Econ Final Review
Definitions of Key Economics Terms:
Economics: The study of how societies allocate scarce resources among competing ends.
Production: The process of creating goods and services.
Distribution: The way in which goods and services are delivered to consumers.
Consumption: The use of goods and services by consumers.
Goods: Tangible products that can be bought and sold.
Services: Intangible activities that are performed to benefit others.
Consumer: An individual who purchases goods and services for personal use.
Producer: An individual or entity that creates goods and services.
Capitalism: An economic system characterized by private ownership of the means of production and operation for profit.
Socialism: An economic system where the means of production are owned and controlled by the state or public.
Market Economy: An economic system in which decisions regarding investment, production, and distribution are driven by supply and demand.
Supply and Demand: The relationship between the availability of goods and the desire for them, affecting their prices.
Traditional Economy: An economic system based on customs, traditions, and practices.
Mixed Economy: An economic system combining private and public enterprise.
Planned/Command Economy: An economic system where the government makes all decisions on production and consumption.
Scarcity: The fundamental economic problem of having seemingly unlimited human wants in a world of limited resources.
Factors of production: The inputs used in the production of goods and services: land, labor, capital, and entrepreneurship.
Opportunity Cost: The cost of the next best alternative foregone when making a decision.
Production possibilities curve: A graph showing the maximum feasible amount of two goods that a business can produce.
Cost Benefit analysis: A process by which business decisions are analyzed as a ratio of benefits to costs.
Standard of living: The degree of wealth and material comfort available to a person or community.
Circular flow chart: A visual model that illustrates how money and goods flow throughout an economy.
European Union (EU): A political and economic union of 27 member states located primarily in Europe.
Entrepreneur: An individual who creates and manages a business, taking on financial risks to do so.
Consumer sovereignty: The idea that consumers dictate the production of goods and services based on their preferences.
Inflation: The rate at which the general level of prices for goods and services is rising.
Substitutes/Complements: Substitutes are goods that can replace each other, while complements are goods that are used together.
Subsidy: Financial assistance granted by the government to encourage the production of certain goods or services.
Diminishing returns: Economic principle stating that as more of a variable input is added to a fixed input, the additional output will eventually decline.
Fixed costs: Costs that do not change with the level of output.
Variable costs: Costs that vary with the level of output.
Overhead: Ongoing expenses of operating a business that are not directly attributed to creating a product or service.
Equilibrium Price: The price at which the quantity of a good demanded equals the quantity supplied.
Surplus: A situation where supply exceeds demand for a good or service.
Monopoly: A market structure characterized by a single seller.
Oligopoly: A market structure dominated by a small number of large firms.
Laissez-faire: Economic theory that promotes minimal government intervention in economic affairs.
Mortgage: A loan taken out to buy property, where the property serves as collateral.
Foreclosure: The legal process by which a lender takes possession of a property from a borrower who has defaulted on their mortgage.
Sole proprietorship: A business owned and run by one individual.
Inventory: The goods and materials a business holds for the purpose of resale.
Corporation: A legal entity separate from its owners, providing limited liability protection to its shareholders.
Stocks: Securities that represent ownership in a corporation.
Bonds: Debt securities issued to raise capital, where the issuer owes the bondholders a debt and is obliged to pay interest.
Franchise: A legal and commercial relationship between the owner of a trademark and an individual or company wanting to use that trademark.
Depreciation: The reduction in the value of an asset over time, due to wear and tear.
Venture capitalists: Investors who provide capital to startup companies in exchange for equity.
Crowdfunding: The practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the internet.
Nonprofit organization: An organization that operates for charitable purposes rather than to make a profit.
Credit union: A member-owned financial cooperative that provides credit at low interest rates.
Collective bargaining: Negotiation between employers and a group of employees aimed at reaching agreements to regulate working conditions.
Boycott: A collective decision to abstain from using, buying, or dealing with a person, organization, or country.
Closed shop: A workplace in which only union members can be hired.
Right to work laws: Laws that guarantee that no person can be forced to join a union as a condition of employment.
Arbitration: A method of resolving disputes by using an impartial third party.
Minimum wage: The lowest wage permitted by law or by a special agreement.
Federal Reserve System (Fed): The central bank of the United States that regulates the U.S. monetary and financial system.
National bank: A commercial bank that is chartered by the federal government.
Federal Deposit Insurance Corporation (FDIC): An independent agency of the federal government that protects bank depositors by insuring deposits.
Certificate of Deposit (CD): A savings certificate with a fixed maturity date and specified interest rate.
Pension: A retirement plan that provides a regular income after retirement.
Individual Retirement Account (IRA): A tax-advantaged account that individuals use to save for retirement.
401(K) plan: A tax-deferred retirement savings plan offered by an employer.
Dow Jones Industrial Average (DJIA): A stock market index that indicates the value of 30 significant publicly traded companies.
Standard and Poor’s 500 (S&P 500): A stock market index that measures the stock performance of 500 large companies.
Gross Domestic Product (GDP): The total value of all goods and services produced within a country in a specific time period.
Infrastructure: The basic physical systems of a business or nation, including transportation, communication, sewage, water, and electric systems.
Business cycles: The fluctuations in economic activity that an economy experiences over a period of time.
Deflation: The reduction of the general level of prices in an economy.
Consumer Price Index (CPI): A measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Creditors: Individuals or institutions to whom money is owed.
Debtors: Individuals or institutions that owe money.
Unemployment Rate: The percentage of the labor force that is jobless and actively seeking employment.
Sin tax: A tax levied on goods deemed harmful to society, such as tobacco and alcohol.
Tax loopholes: Provisions in tax law that allow individuals or businesses to reduce their tax liabilities.
Tax Return: A form used to report income, expenses, and other tax information to tax authorities.
Progressive Tax: A tax rate that increases as the taxable amount increases.
Marginal Tax Rate: The rate at which the last dollar of income is taxed.
Flat Tax: A tax system with a constant marginal rate, usually applied to individual or corporate income.
Value Added Tax (VAT): A type of indirect tax that is charged at each stage of production on the value added to the product.
Fiscal Year: A year as reckoned for taxing or accounting purposes.
Payroll Tax: A tax imposed on employers and employees, typically used to fund social security and healthcare.
FICA: The Federal Insurance Contributions Act, which mandates a payroll tax to fund social security and Medicare.
Property Tax: A tax based on the value of owned property.
Natural Monopolies: Industries where a single firm can supply the entire market at a lower cost than two or more firms.
Keynesian Economics: Economic theory stating that government intervention is necessary to help economies emerge from recession.
Supply-Side Economics: A macroeconomic theory that argues economic growth can be most effectively fostered by lowering taxes and decreasing regulation.
Macroeconomics: The part of economics concerned with large-scale or general economic factors, such as interest rates and national productivity.
Discount Rate (banking): The interest rate charged to commercial banks for loans received from the Federal Reserve's discount window.
Quantitative Easing (QE): A monetary policy where a central bank buys securities to lower interest rates and increase the money supply.
Export/Import: Exporting refers to sending goods and services to other countries, while importing refers to bringing goods and services into a country.
Opportunity Cost: The loss of potential gain from other alternatives when one alternative is chosen.
Protective Tariff: A tax imposed on imported goods to protect domestic industries.
North American Free Trade Agreement (NAFTA): A trade agreement between Canada, Mexico, and the United States that aimed to eliminate trade barriers.
Foreign exchange rate: The rate at which one currency can be exchanged for another.
Trade deficit/surplus: A trade deficit occurs when a country's imports exceed its exports; a trade surplus occurs when exports exceed imports.
Organization of Petroleum Exporting Countries (OPEC): A group of oil-producing countries that coordinate their oil production policies to