Econ Glossary

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1 ability-to-pay principle of taxation

Back 1

belief that taxes should be paid according to level of income regardless of benefits received

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2 absolute advantage

Back 2

country's ability to produce more of a given product than can another country

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3 accelerated depreciation

Back 3

schedule that spreads depreciation over fewer years than normal to generate larger tax reductions

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4 accelerator

Back 4

change in investment spending cuased by a change in overall spending

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5 acid rain

Back 5

pollution in form of rainwater mixed with sulfur dioxide, a mild form of sulfuric acid

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6 agency shop

Back 6

arrangement under which non-union members must pay union dues

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7 aggregate demand

Back 7

the total quantity of goods and services demanded at different price levels

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8 aggregate demand curve

Back 8

hypothetical curve showing different levels of real GDP that could be purchased at various price levels

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9 aggregate supply

Back 9

the total value of goods and services that all firms would produce in a specific period of time at various price levels

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10 aggregate supply curve

Back 10

hypothetical curve showing different levels of real GDP that could be produced at various price levels

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11 alternative minimum tax

Back 11

personal income tax rate that applies to cases where taxes would otherwise fall below a certain level

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12 appropriations bill

Back 12

legislation earmarking funds for certain purposes

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13 aquifer

Back 13

underground water-bearing rock formation

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14 arbitration

Back 14

agreement by two parties to place a dispute before a third party for a binding settlement

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15 ASEAN

Back 15

group of ten Southeast Asian nations working to promote regional cooperation, economic growth, and trade

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16 assets

Back 16

properties, possessions and claims on others; usually listed as entries on a balance sheet

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17 automatic stabilizer

Back 17

program that automatically provides benefits to offset a change in people's incomes; unemployment insurance, entitlement programs

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18 automation

Back 18

production with mechanical or other processes that reduces the need for workers

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19 average tax rate

Back 19

total taxes paid divided by the total taxable income

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20 baby boom

Back 20

historically high birthrate years in the U.S. from 1946-1964

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21 balance of payments

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difference between money paid to, and received from, other nations in trade; balance on current account includes goods and services, merchandise trade balance counts only goods

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22 balance sheet

Back 22

condensed statement showing assets, liabilities, and net worth of an economic unit

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23 balanced budget

Back 23

annual budget in which expenditures equal revenues

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24 balanced budget amendment

Back 24

constitutional amendment requiring government to spend no more than it collects in taxes and other revenues, excluding borrowing

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25 bank holiday

Back 25

brief period during which all banks or depository institutions are closed to prevent bank runs

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26 bankruptcy

Back 26

court-granted permission to an individual or business to cease or delay payment on some or all debts for a limited amount of time

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27 barter economy

Back 27

moneyless economy that relies on trade or barter

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28 base year

Back 28

year serving as point of comparison for other years in a price index or other statistical measure

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29 bear market

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period during which stock market prices move down for several months or years in a row

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30 benefit principle of taxation

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belief that taxes should be paid according to benefits received regardless of income

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31 Better Business Bureau

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business-sponsored nonprofit organization providing information on local companies to consumers

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32 bill consolidation loan

Back 32

popular type of consumer loan used to pay off multiple existing loans

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33 black market

Back 33

market in which economic products are sold illegally

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34 bond

Back 34

formal contract to repay borrowed money and interest on the borrowed money at regular future intervals

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35 boycott

Back 35

protest in the form of a refusal to buy, including atempts to convince others to join

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36 break-even point

Back 36

production needed if the firm is to recover its costs; production level where total cost equals total revenue

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37 bull market

Back 37

period during which stock market prices move up for several months of years in a row

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38 business cycle

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systematic changes in real GDP marked by alternating periods of expansion and contraction

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39 business fluctuation

Back 39

changes in real GDP marked by alternating periods of expansion and contraction that occur on a less than systematic basis

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40 call option

Back 40

contract giving investors the option to buy commodities, equities, or financial assets at a specific future date using a price agreed upon today

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41 capital

Back 41

tools, equipment, and factories used in the production of goods and services; one of four factors of production

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42 capital flight

Back 42

legal or illegal export of a nation's currency and foreign exchange

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43 capital gains

Back 43

profits from the sale of an asset held for 12 months

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44 capital good

Back 44

tool, equipment, or other manufactured good used to produce other goods and services; a factor of production

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45 capital-intensive

Back 45

production method requiring relatively large amounts of capital relative to labor

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46 capital market

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market in which financial capital is loaned and/or borrowed for more than one year

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47 capitalism

Back 47

economic system in which private citizens own and use the factors of production in order to generate profits

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48 capital-to-labor ratio

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measure obtained by dividing the total capital stock by the labor force

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49 cartel

Back 49

group of sellers or producers acting together to raise prices by restricting availability of a product; OPEC

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50 cash flow

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total amount of new funds the business generates from operations; broadest measure of profits for a firm, includes both net income and non-cash charges

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51 cease and desist order

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ruling requiring a company to stop an unfair business practice that reducese or limits competition

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52 census

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complete count of population, including place of residence

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53 center of population

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point where the country would balance if it were flat and everyone weighed the same

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54 central bank

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bank that can lend to other banks in times of need, a "blankers' bank"

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55 certificate of deposit

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receipt showing that an investor has made an interest-bearing loan to a financial institution

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56 chamber of commerce

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nonprofit organization of local businesses whose purpose is to promote their interests

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57 change in demand

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consumers demand different amounts at every price, causing the demand curve to shift to the left or the right

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58 change in quantity demanded

Back 58

movement along the demand curve showing that a different quantity is purchased in response to a change in price

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59 change in quantity supplied

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change in amount offered for sale in response to a price change; movement along the supply curve

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60 change in supply

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different amounts offered for sale at each and every possible price in the market; shift of the supply curve

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61 charter

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written government approval to establish a corporation; includes company name, address, purpose of business, # of shares of stock, and other features of the business

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62 civilian labor force

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non-institutionalized part of the population, aged 16 and over, either working or looking for a job

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63 closed shop

Back 63

illegal arrangement under which workers must join a union before they are hired

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64 coins

Back 64

metallic forms of money such as pennies, nickels, dimes, and quarters

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65 collateral

Back 65

property or other security used to guarantee repayment of a loan

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66 collective bargaining

Back 66

process of negotiation between union and management representatives over pay, benefits, and job-related matters

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67 collective farm

Back 67

small farms in the former Soviet Union owned by the state, but operated by families who shared in some of the profits

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68 collectivization

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forced common ownership of factors of production; used in the former Soviet Union in agriculture and manufacturing under Stalin

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69 collusion

Back 69

agreements, usually illegal, among producers to fix prices, limit output, or divide markets

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70 command economy

Back 70

economic system characterized by a central authority that makes most of the major economic decisions

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71 commercial bank

Back 71

depository institution that, until the mid-1970s, had the exclusive right to offer checking accounts

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72 commodity money

Back 72

money that has an alternative use as a commodity; gunpowder, flour, corn

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73 communism

Back 73

economic and political system in which factors of production are collectively owned and directed by the state; theoretically classless society in which everyone works for the common good

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74 company union

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union organized, supported, and even financed by an employer

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75 comparable worth

Back 75

doctrine stating that equal pay should be given for jobs of comparable difficulty

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76 comparative advantage

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country's ability to produce a given product relatively more efficiently than another country; production at a lower opportunity cost

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77 competition

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the struggle among sellers to attract consumers while lowering costs

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78 complements

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products that increase the value of other products; products related in such a way that an increase in the price of one reduces the demand for both

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79 conglomerate

Back 79

firm with four or more businesses making unrelated products, with no single business responsible for a majority of its sales

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80 constant dollars

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dollar amounts or prices that have been adjusted for inflation; same as real dollars

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81 consumer good

Back 81

good intended for final use by consumers rather than businesses

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82 consumer price index

Back 82

index used to measure price changes for a market basket of frequently used consumer items

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83 consumer sovereignty

Back 83

role of consumer as ruler of the market when determining the types of goods and services produced

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84 cooperative

Back 84

nonprofit association performing some kind of economic activity for the benefit of its members

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85 corporate income tax

Back 85

tax on corporate profits

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86 corporation

Back 86

form of business organization recognized by law as a separate legal entity with all the rights and responsibilities of an individual, including the right ot buy and sell property, enter into legal contracts, sue and be sued

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87 cost-benefit analysis

Back 87

way of thinking that compares the cost of an action to its benefits

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88 Countil of Economic Advisers

Back 88

three-member group that devises strategies and advises the President of the United States on economic matters

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89 coupon

Back 89

stated interest on a corporate, municipal or government bond

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90 craft union

Back 90

labor union whose workers perform the same kind of work; same as trade union

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91 credit union

Back 91

nonprofit service cooperative that accepts deposits, makes loans, and provides other financial services

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92 creditor

Back 92

person or institution to whom money is owed

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93 creeping inflation

Back 93

relatively low rate of inflation, usually 1 to 3 percent annually

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94 crowding-out effect

Back 94

higher than normal interest rates and diminished access to financial capital faced by private investors when government increases its borrowing in financial markets

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95 crude birthrate

Back 95

number of live births per 1000 people

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96 currency

Back 96

paper component of the money supply, today consisting of Federal Reserve notes

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97 current dollars

Back 97

dollar amounts or prices that are not adjusted for inflation

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98 current GDP

Back 98

Gross Domestic Product measured in current prices, unadjusted for inflation

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99 current yield

Back 99

bond's annual coupon interest divided by purchase price; measure of a bond's return

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100 customs duty

Back 100

tax on imported products

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101 customs union

Back 101

group of countries that have agreed to reduce trade barriers

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102 cyclical unemployment

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unemployment directly related to swings in the business cycle

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103 default

Back 103

the act of not repaying borrowed money

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104 deficiency payment

Back 104

cash payment making up the difference between the market price and the target price of an agricultural crop

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105 deficit spending

Back 105

annual government spending in excess of taxes and other revenues