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Econ: Study Guide
Terms/ Definitions
| Term | Definition |
|---|---|
| Inflation | A rise in the general level of prices |
| Branch of the U.S. Treasury Dept. in charge of collecting taxes | Internal Revenue Service |
| Microeconomics | The part of economics concerned with single factors and the effects of individual decisions |
| conglomerate | A firm that has a least four businesses each making unrelated products, none of which is responsible for a majority of its sales. |
| substitution effect | The change in the quantity demanded because of the change in the relative price of the product. |
| goods | merchandise or possessions are items that are economically useful or that satisfy an economic want |
| market economy | In a market economy people and firms act in their own best interest to answer the what, how and for whom questions |
| disposable personal income | The total income that the consumer sector has at its disposal after personal income taxes, |
| a cooperative | a voluntary association of people formed to carry on some form of economic activity that will benefit is members |
| expenditures | an amount of money spent |
| financial/capital account | *It contains domestic investment from foreign countries. * It is a key component of the balance of payments. *It contains foreign investment in the domestic sector. . |
| human capital | The education and experience of the labor force. |
| Consumer Price Index | a price index determined by measuring the price of a standard group of goods mean to represent the typical "market basket" of a typical urban consumer |
| Supply & Demand | the amount of goods available, the desire to own something and the ability to pay for it |
| elasticity | Is a measurement of responsiveness that tells us how a dependent variable such as quantity responds to a change in an independent variable such as price. |
| liability | A bank has a liability when someone deposits money into a savings account. |
| specialization and exchange | * A country can produce beyond its production possibility curve. * Resource can be used more efficiently. * Larger quantities of goods and services can be produced. |
| comparative advantages | Specialize in the production of that good. |
| theory of rational expectations | The theory that states one should use past experiences along with all information available to him/her. |
| which capital markets are the stock market associated with | * Ownership in companies. * The NASDAQ. * 401(k)s and individual retirement accounts. |
| What will decreasing personal tax rates do? | Increased personal income, increase spending, and economic growth. |
| demand curve | The curve that shows the relationship between the price of the good and the quantity that consumers are willing to purchase at each price. |
| where is equilibrium present in a market? | Quantity demanded equals quantity supplied. |
| Losses and business failures | Will help redirect resources away from unproductive projects. |
| The law of comparative advantage | Specializes in goods and services one can produce at a low cost makes it possible for trading partners to produce a larger joint output. |
| When will income and living standards of a nation increase? | the availability of goods and services that people value increases |
| How does the government fund a project that creates jobs | Will have to be either taxed or borrowed from the private sector. |
| secondary effect | Producers will increase the production |
| free market economy | Consumption and investment decisions that shape the future course of the national economy. |
| Why do banks choose to borrow directly from the federal government? | They need additional reserve and they can't borrow from other banks. |
| economics | The social science that deals with the study of how people seek to satisfy seemingly unlimited and competing wants with the careful use of scarce resources. |
| scarcity | The condition that results from society not having enough resources to produce all the things that people would like to have. |
| partnership | a business organization owned by two or more persons who agree on a specific division of responsibilities and profits |
| needs | A necessity |
| conglomerate goods | in most cases, a conglomerate supplies a variety of goods and services that are not necessarily related to one another. |
| trade-offs | People face these or alternative choices, whenever they make an economic decision. |
| microeconomics | The part of economics concerned with single factors and the effects of individual decisions |
| market equilibrium | A situation in which prices are relatively stable and the quantity of goods or services supplied is equal to the quantity demanded |
| marginal utility | The extra usefulness or satisfaction a person gets from acquiring or using more unit of a product. |
| laissez-faire | The philosophy that government generally should not interfere with commerce or trade. |
| fixed costs | The cost that a business incurs even if the plant is idle and the output is zero. |
| industrial union | An association of all workers in the same industry regardless of the job each worker performs. |
| central bank | Is a bank that can lend to other banks in times of need |
| federal budget | An annual plan outlining proposed revenues and expenditures for the coming year prepared by the federal government. |
| trust funds | Created for a beneficiary who receives the benefits (such as assets, income, etc.) from the trust. The fund can contain nearly any asset imaginable, such as cash, stocks, bonds, property or other types of financial assets. |
| municipal bond | Bonds issued by the state or local government. |
| modified union shop | Workers do not have to belong to a union to be hired and cannot be made to join one to keep their jobs |
| Lorenz Curve | Shows how much the actual distribution of income varies from an equal distribution. |
| commodity money | Is money that has an alternative use as an economic good. |
| macroeconomics | The part of economics concerned with large-scale or general economic factors, such as interest rates and national productivity. |
| theory of negotiated wages | states that organized labor's bargaining strength is a factor that helps determines wages |
| perfect competition | Characterized by a large number of well informed independent buyers and sellers who exchange identical products |
| Internal Revenue Service | agency within the U.S. department of the treasury responsible for interpretation and application of federal tax law |
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