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196 Cards in this Set
- Front
- Back
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fractional reserve banking
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a system in which only a fraction of the total deposits managed by each bank must be kept in reserve
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frictional unemployment
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the status of workers who have left one job and are likely soon to find another
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fringe benefit
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the compensation received by employees in addition to wages
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full employment
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the condition in which all of an economy’s resources are being utilized
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full endorsement
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a check endorsement that transfers title of the check to a specific party
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GDP per capita
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total value of all goods and services produced by a national economy in a year divided by the population
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geometric progression
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a sequence of numbers in which the ratio of one number to its predecessor is always the same (e.g. 2 4 16 etc.)
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gift tax
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a federal tax on gifts in excess of specified limits
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glasnost
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a Soviet policy introduced by Mikhail Gorbachev that encouraged public discussion and criticism
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global economy
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the combined economies of all nations
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globalization
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the reduction of barriers to the movement of goods and services and workers and capital among nations
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global warming
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the idea that the Earth’s surface temperatures are increasing over time
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goldsmith
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a person who makes and sells articles of gold for a living
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gold standard
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the tying of the value of a nation’s currency to a fixed amount of gold
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good
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a tangible item of value
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goods-producing industry
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one that primarily makes goods
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goodwill
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the value of a firm’s intangible assets such as its reputation or location
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grant-in-aid
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a payment by one level of government to a lower one usually designated to be spent for a specific purpose
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Great Depression
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the severe economic downturn in the United States and elsewhere 1929–1939
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greenhouse effect
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the trapping of the sun’s heat by atmospheric gases
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Gresham’s Law
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the idea that cheap money drives out expensive money
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grievance
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a formal complaint by a union member against his or her employer
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grievance machinery
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established methods of resolving complaints filed by union members against their employer
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gross domestic product (GDP)
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the total value of all goods and services produced by a national economy in a year
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gross expenses
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total of all expenses other than selling costs
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gross income
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total sales minus selling costs
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gross pay
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one’s paycheck before any payroll deductions are made
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gross private domestic investment
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the sum of business spending for new equipment construction and changes in business inventories
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gross receipts tax
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one levied on a business firm’s retail and wholesale sales
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harmful externality
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a side effect of an economic activity... one that imposes costs on the public
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hidden tax
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one included in the selling price of a good or service without the buyer knowing about it
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holding company
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a corporation that has a controlling interest in the shares of one or more other corporations
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home equity loan
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a consumer loan in which one’s home is used as collateral
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home mortgage
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a pledge of one’s home as security for a loan to buy the home
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homeowner’s insurance
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protection to cover costs of various types of potential risks to the owner of a home
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horizontal merger
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a merger of two or more firms that produce competing products
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hospital insurance
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that part of health insurance that will pay all or part of the costs incurred in a hospital stay (other than surgical and doctors’ fees)
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human resources
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the people whose efforts and skills go into the production of goods and services
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identity theft
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the assumption by criminals of the identity of a person for the purpose of gaining access to that person’s financial accounts or obtaining credit in the name of that person
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imperfect competition
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market classification falling between monopoly and perfect competition and consisting of monopolistic competition and oligopoly
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import
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a good and service that is purchased from abroad
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import restriction
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the imposition of a tariff quota or outright ban on foreign products as a means of protecting the domestic producers of those products
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income approach
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a way of calculating GDP by measuring the total income of all employees and businesses
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income security
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government welfare
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incomes policy
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government efforts to control inflation by limiting increases in wages and prices
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income statement
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a summary of the financial activities of a firm over a period of time
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income tax
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a tax on a person’s or company’s income after certain items have been deducted
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index number
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one showing percentage change of a variable from a base year
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indirect tax
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a tax that can be shifted from the person or business taxed to someone else who is frequently unaware of that fact
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individual income tax
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one on the earnings of individuals and unincorporated businesses
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individual retirement account (IRA)
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a fund into which an individual may pay a limited amount each year to provide income upon retirement
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industrial production index
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a measure of changes in output in the nation’s factories mines and utilities
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Industrial Revolution
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a period of rapid mechanization of a nation’s industry
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inelastic demand
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a market situation in which a decrease in price results in a less than proportionate increase in the quantity demanded and vice versa
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infant industry
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an industry that is newly developed
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infant mortality rate
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the number of babies (out of every 1000 live births) who die before their first birthday
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inflation
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a general rise in prices
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inflationary gap
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the excess of aggregate demand over total output at full employment
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infrastructure
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the physical capital that supports a society’s activities (roads power lines water facilities schools etc.)
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inheritance tax
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a tax levied on the property of a person who has died
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injunction
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a court order to cease a certain activity
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innovation
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a new way of doing something
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installment plan
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a method of purchasing something on credit with payments scheduled over time
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insurance
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a way of protecting oneself and others against money losses by sharing the risks with others
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interest rate
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the price paid to borrow money
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interlocking directorate
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a situation in which the same people sit on the boards of directors of competing firms
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internal causes
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events within the economy that trigger changes in the business cycle
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internal cost
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a business expense paid for by the firm incurring it
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internal debt
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money that the federal government owes to U.S. institutions and individuals
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Internet banking
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a system that allows individuals and firms to use the Internet to perform banking activities
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inventory
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the goods that a business has on hand to sell and the materials used in their manufacture
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inventory on demand
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a method of obtaining supplies needed for manufacturing only just before they are needed
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inverse
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the reverse of
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investing
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the use of savings to buy something that is expected to increase in value
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investment
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that which people or institutions purchase while investing
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investment bank
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an institution that underwrites corporations’ issuing of stocks and bonds
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investment-grade bond
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a bond ranked Baa or BBB and above
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investor
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one who buys something of value for income and/or long-term growth
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job outlook
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the chances of finding work in a particular occupation region or season
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job security
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union-management agreements that make it difficult to dismiss workers without good cause
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junk bond
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a highly risky bond ranked below investment grade
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jurisdictional strike
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one caused by a dispute between two unions over which one can represent certain workers
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keiretsu
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a closely knit network of business firms in Japan
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labor
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the factor of production involving human effort
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labor contract
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a written agreement between an employer and a union
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labor force
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the number of people 16 years of age or older who are working or looking for work
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labor productivity
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output per worker per time period
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Laffer Curve
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a graphic representation of the relationship between tax rates and resulting tax revenues
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lagging indicator
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a set of data that experiences the ups and downs of business activity some time after it occurs in the business cycle
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laissez-faire
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a government’s policy of not interfering with its nation’s economy
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land reform
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the breakup by a government of large estates into smaller farmer-owned plots
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Law of Demand
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the principle that the demand for a good or service varies inversely with its price
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Law of Diminishing Returns
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the principle that in adding factors of production a firm eventually reaches a point where productivity begins to decline
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Law of Supply
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the principle that the quantity of a good or service supplied varies directly with its price
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lawsuit
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a legal action in court taken against one individual or group against another
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leading indicator
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a set of data that experiences the ups and downs of business activity some time before it occurs in the business cycle
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legal tender
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a currency that by law must be accepted in payment of debt
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leverage
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the use of borrowed funds to finance business operations
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liability
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an obligation or debt
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liability insurance
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financial protection for the insured against lawsuits for injuries to other persons or damages to their property
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life expectancy
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the number of years the average newly born infant is expected to live
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life insurance
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a policy that provides for a specified payment to one or more beneficiaries upon the insured’s death
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limited liability
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the legal exemption of stockholders from the debts of the corporation in which they own stock
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limited liability company (LLC)
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one that combines the advantages of a corporation (limited liability) with those of a partnership (no double taxation)
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line of credit
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a bank’s arrangement with a firm that allows the firm to borrow whenever it needs money up to a stated limit
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liquidate
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to sell off the assets of a firm and go out of business
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liquidity
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the ease with which an investment vehicle can be turned into cash
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literacy rate
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the percentage of the adult population who can read and write
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lockout
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the shutting down of a plant by management in hopes of getting its union workers to agree to certain contract proposals
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long run
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a period of time during which any or all of the factors of production could vary
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long-term financing loans
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that need to be repaid after a year or more
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long-term goal
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one that you would expect to take more than a year to achieve
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luxury
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a nonessential good or service that adds comfort and pleasure to life
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M1
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the nation’s money supply as measured by the total currency... checkbook money... and traveler’s checks in circulation on any given day
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M2
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the nation’s money supply as measured by M1 plus individual savings accounts... money market funds... and certain foreign assets
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M3
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the nation’s money supply as measured by M2 plus business and other large savings accounts
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macroeconomics
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the study of the forces affecting the economy as a whole
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managed capitalism
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a market economy with strong government intervention and cooperation among corporations
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margin
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a down payment required when purchasing securities on credit
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marginal cost
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the addition to costs resulting from the production of one extra unit
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marginalism
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the evaluation of the usefulness of adding one more of an item to the production of a good or service
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marginal productivity
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the value of the output of the last worker hired by a company
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marginal propensity to consume (MPC)
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the rate at which the public spends as national income goes up
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marginal propensity to save (MPS)
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the rate at which the public saves as national income goes up
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marginal revenue
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the income from the production of one more unit
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marginal utility
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the additional usefulness received from each added unit of a product or service
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market
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a place where goods and services are bought and sold
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market economy
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one in which the allocation of resources is determined by the free operation of the forces of supply and demand and market prices
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market failure
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the inability of a market to allocate resources efficiently
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market power
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the ability of buyers and sellers to influence prices
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market risk
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the possibility that the value of an investment will be low when one wants to sell
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mass production
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the making of a product in quantity usually with machinery
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maturity
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the date at which a bond is set to be redeemed at face value
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maximize
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to make the most of
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maximum employment
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a goal whereby everyone who wants to work has a job
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maximum production
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the level at which entrepreneurs believe it no longer profitable to add more workers... land... or capital to the production process
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maximum purchasing power
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consumers’ ability to buy the greatest amount possible with limited numbers of dollars
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median retirement age
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the age of retirement at which half of all new retirees are older and half are younger
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mediation
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a nonbinding process in which an impartial party or mediator tries to bring both sides in a labor dispute into agreement
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medical insurance
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protection from the costs of hospitalization... surgery... medicines... and general medical care
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medium of exchange
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something readily accepted in payment for goods or services
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mercantilism
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a set of economic practices of the 16th to 18th centuries based on the premise that a nation’s wealth could be measured by its holdings of gold and silver
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merger
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the absorption of one or more firms by another
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merit pay
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a system of compensation based on the idea that those who perform better are paid more
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microeconomics
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the study of the effects of economic forces on individual parts of the economy
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mint
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to manufacture coins... a place where coins are made
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monetary policies
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the actions taken by the Federal Reserve System to regulate the nation’s supply of money and credit
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monetary standard
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the commodity or benchmark that a society chooses to use for its money
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money market fund
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a mutual fund that invests in short-term credit instruments such as Treasury bills
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monopolistic competition
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a market situation in which there are many firms selling similar items on the basis of product differentiation
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monopoly
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a market situation in which there is only one seller of a particular good or service
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monopoly power
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the ability of a group of firms to act as if it were a monopoly
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monopsony
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a market that has only one buyer
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mortgage
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a pledge of property as security for a loan
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most-favored-nation clause
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a treaty provision requiring a signatory to extend the same preferential trade terms to other signatories that it extends to a nonsignatory
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motor vehicle insurance
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financial protection to help pay the costs of damages and injuries incurred as a result of a motor vehicle accident
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multilateral
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having to do with many nations
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multinational corporation
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a firm that has operations in two or more countries
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multiplier (or multiplier effect)
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a numerical factor by which an increase in investment or spending is multiplied to find the effect on national income
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mutual fund
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a corporation that uses the proceeds from the sale of its stocks to purchase the securities of other corporations
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mutual savings bank
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a bank that is owned by its depositors
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national debt
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the total of all money owed by the federal government
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national income
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the total of incomes earned by individuals and business firms in the production of the GDP
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nationalize
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to take control by the government of private industries
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national union
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a labor group organized on a national level
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natural resource
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a factor of production obtained from the land sea or air
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necessity
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a product or service needed to sustain daily life
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net exports
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the difference between a country’s imports and exports of goods and services in a year
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net income
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gross income minus expenses (also known as net profit)
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net interest
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the difference between the total interest received and that paid out by all businesses in a year
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net worth
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the value of a business as measured by its assets minus its liabilities
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no-fault insurance
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financial protection whereby the injured party in a motor vehicle accident is paid by her or his insurance company... regardless of who was responsible for the accident
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nominal interest rate
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the rate of return on a loan expressed in today’s dollars
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nondurable good
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a product that is quickly consumed or worn out
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nonrenewable resource
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one incapable of being replaced or renewed
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not-for-profit-corporation
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one organized to provide a social... educational... or other nonbusiness service.. rather than to earn a profit
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NOW (negotiable order of withdrawal) account
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a checking account that pays interest on deposited money
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offshore tax shelter
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a strategy for avoiding certain U.S. taxes by opening an office in foreign countries where the taxes are lower
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oligopoly
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a market dominated by only a few sellers
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on-the-job training
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a program whereby workers earn money while they are learning a skill
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open market operations
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the buying and selling of government bonds by the Federal Open Market Committee
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open shop
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a workplace in which the employer is free to hire either union or nonunion workers
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opportunity cost
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the amount of goods and services that must be done without in order to obtain another good or service
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outlay
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an expenditure
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output
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the total value of goods or services produced by a firm
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outsource
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to have certain tasks done by employees of another firm... sometimes in another country
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over-the-counter market
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places where stocks are bought and sold other than the stock exchanges
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paradox of thrift
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the assertion that if individuals increase the level of their savings... society as a whole will have less to save
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parity
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a price that gives farmers the same purchasing power from the sale of their goods that they enjoyed during certain base years
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partnership
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an unincorporated business owned by two or more people
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patent
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a government grant giving ownership rights to an invention
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payee
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the person to whom a check is payable
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payroll tax
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one levied on a business firm’s payroll
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peak
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the upper turning point of a business cycle
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perestroika
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attempts at restructuring the Soviet economy under Mikhail Gorbachev to allow elements of free enterprise
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perfect competition
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a market in which there are many buyers and sellers... none of whom alone can affect prices
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