goods and services.

Store of Value

Money that retains value over time, allowing for future use.

Standard for Deferred Payment

Money that allows borrowing with expectations of future repayment.

Commercial Banks

Financial institutions that provide services like keeping money safe, making loans, and paying interest.

Central Bank

The government institution responsible for overseeing the banking system and monetary policy.

Interest Rate

The cost of borrowing money or the reward for saving money.

Overdraft

A short-term loan allowing an account holder to withdraw more than what is available.

Loan

A fixed amount of money borrowed for a specific purpose, repayable in installments.

Mortgage

A loan secured by the collateral of the borrower's real estate.

Gross Income

Income earned before taxes.

Disposable Income

Income available for spending or saving after taxes.

Derived Demand

The demand for labor based on the demand for the goods/services produced.

Minimum Wage

The lowest legal wage that can be paid to workers.

Trade Union

An association of workers that aims to protect their rights and interests.

Conspicuous Consumption

The purchase of goods or services to display wealth rather than for practical purposes.

Market Structure

The organizational and other characteristics of a market.

Perfect Competition

A market structure with many sellers offering identical products.

Monopoly

A market structure where a single seller dominates the market with no close substitutes.

Horizontal Integration

The merger of firms that produce the same type of goods/services.

Vertical Integration

The merger of firms involved in different stages of production.

Economies of Scale

Cost advantages that firms obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale.

Internal Economies of Scale

Cost savings that accrue to a firm as it increases its output.

Purchasing Economies M

Cost savings achieved through bulk purchasing.

Financial Economies

Lower borrowing costs that larger firms can secure due to better creditworthiness.