question

national income accounting

answer

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

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gross domestic product (GDP)

answer

total dollar value of all final goods and services produced in a nation in a single year

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net exports

answer

difference b/t what the nation sells to other countries and what it buys from other countries

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depreciation

answer

loss of value b/c of wear and tear to durable goods and capital goods

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net domestic product (NDP)

answer

value of the nations total output (GDP) 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

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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 makes to individuals

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disposable personal income (DI)

answer

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

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inflation

answer

prolonged ride in general price level of final goods and services

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purchasing power

answer

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

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deflation

answer

prolong decline in the general price level of goods and services

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consumer price index (CPI)

answer

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

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market basket

answer

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

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base year

answer

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

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producer price index (PPI)

answer

measure of the change in price over time that U.S producers charge for their goods an services

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GDP price deflator

answer

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

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aggregate demand

answer

the total of all planned expenditures in the entire economy

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aggregated demand curve

answer

a graphed line showing the relationship b/t the aggregated quantity demanded and the average of all prices as measured by the implicit GDP price deflator

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aggregated supply

answer

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

question

aggregated supply curve

answer

a graphed line showing the relationship b/t the aggregated 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/boom

answer

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

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contraction

answer

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

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recession

answer

part of the business cycle in which the nations output (real GDP) declines for at least 6 months

question

depression

answer

major slow down of economic activity

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trough

answer

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

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expansion/ recovery

answer

part of the business cycle in which economic activity slowly increases

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innovations

answer

transforming an invention into something useful to humans

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economic indicators

answer

statistics that measure variables in the economy

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leading indicators

answer

statistics that point t what will happen in the economy

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coincident indicators

answer

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

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lagging indicators

answer

indicators that seem to lag behind changes in overall business

question

money

answer

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

question

medium of exchange

answer

use of money for exchange for goods and services

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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

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commodity money

answer

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

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representative money

answer

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

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fiat money

answer

money that has value b/c a government fiat, or order, has been established it as acceptable for payment of debts

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legal tender

answer

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

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overdraft checking

answer

checking account that allows a consumer to write a check for more money than exists n his or hers account

question

electronic fund transfer (EFT)

answer

system of transferring funds from one bank account directly to another w/o any paper money changing hands

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automated teller machine (ATM)

answer

unit that allows consumers to do their banking w/o the help of a teller

question

checking account

answer

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

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checkable deposits

answer

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

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thrift institutions

answer

mutual savings bank, s&ls and credit unions that offer many of the same services as commercial banks

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near moneys

answer

assets, such as savings accounts, that can be turned into money relatively easily and w/o the risk of loss value

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 of credit

question

Federal Open Market Committee (FOMC)

answer

12 members committee in the federal reserve system that meets 8 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 that has been deposited in one institution is transferred to the issuer 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 I an effort to slow the economy down

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

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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 their federal reserve district bank

question

discount rate

answer

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

question

prime rate

answer

rate of interest that banks charge on 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 u.s securities by the Fed to affect the money supply

question

public-works projects

answer

publicity used facilities, such as schools and highways, built by federal, state, or local governments with public money

question

public goods

answer

goods or services that can be used by individuals at the same time w/o reducing the benefit each person receives

question

income redistribution

answer

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

question

social insurance programs

answer

gov. 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

gov. program that extends payment for medical care to workers injured on the job

question

public- assistance program/ welfares

answer

gov, programs that make payments to citizens based on need

question

supplemental 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 an work opportunities to needy families

question

Medicaid

answer

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

question

externalities

answer

economic side effects of by-products that affect an unevolved third party; can be negative or positive

question

fiscal year

answer

yr by which accounts are kept; for the federal gov. oct 1 to sep 30 of the next year

question

budget deficit

answer

situation when the amount of gov. spending exceeds it receipts during the fiscal year

question

deficit financing

answer

gov. policy of spending more money than it is able to bring in through revenues

question

national debt

answer

total amount of outstanding debt for the federal gov

question

budget surplus

answer

situation when the amount of gov. receipts is larger than its expenditures during the fiscal yr

question

benefits received principle

answer

system of taxation in which those who use a particular gov. service support it with taxes in proportion to the benefit they receive; those who don't use a service don't pay taxes for it

question

ability to pay principle

answer

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

question

proportional tax

answer

tax that takes the same percentage of all incomes; as income rises, the amount of tax paid also rises

question

progressive tax

answer

tax that takes a larger percentage of higher 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 Unit 4 Answers – Flashcards

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