| A | B |
|---|
| GDP (gross domestic product) | the $ value of all final goods and services produced within a country's borders in a given year |
| opportunity cost | the most desirable alternative given up as the result of a decision |
| elastic | describes demand that's very sensitive to a change in price |
| inelastic | describes demand that's not very sensitive to a change in price |
| factors of production | land, labor, capital; the 3 groups of resources that are used to make all goods and services |
| consumer price index | a price index determined by measuring the price of a standard group of goods meant to represent the typical "market basket" of a typical urban consumer |
| monetary policy | the actions the Federal Reserve takes to influence the level of real GDP and rate of inflation in the economy |
| fiscal policy | gov't use of taxing and spending to stabalize the economy |
| price ceiling | max price that can be legally charged for a good or service |
| price floor | max. price that can be legally charged for a good or service |
| extrenality | an economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume |
| deductions | variable amounts that you can subtract, or deduct, from your gross income |
| price fixing | an agreement among firms to sell at the same or similar prices. result of collusion. |
| theories of inflation | quantity theory, demand-pull theory |
| quantity theory | theory that too much $ in the economy causes inflation |
| demand-pull theory | theory that inflation occurs when demand for goods and services exceeds existing supplies |
| protectionism | the use of trade barriers to protect a nation's industries from foreign competition |
| inflation | a general increase in prices |
| recession | prolonged economic contraction |
| laissez-faire | the doctrine that states that gov'e generally shouldn't interven in the market place |
| frictional unemployment | unmeployment that occurs when people take time to find a job |
| cyclical unemployment | unemployment that rises during economic downturns and falls when the economy improves |
| macroeconomics | study of the behavior and decision-making of entire economies |
| microeconomics | study of economic behavior and decision-making of small units such as individuals, families, and businesses |
| competition | struggle among producers for the $'s of consumers |
| monopolistic competition | a market structure in which many companies sell products that are similar but not identical |
| comparative advangtage | ability of one person to produce a good at opportunity costs that are lower than that of another person or nation |
| absolute advantage | ability of one person or nation to produce a particular good at lower cost tahn another person or nation |
| aggregate demand | amount of goods and services in the economy that'll be purchased at all possible price levels |
| aggregate supply | total amount of goods and services in the economy available at all possible price levels |
| entitlement program | social welfare program that people are "entitled" to if they meet certain eligibility requirements. they get their funding from the federal budget |
| public goods and services | a shared good or service for which it would be impractical to make consumers pay individually and exlude non-payers. |
| communism | centrally planned economy with all economic and political power resting in the hands of the central gov't. |
| socialism | social and political philosophyy based on the belief that democratic means should be used to evenly distribute wealth throughout a society |
| capitalism | economic and political system dependent on private capital and profit-making |
| European Union (EU) | a regional trade organization made of European nations |
| NAFTA (north american free trade agreement) | agreement that will eliminate all tariffs and other trade barriers between canada, mexico, and the u.s. |
| marginal cost | cost of producing one more unit of a good |
| profit | total revenue minus total cost |
| marginal revenue | the additional income from selling one more unit of a good; sometimes equal to price |
| balance of trade | relationship between a nation's imports and exports |
| prime rate | rate of interest banks charge on short-term loans to their best costumers |
| total cost | fixed cost plus variable cost |
| fixed cost | cost that doesn't change no matter how much is produced |
| variable cost | cost that rises and falls depending on how much is produced |
