Studied by 55 peopleEconomics
the study of how society manages its scarce resources.
Opportunity Cost
the most desirable alternative given up as the result of a decision
Resources are limited wants are
unlimited
economic system
the method used by a society to produce and distribute goods and services
Economic system of the United States
capitalist economy
market economy
command economy
An economic system in which the government makes all economic decisions.
factors of production
Land, labor, and capital; the three groups of resources that are used to make all goods and services
labor
Human effort directed toward producing goods and services
Capital
Assets that are owned in the production of goods and services. Examples include machine, or experts in production.
scarce
limited
Entreprenuer
a person who organizes and operates a business or businesses, taking on greater than normal financial risks in order to do so.
Key Economic Questions
What goods and services should be produced?
How should these goods and services be produced?
Who consumes these goods and services?
Law of Supply
producers offer more of a good as its price increases and less as its price falls
Law of Demand
consumers buy more of a good when its price decreases and less when its price increases
quantity supplied
the amount a supplier is willing and able to supply at a certain price
quanitity demanded
the amount of a good that buyers are willing and able to purchase
demand
the quantity of a good or service that consumers are willing and able to buy
supply
The quantity of something that producers have available for sale
Demand Curve Shifters
number of buyers, income, prices of related goods, tastes, expectations
supply curve shifters
input prices, technology, # of sellers, expectations
movement along the demand curve
a change in the quantity demanded of a good that is the result of a change in that good's price
movement along the supply curve
a change in the quantity supplied of a good arising from a change in the good's price
substitute goods
Products or services that can be used in place of each other. When the price of one falls, the demand for the other product falls; conversely, when the price of one product rises, the demand for the other product rises.
complementary goods
Goods that are commonly used with other goods
Oligoploy
A market structure in which a few large firms dominate a market
clothing brands often belong in monopolistic competition because
Many companies have a small share of each market
Monopoly
A market in which there are many buyers but only one seller.
positive externality
beneficial side effect that affects an uninvolved third party
GDP
Gross Domestic Product- the total market value of all final goods and services produced annually in an economy
final goods and services
goods and services sold to the final, or end, user
Nominal GDP
GDP measured in current prices
Real GDP
the production of goods and services valued at constant prices
purchasing power
a comparison of income versus the relative cost of a standard set of goods and services in different geographic areas
frictional unemployment
A type of unemployment caused by workers voluntarily changing jobs and by temporary layoffs; unemployed workers between jobs.
seasonal unemployment
unemployment caused by seasonal changes in the demand for certain kinds of labor
structual unemployment
Unemployment caused by changes in production
cyclical unemployment
unemployment that rises during economic downturns and falls when the economy improves
GDP per capita
Gross domestic product divided by the number of people in the population.assesses standard of living
recession
a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.
fiscal policy
Government policy that attempts to manage the economy by controlling taxing and spending.
mandatory spending
Federal spending required by law that continues without the need for annual approvals by Congress.
discretionary spending
Federal spending on programs that are controlled through the regular budget process
public goods and services
Goods and services provided by a government for the use of all people.
Credit
An arrangement to receive cash, goods, or services now and pay for them in the future.
401(k) plan
a tax-deferred investment and savings plan that acts as a personal pension fund for employees
Certificate of Deposit
a certificate issued by a bank to a person depositing money for a specified length of time.
W-4 Form
a form employment form required by law that you complete so that your employer can determine the proper amount to withhold from your paycheck
W-2 Tax Form
the form that an employer must send to an employee and the Internal Revenue Service (IRS) at the end of the year.
Net Pay (Take Home Pay)
Amount of income left after taxes and deductions have been taken out.
interest rate
Percentage of amount borrowed to be added to the amount loaned and paid back
savings
Portion of income not spent on consumption
investment
the act of redirecting resources from being consumed today so that they may create benefits in the future; the use of assets to earn income or profit
1040
A tax form filled out by an individual and filed with the IRS that determines the amount of income tax owed in a single year.
free rider problem
For a group, the problem of people not joining because they can benefit from the group's activities without joining.
Monetary policy
the setting of the money supply by policymakers in the central bank
Federal Reserve System
The country's central banking system, which is responsible for the nation's monetary policy by regulating the supply of money and interest rates
expansionary monetary policy
Federal Reserve system actions to increase the money supply, lower interest rates, and expand real GDP; an easy money policy.
contractionary monetary policy
the Federal Reserve's policy of increasing interest rates to reduce inflation
discount rate
the minimum interest rate set by the Federal Reserve for lending to other banks.
regressive tax
A tax for which the percentage of income paid in taxes decreases as income increases
progressive tax
A tax for which the percentage of income paid in taxes increases as income increases
automatic stabilizers
changes in fiscal policy that stimulate aggregate demand when the economy goes into a recession without policymakers having to take any deliberate action
flat tax
proportional tax on individual income after a specified threshold has been reached
Stocks
shares of ownership in a company
compound interest
interest earned on both the principal amount and any interest already earned
Note
Flashcard