FBLA

productive resources

the inputs used to produce the goods and services that people want

renewable resource

a natural resource that can be replaced at the same rate at which the resource is consumed; timber

exhaustible resource

a natural resource that does not renew itself and so is available in a finite amount, such as oil or copper ore

sunk cost

a cost that you have already incurred and cannot recover

centrally planned economy

an economic system in which all resources are government-owned and production is coordinated by the central plans of government

market economy

economic decisions are made by individuals or the open market.

transitional economies

a country that is adapting from a controlled, centralized economy to a free-market system; in the process of privatization

traditional economies

economies shaped by customs and religions

absolute advantage

the ability to produce a good using fewer inputs than another producer

comparative advantage

the ability to produce a good at a lower opportunity cost than another producer

intellectual property rights

rights to which creators are entitled for their work; songwriters

When Adam Smith wrote of the "invisible hand of the market," he was referring to

competition

public utility

a government-owned and regulated monopoly

earned income tax credit

a "negative income tax" that provides income to very poor individuals in lieu of charging them federal income taxes

real income

how many goods and services you can buy.

If a price floor is set above the equilibrium price,

a permanent surplus results.

commodity

a raw material or primary agricultural product that can be used to create the products consumers buy

Sherman Act

outlawed the creation of trusts, restraint of trade, and monopolization; 1890

horizontal merger

the combination of two or more firms competing in the same market with the same good or service

What large industry was deregulated by the federal government in 1978?

airline

undifferentiated oligopoly

an oligopoly that sells a commodity, or a product that does not differ across suppliers, such as an ingot of steel or a barrel of oil

differentiated oligopoly

an oligopoly in which the firms produce a differentiated product

sole proprietorships

businesses owned and operated by one individual; the most common form of business organization in the United States; pay lower taxes, unlimited life, few government regulations, easy to start.

charter

the legal authorization to organize a business as a corporation.

corporations

have limited liability, the stock of a \___ does not need to be resold after the death of its major shareholder, they have unlimited life, they can raise revenue rather efficiently.

Studies have shown that union wages are what percent higher than non-union workers?

15

featherbedding

more workers hired than needed.

diversification

spreading out investments to reduce risk; reduce risks to savers

The largest mergers in history occurred during the

1990s

conglomerate merger

A combination of firms in different industries

What was the poverty threshold for a family of four living in the United States in 2003?

$18,400

output per capita

average production of all people in the country

Which country has the most aggressive policy for regulating and supporting industries?

Japan

cluster

Firms in some industries gain a performance advantage by locating themselves in a region with similar industries

structural unemployment

unemployment that occurs when workers' skills do not match the jobs that are available

underemployment

workers are overqualified for their jobs or work fewer hours than they would prefer

Which era in American history showed high unemployment combined with high inflation?

1971-1981

benefits-received tax principle

those who receive more benefits from the government program funded by a tax should pay more taxes

ability-to-pay tax principle

those with a greater ability to pay such as those with a higher income or those who own more property should pay more taxes

marginal rate

tax rate that applies to the next dollar of taxable income

Since 1960, redistribution has increased as a share of the federal budget, and defense spending has

declined

automatic stabilizer

a government program that changes automatically depending on GDP and a person's income; unemployment insurance, non-discretionary fiscal policy

deficit

a way of billing future taxpayers for today's spending.

token money

money whose face value exceeds its cost of production

fiat money

Bank notes that could be redeemed for gold, government must control the money supply

federal funds market

allows banks that fall short of the reserve requirement to borrow funds from banks with excess reserves

convergence

can occur even when both high- and low-income countries increase investment in physical and human capital with the objective of growing GDP; has not happened in countries with high birth rates

balance of trade

the difference between a country's total exports and total imports

ceteris paribus

all other things held constant

money growth

the ultimate source of inflation

loss leader

an item priced at or below cost to draw customers into a store.

NIRA

agency that provided industry, wage, and price regulation that stimulated the economic recovery of the US proceeding the Great Depression

reserve ratio

the fraction of deposits that banks hold as reserves; should decrease during economic decline

monetary policy

the setting of the money supply by policymakers in the central bank, characterizes free market operations

increasing returns of scale

when long-run average total cost declines as output increases

phillips curve

a curve that shows the short-run trade-off between inflation and unemployment

COLA

an increase made to Social Security and Supplemental Security Income (SSI) to counteract the effects of rising prices in the economy when country is experiencing economic prosperity

FTA

free trade agreement; contract between countries that promotes mutual benefit that allows for international trade

infant industry agreement

emerging domestic industries require protection from foreign competitors

GNP

Gross National Product - the sum of all goods and services produced in a nation in a year

internal revenue code

created the 401K

investment bank

financial institution that specializes in issuing and reselling new securities

government crowding out effect

increased government spending ultimately decreases private sector spending due to higher interest rates, shifts PPF left

frictional unemployment

unemployment reflecting the gap between someone voluntarily leaving a job and finding another.

law of increasing opportunity cost

states that the opportunity cost of a good rises as more of the good is produced

purchasing power parity

a monetary measurement of development that takes into account what money buys in different countries.

discretionary fiscal policy

fiscal policy that is the result of deliberate actions by policy makers rather than rules

non discretionary fiscal policy

permanent spending or taxation laws enacted to work counter cyclically to stabilize the economy, unemployment insurance, progressive income tax, affected by economic activity

federal funds rate

the interest rate at which banks make overnight loans to one another; decrease to ease monetary policy

barter economy

system in which one set of goods or services is exchanged for another

money economy

an economic system based on money rather than item exchanging

M1

currency, demand deposits, traveler's checks, and other checkable deposits

capital deepening

an increase in the quality and quantity of capital per worker; promoted by raising taxes to pay for building roads, borrowing money from foreign nations to invest in building infrastructure in this country, a low population growth rate at the same time that capital stock expands.

money multiplier

the amount of money the banking system generates with each dollar of reserves; the multiple that money increases when increasing the monetary base

price discrimination

the business practice of selling the same good at different prices to different customers

1120

tax form that must be filled out by all corporations

household expenditures

the payments that households make to buy goods and services

constant returns to scale

the property whereby long-run average total cost stays the same as the quantity of output changes

sticky wages

nominal wages that are slow to fall even in the face of high unemployment and slow to rise even in the face of labor shortages

gini coefficient

a measure of income inequality within a population, ranging from zero for complete equality, to 100 if one person has all the income.

bond distribution

a way that institutions raise capital

wholly owned subsidiary

foreign subsidiary that is totally owned and controlled by an organization

speculative risk

a chance of loss, no loss, or gain.

nominal gdp

the production of goods and services valued at current prices

CPI

a measure of the overall cost of the goods and services bought by a typical consumer

paradox value

apparent contradiction between the high value of a nonessential item and the low value of an essential item

cyclical unemployment

unemployment that rises during economic downturns and falls when the economy improves

trade surplus

the amount by which the value of a country's exports exceeds the cost of its imports.

OSHA

a government agency in the Department of Labor to maintain a safe and healthy work environment

AD-AS graph

aggregate demand-aggregate supply: price level, real gdp, AD, SRAS, LRAS, YF, Y1

keynesian economics

stating that government spending should increase during business slumps and be curbed during booms.

classical economies

the idea that free markets can regulate themselves

marginal propensity

the tendency of consumers to increase spending in conjunction with increases in income

what happens to the nominal interest rate when the fed sells bonds

rise because money supply goes down

natural unemployment

frictional unemployment + structural unemployment

laffer curve

shows the relationship between the size of the tax and tax revenue

tax multiplier

the decrease in GDP as a result of raising taxes

M2

M1 plus savings accounts, certificates of deposit, and other liquid assets

means-tested programs

gov programs available only to individuals below a poverty line

savings bonds

bonds issued by the federal government as a way of borrowing money; they are purchased at half the face value and increase every 6 months until full face value is reached; the buyer does not receive periodic interest payments in exchange for a lower purchase price.