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27 Cards in this Set

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  • Back

Opportunity Cost

1. The cost of an alternative that must be forgone in order to pursue a certain action. Put another way, the benefits you could have receive by taking an alternative action.





Xn-Net Exports

GDP-Finds $ value of goods & services

Types of Unemployment

Frictional-occurs when people are laid off or take time off working.

Seasonal-when a result of harvest schedules or vacations, or when industries slow/shutdown for a season

Structural-when workers skills do not match the jobs that are available.

Cyclical-Rises during economic down turns, or recessions, and falls when the economy improves.

Definition of Unemployment

when people are without work while actively searching for employment


(production possibilities curve)

A curve that illustrates the production possibilities for the economy.

Represents the boundary or frontier of the economy's production capabilities.

Unemployment Rate

#unemployment/labor force

(employed + unemployed)

Open-Market Operations

The buying and selling of U.S Government securities by the Federal Reserve Banks for purposes of carrying out monetary policy.

Determinants of Demand

*Factors that shift the demand curve*

1. Change in consumer tastes

2. Changes in # of buyers

3. Change in consumer incomes

4. Changes in prices of complimentary and substitute goods

5.Change in consumer expectations

Nominal GDP

A gross domestic product (GDP) figure that has not been adjusted for inflation.

*The determination of actual GDP without taking into account other factors or variables such as inflation.

Business Cycle

The fluctuation in economic activity that an economy experiences over a period of time.


(consumer price index)

Measure of the average change in prices paid by urban consumers for a "market basket" of goods and services, including food, clothing, shelter, transportation, and prescription drugs.

Fiscal Policy

Changes in federal taxes and federal government spending designed to affect the level of aggregate demand (and in some cases aggregate supply) in the economy are called fiscal policy.


Any item that is generally acceptable to sellers in exchange for goods and services.

A good that acts as a medium of exchange in transactions.

Classically it is said that money acts as a unit of account a store of value and a medium of exchange.

Natural Rate of Unemployment

The full employment-unemployment rate. The unemployment rate occurring when there is no cyclical unemployment and the economy is achieving its potential output, the unemployment rate at which actual inflation equals expected inflation.


A condition of slow economic growth and relatively high unemployment---a time of stagnation---accompanied by a rise in prices, or inflation.

Absolute Advantage

-A country that has absolute advantage can produce a good at lower marginal cost.

-A country with an absolute advantage can sell the goods for less that the country that does not have the absolute advantage.

-Absolute advantage differs from comparative advantage, which refers to the ability to produce specific goods at a lower opportunity cost.

Term: The capability to produce more of a given product using less of a given resource than a competing entity.

Appreciation and Depreciation

Appreciation (of the dollar)-an increase in the value of the dollar relative to the currency of another nation, so a dollar buys more of the foreign currency and foreign goods.

Depreciation (of the dollar)-decrease in the value of the dollar relative to another currency, so the dollar buys less of the foreign currency and less foreign goods


The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. Central banks attempt to keep the deflation, in an attempt to keep the excessive growth of prices to a minimum.


A significant decline in activity across the economy, lasting longer than a few months.

The technical indicator of a recession is two consecutive quarters of neg. economic growth as measured by a country's GDP.


A financial device through which a borrower (firm or government) is obligated to pay the principal and interest on a loan at a specific date in the future.


Choice comes about as a result of scarcity, and in a way, choice is enforced by these circumstances.

Shortage and Surplus

Shortage- The amount by which the quantity demanded of on product exceeds the quantity supplied at a particular (below-equilibrium) price.

Surplus- The amount by which the quantity supplied of a product exceeds the quantity demanded at a specific (above-equilibrium) price.

Real GDP

Measure of the value of economic output adjusted for price changes.

Transforms the money-value measure, nominal GDP, into an index for quantity of total output.


Leads to greater economic efficiency and consumer benefits.

-Benefits of specialization include greater economic efficiency, consumer benefits, and opportunities for growth for competitive sectors.

-The disadvantages include threats to noncompetitive sectors, the risk of over-specialization, and strategic vulnerability.


Resources will never be sufficient to fulfill society's unlimited demand for goods and services.

Society requires that the individual makes choices about which goods to produce.

Determinants of Supply

*Factors that shift the supply curve*

1.Change in input prices

2.Change in technology

3.Change in taxes and subsidies

4.Change in prices of other goods

5.Change in producer expectations

6.Change in # of suppliers

-Any factor that increases the cost of production decreases supply.

-Any factor that decreases the cost of production increases supply.

Monetary Supply

A central banks changing of the money supply to influence interest rates and assist the economy in achieving price stability, full employment, and economic growth.