| A | B |
|---|
| principal | amount of money originally borrowed in a loan |
| credit union | depository institution owned and operated by its members that provides savings accounts and low-interst loans to its members only |
| unsecured loan | loan guaranteed only by a promise to repay it |
| usury law | law restricting the amount of interest that can be charged for credit |
| past due notices | reminders sent by businesses and lending institutions that debt payments are overdue |
| technological monopolies | a market situation that results when a seller develops a product or production process for which it obtains a patent |
| monopolistic competition | a market situation in which a large numbers of sellers offer similar but slightly different products and each has some control over price |
| interlocking dictorate | a situtation when the majority of members of the boards of directords of competing corporations are the same; in effect having one group of people manage both companies |
| complementary good | one product often used with another product; as the price of the second product decreases, the demand for the first product will increase; as the price of the second product increases, the demand for the first product will decrease |
| equilibrium price | price of a product or service at which the amount producers are willing to supply is equal to the amount consumers are willing to buy |
| surplus | when supply is greater than demand |
| interest | amount of money the borrower must pay for the use of someone else's money |
| credit bureau | private business that investigates a person's income, current debts, personal life, and past history of borrowing and repaying debts to determine the rik involved in lending money to that person |
| perfect competition | market situation in which there are numerous buyers and sellers, and no one buyer or seller can affect price |
| geographic monopolies | market situations occurring when an individual seller has control over a market because of the location |
| conglomerate merger | buying out of unrelated businesses |
| five-year plans | centralized planning system that was the basis for China's economic system |
| utility | ability of any good or service to satisfy consumer wants |
| substitution effect | economic principle stating that if two items satisfy the same need and the price of one rises, people will buy the other |
| elastic demand | situation in which the rise orfall in price of a product greatly affects the amount of that product which people are willing to buy; if the prices of certain products rise, consumers will buy cheaper substitutes |
| mortgage | installment debt owed on real property-housings, buildings, or land |
| bankruptcy | the inability to pay debts based on the income received |
| annual percentage rate | cost of credit expressed as a yearly percentage |
| collateral | something of value that a borrower lets the lender claim if a loan is not repaid |
| consumer durables | manufactured items that people use for long periods of time before replacement |
| credit check | investigation of a person's income, current debts, personal life, and past history of borrowing and repaying debts |
| natural monopolies | market situations resulting when one company forces its competitors out of business by producing goods or services at the lowest cost |
| patent | right granted by the government to exclusively manufacture an invention for a specified number of years |
| oligopoly | industry dominated by a few suppliers that exercise some control over price |
| horizontal merger | buy-out of a company by one in the same business |
| deregulation | gradual reduction of government regulation and control over business activity |
| privatization | change from state ownership of business, land, and buildings to private ownership |
| welfare state | country that is blend of capitalism and socialism, combining private ownership of the means of production and competitive allocation of resources with the goal of social equality for its citizens |
| Fed | Federal Reserve System created by Congress in 1913 as the nation's central banking organization; functions include processing checks, serving as the government's banker, and controlling the reate of growth of the money supply |
| tight money policy | monetary policy which makes credit expensive and in short supply in an effort to slow the economy |
| voluntary exchange | the principle that is the basis of activity in a market economy - a buyer and a seller exercise their economic freedoms by working out their own terms of exchange |
| elasticity | economic concept dealing with consumers' responsiveness to an increase or decrease in prices - price responsiveness |
| inelastic demand | a situation in which a price change of a product has little impact on the quantity demanded by consumers |
| law of diminishing returns | economic rule stating tht after some point, adding units of a factor of production (such as labor) to all the other factors of production (such as equipment) increases total output for a time - after a certain point, the extra output for each additional unit will begin to decrease |
| shortages | situations occurring when, at the going price, the quantity demanded is greater than the quantity supplied |
| regular charge account | credit extended to a consumer allowing the consumer to buy goods or services from a particular store and to pay fo them later. Interest is charged on that part of the account not paid within a cetain period of time - also known as a 30-day charge |
| installment debt | type of loan repaid with equal payments, or installments, over a specific period of time |
| credit card | credit device that allows a person to make purchases at many kinds of stores, restaurants, hotels, and other businesses without paying cash |
| finance charge | cost of credit expressed in dollars and cents |
| commercial banks | bank offering wide range of services - main functions are to accept deposits, lend money, and transfer funds among banks, individuals, and businesses |
| imperfect competition | market situtation in which individual or group buys or sells a good or service in amounts large enough to affect price - includes monopoly, oligopoly, and monopolistic competition |
| government monopolies | market situations created by the government and protected by legal barriers to entry - activity exclusive to government |
| vertical merger | a merger in which a business that is buying from or selling to another business merges with that business |
| reregulation | federal government regulation and control over business activity of formerly heavily-regulated industries |
| price system | system of pure capitalism that allows prices to seek their own level as determined by the forces of supply and demand |
| law of demand | economic rule which states that the quantity demanded and price move in opposite directions - as price goes up, quantity demanded goes down; as price goes down, quantity demanded goes up. There is an inverse, or opposite, relationship between demand and price |
| law of diminishing marginal utility | economic rule stating tht the additional satisfaction a consumer gets from purchasing one more unit of a product will lessen with each additional unit purchased |
| law of supply | economic rule stating that as the price rises for a good, the quantity supplied rises. As the price falls, the quantity supplied also falls |
| credit | receipt of money either directly or indirectly to buy goods and services in the present with the promise to pay for them in the future |
| charge account | credit extended to a consumer allowing the consumer to buy goods or services from a particular company and to pay for them later |
| cosigner | person who signs a loan contract along with the borrower and promises to repay the loan if the borrower does not |
| cartel | arrangement among groups of industrial businesses, often in different countries, to reduce international competition by controlling the price, production, and distribution of goods; international form of monopoly |
| communisim | term used by Karl Marx for his ideal society in which no government is necessary; has come to mean any authoritarian socialist system that supports revolution as a means to overthrow capitalism and bring about socialist goals; a central government controls the entire economy |
| credit limit | maximum amount of goods or services a person or business can buy on the promise to pay in the future |
| credit rating | rating of risk involved in lending money to a specific person or business |
| price elasticity of demand | economic concept that deals with how much demand varies according to changes in price |
| product differentiation | manufacturers' use of minor differences in quality and features to try to differentiate between similar goods and services |
| pure monopoly | most extreme market form of imperfect competition in which a single seller controls the supply of a good or service and thus has control over price |
| prime rate | rate of interest banks charge on loans to their best business customers |
| revolving charge account | credit extended to a consumer allowing the consumer to buy goods or services from a particular store and to pay for them later |
| finance company | company that takes over contracts for installment debts from stores and adds a fee for collecting the debt; also makes loans directly to consumers |
| secured loan | loan that is backed up by collateral |
| barriers to entry | obstacles to competition that prevent others from entering a market |
| antitrust legislation | laws passed by federal and state governments to prevent new monopolies from forming and to break up those that already exist |
| merger | situation occurring when one corporation buys more than half the stock of another corporation |
| secondary market | process through which owners of securities sell the securities to other investors for cash |
| technology | any use of land, labor, and capital that produces goods and services more efficiently; today it generally means the use of science to develop new products and new methods for producing and distributing goods and services |
| debit card | credit device used to make cashless purchases of goods and services; money is electronically withdrawn from the consumer's checkable account and transferred directly to the store's bank account |
| savings and loan | depository institution that, like a commercial bank, accepts deposits and lends money |
| monetary policy | policy that involves changing the rate of growth of the supply of money in circulation to affect the amount of credit and , therefore, business activity in the economy |
| loose money policy | monetary policy that makes credit inexpensive and abundant, possibly leading to inflation |
| antitrust legislation | laws passed by federal and state governments to prevent new monopolies from forming and to bread up those that already exist |
| capitalism | economic system in which private individuals own the factors of production and decide how to use them within the limits of the law |
| Federal Reserve | nation's central banking system; functions include processing checks, serving as the governmnet's banker, and controlling the rate of growth of the money supply |
| discount rate | interest rate the Fed charges on loans to banks |
| check clearing | method by which a check that has been deposited in one depository institution is transferred to the depository institution on which it was written |
| fractional reserve banking | system in which only a fraction of the deposits in a bank is kept on hand, or in reserve; the remainder is available to lend to borrowers or is otherwise invested |
| Federal Open Market Committee (FOMC) | 12 member committee in the Federal Reserve System which meets approximately 8 times a year to decide the course of action that the Fed should take to control the money supply |
| recession | portion of the business cycle in which the nation's output, the real GDP, doesn't grow for at least two quarters (6 months) |
| private property | whatever is owned by individuals or groups rather than the federal, state, or local governments |
| reserve requirements | regulations set by the Fed, requiring banks to keep a certain percentage of their deposits as cash in their own vaults or as deposits in their district Federal Reserve Bank |
| open-market operations | buying and selling of the US securities by the Fed to affect the money supply by changing depository institution reserves or by putting money into or taking it out of circulation in the economy |
| democratic socialism | system that works within the constitutional framework of a nation to elect socialists to office; the government usually controls only some areas of the economy |
| authoritarian socialism | a central government controls the entire economy |
| Proletariat | workers |
| Karl Marx | Socialist who published The Communist Manifesto with Friedrich Engels |
| Sweden | labeled a welfare state- a blend of capitalism and socialism; this combines private ownership of the means of production and competitive allocation or resources with the goal of social equality |
| Alfred Marshall | introduced concept of supply and demnad analysis |
| Adam Smith | published The Wealth of Nations - idea of capitalism, or market system - private individuals own the factors of production and decide how to use them within the limits of the law |
| market order | an order that requires immediate execution at the best price available..generally the cheapest treades to place because there is little work or maintenance by the broker |
| limit order | an order to transact at a specified price. This guarantees the price at which you will buy or sell a security. Limit orders are usually more expensive than market orders |
| stop order | A market order that trades afte a specified level has been reached. This may be a stop-loss or stop-limit. The exact price cannot be guaranteed, but this can be a good way to protect your downside. |
| all or none (AON) | A stipulation on a limit order either to buy or sell a security only if the broker can fill the entire order, not part of it. |
| day order | An order that expires at the end of the business day if it has not been filled. |
| good till cancelled (GTC) | An order either to buy or sell a security that remains in effect until the customer cancels it or until it is executed by the broker. |
| fill-or-kill | An order for immediate execution. If it cannot be filled immediately, the order is automatically cancelled. |
| short sale | Short selling is an advanced investing technique when stock is borrowed and sold with the hopes of returning the stock at a lower price. |
| buy to cover | An order placed to close out a short position |
