Economics Final Exam Review Vocab – Flashcards
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scarcity
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A situation in which unlimited wants exceed the limited resources available to fulfill those wants.
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shortage
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A situation in which quantity demanded is greater than quantity supplied
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opportunity cost
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Cost of the next best alternative use of money, time, or resources when one choice is made rather than another
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traditional economy
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An economy in which production is based on customs and traditions and economic roles are typically passed down from one generation to the next.
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command economy
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An economic system in which the government controls a country's economy.
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market economy
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An economy in which the decisions of households and firms interacting in markets allocate economic resources.
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mixed economies
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Economic systems in which some allocation of resources is made by the market and some by the government
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capitalism
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An economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations, esp. as contrasted to cooperatively or state-owned means of wealth.
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socialism
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A system in which society, usually in the form of the government, owns and controls the means of production.
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communism
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A political and economic system where factors of production are collectively owned and directed by the state.
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law of demand
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consumers buy more of a good when its price decreases and less when its price increases
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elasticity of demand
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A measure of how consumers react to a change in price
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equilibrium price
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The price at which the amount of goods producers supply meets the amount of goods consumers demand.
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surplus
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A situation in which quantity supplied is greater than quantity demanded
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price ceiling
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A maximum price that can be legally charged for a good or service
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price floor
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A legal minimum on the price at which a good can be sold
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perfect competition
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A market structure in which a large number of firms all produce the same product. The market situation in which there are many sellers in a market and no seller is large enough to dictate the price of a product
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monopolistic competition
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A market structure in which many firms sell products that are similar but not identical.
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monopoly
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(economics) a market in which there are many buyers but only one seller
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oligopoly
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A degree of competition in which just a few sellers dominate the market
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sole proprietorship
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A business owned by one person
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partnership
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A business in which two or more persons combine their assets and skills
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limited partnership
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A partnership that includes at least one general partner who actively manages the company and accepts unlimited liability and one limited partner who gives up the right to actively manage the company in exchange for limited liability
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corporation
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A business owned by stockholders who share in its profits but are not personally responsible for its debts
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stock
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A certificate of ownership in a corporation
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investment
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In economics, spending for the production and accumulation of capital and additions to inventories.
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bear market
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A steady drop in the stock market over a period of time
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bull market
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A period of increased stock trading and rising stock prices
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labor union
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An organization of workers in a particular industry or trade, created to defend the interests of members
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strike
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Nonviolent refusal to continue to work until a problem is resolved between the union and management
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right-to-work
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a measure that bans mandatory union membership
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collective bargaining
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Negotiations between representatives of labor unions and management to determine pay and acceptable working conditions.
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mediation
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A method of settling disputes outside of court by using the services of a neutral third party, called a mediator. The mediator acts as a communicating agent between the parties and suggests ways in which the parties can resolve their dispute.
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arbitration
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A way of settling a dispute without going to trial. The parties who disagree select one or more impartial persons to settle the argument. If the arbitration is binding, then all parties must accept the decision.
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GDP
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Gross Domestic Product- the total market value of all final goods and services produced annually in an economy
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nominal GDP
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the production of goods and services valued at current prices
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real GDP
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gross domestic product (GDP) adjusted to account for changes in currency values and price changes
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inflation
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A general and progressive increase in prices.
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purchasing power
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The ability to purchase goods and services
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types of inflation
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Cost Push Inflation, Demand Pull Inflation, Monetary Based Inflation
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CPI
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(consumer price index) a measure of the overall cost of the goods and services bought by a typical consumer
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cost push inflation
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A rise in prices due to an increase in the cost of the factors of production.
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demand pull inflation
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A rise in prices due to excessive demand across the economy.
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3 types of taxes
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progressive, proportional, regressive
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Keynesian economics
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Theory based on the principles of John Maynard Keynes, stating that government spending should increase during business slumps and be curbed during booms.
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fiscal policy
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Government policy that attempts to manage the economy by controlling taxing and spending.
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expansionary policies
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fiscal policies, like higher spending and tax cuts, that encourage economic growth
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contractionary policies
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fiscal policies, like lower spending and higher taxes, that reduce economic growth
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budget surplus
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A situation in which the government takes in more than it spends
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budget deficit
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Government spending more than it takes in
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fiat money
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Money that has value because the government has ordered that it is an acceptable means to pay debts
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commodity money
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Money that has an alternative use as a commodity; gold, flour, corn
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representative money
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Objects that have value because the holder can exchange them for something else of value
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medium of exchange
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Anything that is used to determine value during the exchange of goods and services
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Federal Reserve
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A national banking system, established in 1913, that controls the U.S. money supply and the availability of credit in the country.
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monetary policy
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Government policy that attempts to manage the economy by controlling the money supply and thus interest rates.
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reserve requirement
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A percentage of commercial banks' checking and savings accounts that must be physically kept in the bank.
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easy money policies
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monetary policies that increases the money supply
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tight money policies
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monetary policy that reduces the money supply
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absolute advantage
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If you can produce more of a good with the same amount of resources as someone else
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comparative advantage
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The ability of a country to produce a good at a lower cost than another country can.
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trade surplus
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Exports exceed imports
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trade deficit
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An excess of imports over exports
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protectionism
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A policy adopted by a government to give domestic companies an advantage
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credit score
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A rating used by credit reporting companies to help lenders decide whether and/or how much credit can be extended to a borrower.
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mutual fund
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A selection of stocks that is owned by many shareholders and managed by a professional stock manager. It allows people to pool their money with other people to buy a variety of stocks.
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401(k)
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A form of retirement fund that an employee to contributes directly through a deduction from their paycheck.
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individual retirement account
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a self-funded retirement plan that allows you to contribute a limited yearly sum toward your retirement
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compound interest
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interest calculated on both the principal and the accrued interest
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FDIC
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Federal Deposit Insurance Corporation: A federal guarantee of savings bank deposits initially of up to $2500, raised to $5000 in 1934, and frequently thereafter; continues today with a limit of $100,000
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diversification
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Buying several different investment alternatives to spread the risk of investing.
