ECON 102: Modules #1, 2 & 3 Key Terms
ECON 102: Modules #1, 2 & 3 Key Terms ECON 102
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This 17 page Bundle was uploaded by Margaret Pressman on Thursday February 11, 2016. The Bundle belongs to ECON 102 at California State University Chico taught by Ruben Sargsyan in Winter 2016. Since its upload, it has received 63 views. For similar materials see Principles of Macro Analysis in Economcs at California State University Chico.
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Date Created: 02/11/16
Glossary of Key Terms for Chapter #1 business cycle fluctuations in economic activity, such as employment and production economics the study of how society manages its scarce resources efficiency the property of a resource allocation of maximizing the total surplus received by all members of society; the property of society getting the most it can from its scarce resources equality the property of distributing economic prosperity uniformly among the members of society externality the impact of one person's actions on the well-being of a bystander incentive something that induces a person to act inflation an increase in the overall level of prices in the economy marginal a small incremental adjustment to a plan of action change market an economy that allocates resources through the decentralized decisions of many firms and economy households as they interact in markets for goods and services market failure a situation in which a market left on its own fails to allocate resources efficiently market power the ability of a single economic actor (or small group of actors) to have a substantial influence on market prices opportunity whatever must be given up to obtain some item cost productivity the quantity of goods and services produced from each unit of labor input property rights the ability of an individual to own and exercise control over scarce resources rational people people who systematically and purposefully do the best they can to achieve their objectives scarcity the limited nature of society's resources Glossary of Key Terms for Chapter #2 model a highly simplified representation of a more complicated reality circular-flow a visual model of the economy that shows how dollars flow through markets among diagram households and firms production a graph that shows the combinations of two goods that the economy can possibly produce possibilities frontier (PPF) given the available resources and the available technology macroeconomics the study of economy-wide phenomena, including inflation, unemployment, and economic growth microeconomics the study of how households and firms make decisions and how they interact in markets normative claims that attempt to prescribe how the world should be. Normative statements are value statements judgments. positive claims that attempt to describe the world as it is. Positive statements contain relationships statements and can be confirmed or refuted. A Glossary of Key Terms for Chapter #4 competitive a market in which there are many buyers and many sellers so that each has a negligible impact on market the market price complements two goods for which an increase in the price of one leads to a decrease in the demand for the other demand table that shows the relationship between the price of a good and the quantity demanded schedule equilibrium a situation in which the market price has reached the level at which quantity supplied equals quantity demanded equilibrium the price that balances quantity supplied and quantity demanded price equilibrium the quantity supplied and the quantity demanded at the equilibrium price quantity inferior good a good for which, other things being equal, an increase in income leads to a decrease in demand law of demand the claim that, other things being equal, the quantity demanded of a good falls when the price of the good rises law of supply the claim that, other things being equal, the quantity supplied of a good rises when the price of the good rises law of supply the claim that the price of any good adjusts to bring the quantity supplied and the quantity and demand demanded for that good into balance market a group of buyers and sellers of a particular good or service normal good a good for which, other things being equal, an increase in income leads to an increase in demand quantity demanded the amount of a good that buyers are willing and able to purchase quantity supplied the amount of a good that sellers are willing and able to sell shortage a situation in which quantity demanded is greater than quantity supplied substitutes two goods for which an increase in the price of one leads to an increase in the demand for the other supply curve a graph of the relationship between the price of a good and the quantity supplied supply schedule a table that shows the relationship between the price of a good and the quantity supplied surplus a situation in which quantity supplied is greater than quantity demanded Glossary of Key Terms for Chapter #10 GDP deflator a measure of the price level calculated as the ratio of nominal GDP to real GDP times 100 government purchases spending on goods and services by local, state, and federal governments gross domestic the market value of all final goods and services produced within a country in a given period product (GDP) of time investment spending on capital equipment, inventories, and structures, including household purchases of new housing macroeconomics the study of economy-wide phenomena, including inflation, unemployment, and economic growth microeconomics the study of how households and firms make decisions and how they interact in markets natural-rate the claim that unemployment eventually returns to its normal, or natural, rate, regardless of hypothesis the rate of inflation nominal GDP the production of goods and services valued at current prices real GDP the production of goods and services valued at constant prices Glossary of Key Terms for Chapter #11 consumer price index (CPI) a measure of the overall cost of the goods and services bought by a typical consumer indexation the automatic correction by law or contract of a dollar amount for the effects of inflation inflation rate the percentage change in the price index from the preceding period nominal interest the interest rate as usually reported without a correction for the effects of inflation rate producer price a measure of the cost of a basket of goods and services bought by firms index real interest rate the interest rate corrected for the effects of inflation Glossary of Key Terms for Chapter #12 catch-up effect the property whereby countries that start off poor tend to grow more rapidly than countries that start off rich diminishing the property whereby the benefit from an extra unit of an input declines as the quantity of returns the input increases human capital the knowledge and skills that workers acquire through education, training, and experience natural resources the inputs into the production of goods and services that are provided by nature, such as land, rivers, and mineral deposits physical capital the stock of equipment and structures that are used to produce goods and services productivity the quantity of goods and services produced from each unit of labor input technological knowledge society's understanding of the best ways to produce goods and services Glossary of Key Terms for Chapter #13 bond a certificate of indebtedness budget deficit a shortfall of tax revenue from government spending budget surplus an excess of tax revenue over government spending crowding out a decrease in investment that results from government borrowing financial intermediaries financial institutions through which savers can indirectly provide funds to borrowers financial markets financial institutions through which savers can directly provide funds to borrowers financial system the group of institutions in the economy that help to match one person's saving with another person's investment market for the market in which those who want to save supply funds and those who want to borrow to loanable funds invest demand funds mutual fund an institution that sells shares to the public and uses the proceeds to buy a portfolio of stocks and bonds national saving the total income in the economy that remains after paying for consumption and government purchases private saving the income that households have left after paying for taxes and consumption public saving the tax revenue that the government has left after paying for its spending stock a claim to partial ownership in a firm Glossary of Key Terms for Chapter #15 collective bargaining the process by which unions and firms agree on the terms of employment cyclical unemployment the deviation of unemployment from its natural rate discouraged workers individuals who would like to work but have given up looking for a job efficiency wages above-equilibrium wages paid by firms to increase worker productivity frictional unemployment that results because it takes time for workers to search for the jobs that best unemployment suit their tastes and skills job search the process by which workers find appropriate jobs given their tastes and skills labor force the total number of workers, including both the employed and the unemployed labor-force participation rate the percentage of the adult population that is in the labor force natural rate of the normal rate of unemployment around which the unemployment rate fluctuates unemployment strike the organized withdrawal of labor from a firm by a union structural unemployment that results because the number of jobs available in some labor markets is unemployment insufficient to provide a job for everyone who wants one unemployment a government program that partially protects workers' incomes when they become insurance unemployed unemployment rate the percentage of the labor force that is unemployed union a worker association that bargains with employers over wages, benefits, and working conditions Glossary of Key Terms for Chapter #16 central bank an institution designed to oversee the banking system and regulate the quantity of money in the economy commodity money money that takes the form of a commodity with intrinsic value currency the paper bills and coins in the hands of the public demand deposits balances in bank accounts that depositors can access on demand by writing a check discount rate the interest rate on the loans that the Fed makes to banks federal funds rate the interest rate at which banks make overnight loans to one another Federal Reserve the central bank of the United States (Fed) fiat money money without intrinsic value that is used as money because of government decree fractional-reserve a banking system in which banks hold only a fraction of deposits as reserves banking leverage the use of borrowed money to supplement existing funds for purposes of investment liquidity the ease with which an asset can be converted into the economy's medium of exchange medium of an item that buyers give to sellers when they want to purchase goods and services exchange monetary policy the setting of the money supply by policymakers in the central bank money the set of assets in an economy that people regularly use to buy goods and services from other people money multiplier the amount of money the banking system generates with each dollar of reserves money supply the quantity of money available in the economy open-market the purchase and sale of U.S. government bonds by the Fed operations reserve ratio the fraction of deposits that banks hold as reserves reserve requirements regulations on the minimum amount of reserves that banks must hold against deposits reserves deposits that banks have received but have not loaned out store of value an item that people can use to transfer purchasing power from the present to the future unit of account the yardstick people use to post prices and record debts Glossary of Key Terms for Chapter #17 classical dichotomy the theoretical separation of nominal and real variables Fisher effect the one-for-one adjustment of the nominal interest rate to the inflation rate menu costs the costs of changing prices monetary neutrality the proposition that changes in the money supply do not affect real variables nominal variables variables measured in monetary units quantity equation the equation M X V = P X Y, which relates the quantity of money, the velocity of money, and the dollar value of the economy's output of goods and services quantity theory of a theory asserting that the quantity of money available determines the price level and that money the growth rate in the quantity of money available determines the inflation rate real variables variables measured in physical units shoe-leather cost the resources wasted when inflation encourages people to reduce their money holdings velocity of money the rate at which money changes hands Glossary of Key Terms for Chapter #20 aggregate-demand a curve that shows the quantity of goods and services that households, firms, the curve government, and customers abroad want to buy at each price level aggregate-supply a curve that shows the quantity of goods and services that firms choose to produce and curve sell at each price level depression a severe recession model of aggregate the model that most economists use to explain short-run fluctuations in economic activity demand and aggregate supply around its long-run trend natural level of the production of goods and services that an economy achieves in the long run when output unemployment is at its normal rate recession a period of declining real incomes and rising unemployment stagflation a period of falling output and rising prices Glossary of Key Terms for Chapter #21 crowding-out effect the offset in aggregate demand that results when expansionary fiscal policy raises the interest rate and thereby reduces investment spending fiscal policy the setting of the level of government spending and taxation by government policymakers Contractionay monetary policy a decrease in the money supply by the Fed Expansionary an increase in the money supply by the Fed monetary policy Contractionary a spending cut or tax increase by the government fiscal policy Expansionary fiscal a spending increase or tax cut by the government policy multiplier effect the additional shifts in aggregate demand that result when expansionary fiscal policy increases income and thereby increases consumer spending
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