Economics Unit 5 Vocabulary

Front 1

Stabilization Properties

Back 1

attempts by the federal govt to keep the economy healthy; includes monetary and fiscal policies

Front 2

Unemployment Rate

Back 2

percentage of the civilian labor force that is unemployed but is actively looking for work

Front 3

Full Employment

Back 3

condition of the economy when the unemployment rate is lower than a certain percentage established by economists' studies

Front 4

Underground Economy

Back 4

transactions by people who do not follow federal and state laws with respect to reporting earnings

Front 5

Demand-Pull Inflation

Back 5

theory that prices rise as the result of excessive business and consumer demand; demand increases faster than total supply, resulting in shortages that lead to higher prices

Front 6

Stagflation

Back 6

combination of inflation and stagnation (low economic activity)

Front 7

Cost-Push Inflation

Back 7

theory that higher wages push up prices

Front 8

Fiscal Policy

Back 8

federal government's use of taxation and spending policies to affect overall business activity

Front 9

Circular Flow of Income and Output

Back 9

economic model that pictures income as flowing continuously between businesses and consumers

Front 10

Monetarism

Back 10

theory that deals with the relationship between the amount of money the Fed places in circulation and the level of activity in the economy

Front 11

Monetarists

Back 11

supporters of the theory of monetarism, often associated with Milton Friedman

Front 12

Monetary Rule

Back 12

Monetarists' belief that the Fed should allow the money supply to grow at a smooth, consistent rate per year and not use monetary policy to stimulate or slow the economy

Front 13

Inflation Targeting

Back 13

a possible central bank policy in which the head of the central bank is given a specified annual rate of inflation as a goal

Front 14

Time Lags

Back 14

periods between the time fiscal policy is enacted and the time it becomes effective

Front 15

Imports

Back 15

goods bought from other countries for domestic use

Front 16

Exports

Back 16

goods sold to other countries

Front 17

Absolute Advantage

Back 17

ability of one country to produce more output per unit of input than can another country

Front 18

Specialization

Back 18

concept that a nation should produce and export a limited assortment of goods for which it is particularly suited in order to use its resources most efficiently

Front 19

Comparative Advantage

Back 19

ability of a country to produce a product at a lower opportunity cost than another country

Front 20

Exchange Rate

Back 20

the price of one nation's currency in terms of another nation's currency

Front 21

Foreign Exchange Markets

Back 21

markets dealing in buying and selling foreign currency for businesses that want to import goods from other countries

Front 22

Fixed Rate of Exchange

Back 22

system under which a national government sets the value of its currency in relation to other currencies

Front 23

International Monetary Fund (IMF)

Back 23

agency whose member governments once were obligated to keep their foreign exchange rates more or less fixed; today it offers monetary advice and provides loans to developing nations

Front 24

Devaluation

Back 24

lowering a currency's value in relation to other currencies by government order

Front 25

Flexible Exchange Rates

Back 25

arrangement in which the forces of supply and demand are allowed to set the price of various currencies

Front 26

Depreciation

Back 26

fall in the price of a currency through the action of supply and demand

Front 27

Balance of Trade

Back 27

difference between the value of a nation's exports and its imports

Front 28

Tariff

Back 28

tax placed on an imported product

Front 29

Revenue Tariff

Back 29

tax on imports used primarily to raise government revenue without restricting imports

Front 30

Protective Tariff

Back 30

tax on imports used to raise the cost of imported goods and thereby protected domestic producers

Front 31

Import Quota

Back 31

restriction imposed on the number of units of a particular good that can be brought into the country

Front 32

Embargo

Back 32

complete restriction on the import or export of a particular good or goods going to or coming from a specific country

Front 33

Protectionists

Back 33

people who argue for trade restrictions to protect domestic industries

Front 34

World Trade Organization (WTO)

Back 34

world's largest trade agreement, currently with more than 140 members

Front 35

North American Free Trade Agreement (NAFTA)

Back 35

trade agreement designed to reduce and gradually eliminate tariff barriers between Mexico, Canada, and the US

Front 36

Central American Free Trade Agreement (CAFTA)

Back 36

trade agreement designed to reduce tariff barriers between Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, the Dominican Republic and the US

Front 37

European Union (EU)

Back 37

organization of European nations whose goal is to encourage economic integration as a single market

Front 38

Developed Nations

Back 38

Nations with relatively high standards of living and economies based more on industry than o agriculture

Front 39

Developing Nations

Back 39

Nations with little industrial development and relatively low standards of living

Front 40

Subsistence Agriculture

Back 40

growing of just enough food by a family to take care of its own needs; no crops are available for export or to feed an industrial workforce

Front 41

Infant Mortality Rate

Back 41

death rate of infants who die during the first year of life

Front 42

Confiscation

Back 42

taking over industries by government without paying for them

Front 43

Foreign Aid

Back 43

funds, goods, and services given by governments and private organizations to help other nations and their citizens

Front 44

Economic Assistance

Back 44

loans and outright grants of funds or equipment to other nations

Front 45

Technical Assistance

Back 45

aid in the form of engineers, teachers, and technicians to teach skills to individuals in other nations

Front 46

Military Assistance

Back 46

aid given to a nation's armed forces

Front 47

Bureaucracies

Back 47

offices and agencies of the government that each deal with a specific area

Front 48

Capital Flight

Back 48

the legal or illegal export of currency or money capital from a nation by that nation's leaders

Front 49

Five-Year Plans

Back 49

centralized planning system that used to be the basis for China's economic system; eventually was transformed to a regional planning system leading to limited free enterprise

Front 50

Global Integration

Back 50

interdependency among the countries of the world, especially within financial markets and telecommunications

Front 51

Telecommunications

Back 51

long-distance communication, usually electronic, using communications satellites and fiber-optic cables

Front 52

Direct Foreign Investment (DFI)

Back 52

the purchase by foreigners of real estate and businesses in another country

Front 53

Multinationals

Back 53

firms that do business and have offices or factories in many countries

Front 54

Foreign Affiliates

Back 54

branches of multinational firms