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50 Cards in this Set
- Front
- Back
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positive economics
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"unemployment rate is 5.1%"
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normative economics
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"the unemployment rate is relatively low"
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land
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a factor of production; includes geographic tracts as well as mineral resources
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labor
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a factor of production; includes doctors, teachers, laborers, anyone working for someone else
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capital
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a factor of production; anything involved in producing something else
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entrepreneurship
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a factor of production; the catalyst for business activity; takes a risk
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Adam Smith
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the father of modern economics; linked ability to pursue self interest (and profit) to increase in social good
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law of demand
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as price increases, quantity demanded decreases (all else equal)
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law of supply
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as price increases, quantity supplied increases (all else equal)
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determinants of demand (consumer prospective)
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price, income, prices of other goods, tastes and preferences, expectations of future conditions
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determinants of demand
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price, costs (wages, raw materials), technology (ways and methods), number of producers, expectations, taxes/subsidies
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surplus
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excess supply (incentive for price reduction)
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shortage
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excess demand (incentive for price increase)
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equilibrium
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free market works towards this, exactly the amount offered for sale is sold
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sole proprietorship
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business owned and operated (and generally supervised) by one person
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partnership
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two or more individuals agree to own and operate a business together. Usually, they pool their financial resources and business skills. Consequently, they share the risks and the profits or losses.
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monopoly
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a one-firm situation; achieved by winning the competition and/or gaining control of a scarce resource; many monopolies are subject to pricing regulation
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externality
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third-party costs or benefits (outside buyer and seller)
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public goods
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indivisible, joint-use goods (like roads)
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free-rider problem
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people receive benefits from a public good without paying into its costs
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transfer payments
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money taken from earners (through taxation) that is given by the government to non-earners (i.e. funds that the non-earners have not earned in the period)
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marginal tax rate
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rate (a %) paid on each additional unit (dollar) of taxable income
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average tax rate
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total tax paid divided by total taxable income
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NAFTA
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North American Free Trade Agreement: has greatly reduced tariffs and other trade barriers between Canada, Mexico, and the United States and will eliminate them entirely by 2008
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EU
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regional free-trade zone that includes 25 European countries
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multinational corporation
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firm that has sizable production and distribution activities in other countries
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GPD
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gross domestic product: consuption+investment+government spending+net exports (expenditures approach); it is the dollar value of all final goods and services produced in a nation in a year; main measure of weather an economy is expanding or is in recession
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intermediate goods
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goods and services that are produced for resale or for further process or manufacturing
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final goods
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purchased for final use by the consumer
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nominal GDP
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current-year, current-dollar GDP
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real GDP
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GDP is adjusted for inflation in order to compare apples to apples
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economic growth
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increase in the GDP; caused by increase in resources and/or increase in productivity
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productivity
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labor productivity=output per worker hour
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business cycles
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natural part of a market economy
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discouraged workers
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people who stop seeking employment when job search/economic conditions are difficult
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types of unemployment
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cyclical, structural, frictional, seasonal
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inflation
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increase in general price level
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CPI
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consumer price index: key measure of inflation
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demand-pull inflation
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increase in general price levels that is caused by increases in aggregate demand
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cost-push inflation
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increase in general price levels that is caused by increases in business costs
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nominal interest rate
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current posted interest rate
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real interest rate
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nominal interest rate minus inflation rate
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hyperinflation
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very rapid inflation; what would happen if a government significantly increased money supply
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MPC
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marginal propensity to consume: tendency to consume an additional dollar of income
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MPS
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marginal propensity to save: tendency to save an additional dollar of income
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wealth effect
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when events boost of the value of existing wealth, households increase their spending and reduce their saving
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expected rate of return
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expected profit/cost of capital
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investment demand curve
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relationship between amound of investment and real interest rate
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leakage
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savings is a withdrawal of spending from the income expenditures stream
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injection
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investment-acquisition of capital - a deposit into the income expenditures stream
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