Econ - vocab

Law of Supply

the principle that states that as the price of an item increases, so will the amount of the item supplied producers are willing to supply and vice versa

Law of Demand

the principle that as the price of an item increases, a smaller quantity of the item will be purchased and vice versa

Money

any object used as a medium of exchange. A store of wealth, and a measure of value

Factors of production

the resources needed to produce goods and services such as land, labor, capital and the entrepreneur

Deficit budget

when the government spends more money than it collects in income for one year

Demand schedule

a table that shows how much of a product consumers will demand at various possible prices

Supply schedule

a table that shows how much of a product consumers will demand at various possible prices

Depression

a major decline in business activity that lasts for more than 6 months characterized by high rate of unemployment

Recession

a minor decline in business activity that lasts for less than 6 months

Capitalism

an economic system characterized by private ownership of resources, profit motive, competition, and market systems

Market

any place buyer and seller meet

Consumer price index

a statistic used to measure changes in the level of prices

Economics

the social science that studies how human societies use scarce resources to satisfy unlimited wants

Microeconomics

the branch of economics that studies the behavior of individuals and individual firms

Macroeconomics

the branch of economics that studies the large economic issues and the economy as a whole

Gross domestic product

(GDP) the dollar value of all finished goods and services produced within the nations’ boundaries within one year

Gross national product

(GNP) the dollar value of all finished goods and services produced within the nation’s boundaries and the foreign sector within one year

Inflation

a period of rising prices

Monetary policy

the government’s adjusting the money supply and interest rates to influence changes in the economy

Fiscal policy

the government’s adjusting taxation and government spending to influence changes in the economy (Demand-Side/Keynesian Economics)

Aggregate demand

the total quantity of goods and services demanded

Business cycle

the pattern of growth and decline of real GNP; including four phases: expansion, inflation, recession and depression

Capital

items used to produce goods and services such as machinery, money, and tools

Real gdp

Gross Domestic Product adjusted for inflation

Command economy

an economic system where a central authority makes the major decisions

Stagflation

a period of rising prices (inflation) combined with increases in unemployment

Prime interest rate

the interest rate banks offer their most preferred customers

Disposable income

income available to consumers after taxes are deductible

Opportunity cost

the value in time, money, resources given up in making a choice

Supply side economics

(trickle-down economics) the theory that government can encourage economic growth by helping businesses

Equilibrium price:

the price where the quantity supplied equals the quantity demanded

Invisible hand theory

a theory by Adam Smith stating each person acting for their own well-being will serve the interests of society as a whole

Socialism

an economic system where the resources needed to produce goods and services are owned by the governmen

Government subsidy

a government payment to encourage or protect a certain economic activity

Interest vs. interest income

interest is the price for borrowed money; interest income is what is earned by one who loans money

National debt

the total amount of money the federal government borrows; the annual deficits combined

Aggregate supply

the total value of goods and services that all firms produce in a specified period of time

Asset

an item of value such as money, stock, land, etc

Elasticity of demand/supply

how sensitive changes in the quantity demanded are to change in pric

Business investment

business decisions to spend on capital goods to promote economic growth

Bond

a loan of money; an IOU

Tariff

a tax placed on imported products

Protectionist trade policy

a foreign trade policy that protects domestic producers with tariffs or quotas

Trade deficit

trade where spending on imports exceeds money made from selling exports