question

national income accounting

answer

Measurement of the national economy's performance dealing with the overall economy's output and income

question

gross domestic product (GDP)

answer

price index that removes the effect of inflation from GDP so that the overall economy in one year can be compared to another year

question

net exports

answer

difference between what the nation sells to other countries and what it buys from other countries

question

depreciation

answer

loss of value because of wear and tear to durable goods and capital goods fall in the price of the currency through the action of supply and demand

question

net domestic product (NDP)

answer

Value of the nations total output minus the total value lost through depreciation on equipment

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national income (NI)

answer

total income earned by everyone in the economy

question

personal income (PI)

answer

total income that individuals receive before personal taxes are paid

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transfer payments

answer

Welfare and other supplementary payments that a state or the federal government make to individuals

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disposable personal income (DI)

answer

income remaining for a person to spend or save after all taxes have been paid

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inflation

answer

prolonged rise in the general price level of final goods and services

question

purchasing power

answer

The real goods and services that money can buy determines the value of money

question

deflation

answer

prolonged decline in the general price level of goods and services

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consumer price index (CPI)

answer

a statistical measure of the average of prices of a specified set of goods and services purchased by typical consumers in city areas

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market basket

answer

representative group of goods and services used to compile the consumer price index

question

base year

answer

year used as a point of comparison for other years in a series of statistics

question

producer price index (PPI)

answer

measure of the change in price over time that US producers charge for their goods and services

question

GDP price deflator

answer

price index that removes the effect of inflation from GDP so that the overall economy in one year can be compared to another year

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real GDP

answer

GDP that has been adjusted for inflation by applying the price deflator

question

aggregates

answer

summation of all of the individual jobs in the economy

question

aggregate demand

answer

the total of all planned expenditures in the entire economy

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aggregate demand curve

answer

a graphed line showing the relationship between aggregate quality demanded and the average of all prices as measured by the implicit GDP price deflator

question

aggregate supply

answer

real domestic output of producers based on the rise in the fall of the price level

question

aggregate supply curve

answer

a graphed line showing the relationship between the aggregate quantity supplied and the average of all prices as measured by the implicit GDP price deflator

question

business fluctuations

answer

ups and downs in an economy

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business cycle

answer

irregular changes in the level of total output measured by real GDP

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peak

answer

period of prosperity in the business cycle in which economic activity is at its highest point

question

contraction

answer

part of the business cycle during which economic activity is slowing down

question

recession

answer

part of the business cycle in which the nations output declines for at least six months

question

depression

answer

major slowdown of economic activity

question

trough

answer

lowest part of the business cycle in which the downward spiral of the economy levels off

question

expansion

answer

part of the business cycle in which economic activity slowly increases

question

innovations

answer

transforming an invention into something useful to humans

question

economic indicators

answer

statistic that measure variables in the economy

question

leading indicators

answer

statistics that point to what will happen in the economy

question

coincident indicators

answer

economic indicators that usually change at the same time as changes in overall business activity

question

lagging indicators

answer

indicators that seem to lag behind changes in overall business activity

question

money

answer

anything customarily used as a medium of exchange a unit of accounting a store of value

question

medium of exchange

answer

use of money for exchange for goods or services

question

barter

answer

exchange of goods and services for other goods and services

question

unit of accounting

answer

use of money as a yardstick for comparing the values of goods and services in relation to one another

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store of value

answer

use of money to store purchasing power for later use

question

commodity money

answer

a medium of exchange such as cattle or gems that has value as a commodity or good aside from its value is money

question

representative money

answer

money that is backed by an item of value such as gold or silver

question

fiat money

answer

money that has value because a government fiat or order has established it is acceptable for payment of debts

question

legal tender

answer

money that by law must be accepted for payment of public and private debts

question

overdraft checking

answer

checking account that allows a customer to write a check for more money than exists in his or her account

question

electronic funds transfer (EFT)

answer

system of transferring funds from one bank account directly to another without any paper money changing hands

question

automated teller machine (ATM)

answer

unit that allows consumers to do their banking without the help of a teller

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checking account

answer

account in which deposited funds can be withdrawn at any time by writing a check

question

checkable deposits

answer

funds deposited in a bank that can be withdrawn at any time by presenting a check

question

thrift institutions

answer

mutual savings banks S&Ls and credit expensive and in short supply in an effort to slow the economy

question

debit card

answer

device used to make cashless purchases money is electronically withdrawn from the consumers checkable account and transfer directly to the stores bank account

question

near moneys

answer

assets, such as savings accounts, that can be turned into money relatively easily and without the risk of loss of value

question

M1

answer

narrowest definition of the money supply consists of money's that can be spent immediately and against which checks can be written

question

M2

answer

broader definition of the money supply includes all of M1 plus such near moneys as savings deposits small denomination time deposits money market deposit account and retail money market mutual fund balances

question

Fed

answer

The Federal Reserve system created by Congress in 1913 as the nations central banking Organization

question

monetary policy

answer

policy that involves changing the rate of growth of the supply of money in circulation in order to affect the cost and availability for credit

question

Federal Open Market Committee (FOMC)

answer

12 member committee in the federal reserve system that meets eight times a year to decide the course of action that the fed should take to control the money supply

question

check clearing

answer

method by which a check has been deposited in one institution is transferred to the issuers depository institution

question

loose money policy

answer

monetary policy that makes credit inexpensive and abundant possibly leading to inflation

question

tight money policy

answer

monetary policy that makes credit expensive and in short supply in an effort to slow the economy

question

fractional reserve banking

answer

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

question

reserve requirements

answer

regulations set by the Fed requiring banks to keep a certain percentage of their checkable deposits as cash in their own vaults or as deposits in the federal reserve district bank

question

discount rate

answer

interest rate that the Fed charges on loans to commercial banks and other depository institutions

question

prime rate

answer

rate of interest that banks charge in loans to their best business customers

question

federal funds rate

answer

interest rate that banks charge each other on loans

question

open-market operations

answer

buying and selling of United States securities by the fed to affect the money supply

question

public-works projects

answer

publicly use facility such as schools in highways bill by federal state or local government with public money

question

Medicare

answer

government program that provides healthcare for the aged

question

public goods

answer

goods or services that can be used by many individuals at the same time without reducing the benefit each person receives

question

income redistribution

answer

government activity that takes income from some people through taxation and uses it to help citizens in need

question

social-insurance programs

answer

government programs that pay benefits to retired and disabled workers their families and the unemployed

question

social security

answer

federal program that provides monthly payments to people who are retired or unable to work

question

workers' compensation

answer

Government program that extends payments for Medicare to workers injured on the job

question

public-assistance programs/welfare

answer

government program that make payments to citizens based on need

question

supplementary security income

answer

federal programs that include food stamps and payments to the disabled and aged

question

temporary assistance to needy families

answer

state run program that provides assistance in work opportunities to needy families

question

Medicaid

answer

state and federal public assistance program that helps pay health care cost for low income in disabled persons

question

externalities

answer

economic side effects or by-products that affect on uninvolved third party can be negative or positive

question

fiscal year

answer

by which accounts for the federal government October 1 to September 8 of next year

question

budget deficit

answer

situation when the amount of government spending exceeds its receipt during the fiscal year

question

deficit financing

answer

government policy of spending more money than it is able to bring through revenues

question

national debt

answer

total amount of outstanding debt for the federal government

question

budget surplus

answer

situation when the amount of government receipts is larger than its expenditures during the fiscal year

question

benefits-received principle

answer

system of taxation in which those who use a particular government service support it with taxes in proportion to the benefit they receive those who do not use A service do not pay taxes for it

question

ability-to-pay principle

answer

principle of taxation in which those with higher incomes pay more taxes than those with lower income regardless of the number of government services they use

question

proportional tax

answer

tax that takes the same percentage of all income is income rises the amount of tax paid also rises

question

progressive tax

answer

tax that takes the larger percentage of higher incomes and lower incomes justified on the basis of the ability to pay principle

question

regressive tax

answer

tax that takes a larger percentage of lower incomes than of higher incomes

Economics CP Unit 4 Vocab – Flashcards

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