ACDC Economics pt. 2 – Flashcards
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Comparative advantage
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The ability to produce a good or service at a lower opportunity cost than other producers.
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Competitive market
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A market with many buyers and sellers trading a homogenous good or service in which each buyer and seller is a price taker.
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Complements
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Two goods for which a rise in the price of one leads to a decline in the demand for the other.
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Consumer price Index
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An index construct- ed by comparing the cost of purchasing a fixed basket of goods at different times.
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Consumer surplus
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The difference between the amount that a buyer would be willing to pay for a good or service and the price actually paid.
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Consumption
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spending by households on goods and services, with the exception of the purchase of new housing
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Crowding out
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The decrease in private investment that occurs as a result of a reduction in government saving or an increase in government borrowing.
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Currency
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Coins and bills in the hands of the public.
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Cyclical unemployment
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Unemployment caused by deviations of output from its potential level.
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Deadweight loss
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The reduction in total surplus that results from a market distortion such as a tax.
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Financial markets
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The institutions through which individuals with savings can supply these funds to persons or firms that wish to borrow money to purchase consumption goods or invest in physical capital.
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Fiscal policy
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The use of taxes and spending to influence aggregate demand and through it the level of overall economic activity.
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Fixed cost
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A cost of production that is independent of the quantity produced.
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Foreign direct Investment
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When a company invests in an operational entity in a foreign country that the company or individual will manage directly.
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Frictional unemployment
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Unemployment that results because it takes time for workers to search for the jobs that are best suited to their tastes and skills.
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Gains from trade
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The benefits that both individuals or nations realize from mutually beneficial exchange.
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Government purchases
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Spending on goods and services by federal, state, and local governments.
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Gross domestic product
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The market value of final goods and services produced in an economy during a specified period of time.
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Human capital
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Skills and experience that are acquired through education, training, and on the job experience that increase a worker's productivity.
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Imperfect competition
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The case of a market with a small number of sellers, so that sellers have market power.
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Inferior good
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A good for which the quantity demanded falls as buyers' income increases.
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Inflation
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A general increase in prices.
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Information technology services
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Any type of service that can be exchanged over the internet or via other methods of communications; this can include call centers, software development and sales, accounting, and much more.
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Monetary base
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The quantity of currency plus bank reserves.
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Monetary policy
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The use of the supply of money in the economy by the Federal Reserve to influence the level of aggregate demand.
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Money
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An asset that is a medium of exchange, unit of account, and store of value.
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Money multiplier
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The ratio of the money supply to the monetary base.
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Money supply
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The quantity of money available to the economy.
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Monopolistic competition
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A market in which there is free entry or exit, but every producer supplies a differentiated product and faces a downward sloping demand curve.
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Monopoly
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A market in which there is a single producer.
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Natural rate of unemployment
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The level of un- employment that would exist if the economy were producing at its potential output.
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Nehru, Jawaharlal
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India's first prime minister, 1947-1964, and a leader of the independence movement in the waning days of British colonial domination.
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Net capital outflow
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The difference between the purchases of foreign assets by domestic residents and the purchases of domestic assets by foreign residents.
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Net exports
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The difference between the value of goods and services sold to foreigners and the value of goods and services purchased from foreigners.
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Neutrality of money
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The proposition that in the long run, changes in the quantity of money affect the price level but do not affect any real quantities.
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Nominal Gdp
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The production of goods and services valued at current prices.
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Normal good
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A good or service for which demand is positively related to the buyer's income.
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Normative economics
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Economic analysis used to guide decisions about what should be as opposed to what is the case.
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Production possibility frontier
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A graphical depiction of the combinations of output that can be produced by an economy.
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Public good
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a good or service for which it is not possible to establish individual property rights.
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Rationality
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when individual choices are made by comparing the benefits and costs of different actions and then selecting the action that produces the greatest benefit.
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Real Gdp
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the production of goods and services valued at constant prices.
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Recession
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a period between a peak and a trough in economic activity.
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Rent seeking
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using political influence to increase one's economic profits at the expense of others.
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Reserve requirement
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the amount of reserves that the Federal Reserve requires banks to hold.
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Reserves
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the fraction of deposit liabilities that banks hold to meet depositor withdrawals.
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Rival goods
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goods or services characterized by the fact that one person's enjoyment of the good or service reduces the quantity available for others' enjoyment.
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Savings
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the difference between a person's disposable income and his or her expenditures.
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Scarcity
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an inescapable fact of human existence that results from the fact that the available resources are always less than our limitless desires.
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Structural unemployment
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unemployment that results from the mismatch in skills, locations, or other important characteristics between job seekers and the available jobs.
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Substitutes
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two goods for which an increase in the price of one leads to an increase in the demand for the other.
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Supply curve
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a graphical representation of the quantity of a good or service supplied as a function of the price.
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Supply schedule
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a table showing the relationship between the price of a good or service and the quantity supplied.
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Unemployment rate
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the number of unemployed workers as a fraction of the total labor force.
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Variable cost
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a cost of production that depends on the quantity produced.
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Velocity of money
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the ratio of nominal GDP to the money supply; in effect, the average number of transactions supported by each dollar of the money supply.
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Wealth
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the total value of assets used as a store of value.
