Economics Vocabulary Questions And Answers – Flashcards
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appropriation
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the law passed by Congress that funds (provides money) to government agencies to carry out their programs
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authorization
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the law passed by Congress that states the maximum amount of money Congress may appropriate for government programs
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automatic stabilizer
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program that automatically provides benefits to offset a change in people's incomes
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balanced budget
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a budget in which the money going out is equal to or less than the money taken in
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bank
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a business that keeps money for customers, makes loans, and provides other money-related services
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bank panic
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a situation in which many banks fail because they are not able to meet the demands of their depositors for cash
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bankrupt
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unable to pay debts
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bond
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a certificate of a loan to a government or a business (A person who buys a bond is lending money to the government or corporation that sells the bond.)
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budget
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a plan of how much money a person, business, government, or organization is able to spend and how it will be spent
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budget deficit
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a financial situation in which spending is greater than income or revenues
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budget resolution
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an agreement in Congress that shows total spending and revenues for a fiscal year and how much will be spent in various categories
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budget surplus
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a financial situation in which spending is less than income or revenues
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business cycle
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alternating time periods of expanding and contracting economic activity
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capital
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human-made items, such as machines and tools, that are used to produce goods and services
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capitalism
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an economic system in which individuals, not the government control the production and distribution of goods and services; also called market system
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central bank
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a bank whose functions include controlling the nation's money supply; an institution that lends money to other banks and the place where the government does its banking business (Federal Reserve System in U.S.).
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cash
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bills and coins
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circulation
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money that is available for use
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clearinghouse
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a place where banks exchange checks and settle accounts
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coin
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an economic system in which the government controls the production and distribution of goods and services
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command system
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a bank that provides checking accounts and savings accounts, and makes loans for a variety of purposes
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commercial bank
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a country's ability to produce a product at a lower opportunity cost than other countries
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comparative advantage
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a situation in which producers or sellers of similar goods or service each try to get consumers to buy their products or use their services
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competition
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a situation in which producers or sellers of similar goods or service each try to get consumers to buy their products or use their services
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compound interest
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interest earned on the deposit and on all previously earned interest
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consumer
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someone who buys and uses goods and services
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contraction
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a time period when GDP (amount of business) is decreasing
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cost-push inflation
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the kind of inflation caused by the rising cost of resources such as labor or oil
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counterfeit
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to make a copy of something that people will think is genuine
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credit
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money loaned, usually for a fee, that must be paid back
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credit union
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a kind of bank that is owned by members who belong to a certain company or group; usually a not-for-profit organization
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currency
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any kind of money that is used as a medium of exchange
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debt
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money owed when you or a government buy something or credit or borrow money
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deficit
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situation in which government spends more than it collects in revenue
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deflation
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a decrease in the average price of all goods and services
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demand-pull inflation
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the kind of inflation caused when consumer spending is greater than the amount of goods and services available
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denomination
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paper money of a particular value
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deposit
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money put into a bank
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depression
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a period of serious recession marked by high unemployment and a decline in business
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discount rate
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the rate of interest charged by the Federal Reserve Bank to borrowing banks
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discretionary spending
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spending for federal programs that must receive annual approval (appropriations) by Congress
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dollar
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the official unit of currency in the United States; based on the decimal system
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economic choices
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every society must decide WHAT to produce, HOW to produce, and FOR WHOM to produce
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economics
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the study of how people, businesses, and governments choose to use their limited (scarce) resources
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economic system
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the way that a country or culture produces and distributes goods and services
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economist
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a person who studies the economy
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economy
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the way in which human resources and natural resources are used to produce goods and services
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embargo
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a government policy that cuts off trade with certain countries
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employee
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a person who works for another in return for pay
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employer
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a person or company for whom other people work for pay
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entitlement program
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a program using eligibility requirements to provide health, nutritional, or income supplements to individuals
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exchange rate
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the value of one nation's currency in comparison to another
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excise tax
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a tax on certain items such as alcohol, tobacco, and gasoline
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expansion
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a period of time during which the amount of business (GDP) increases
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export - (noun)
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a good that is sent from one country to another; (verb)to send goods from one country to another
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Federal Deposit Insurance Corporation (FDIC)
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a government corporation that insures bank deposits up to $100,000
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Federal Open Market Committee (FOMC)
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the most powerful committee of the Fed, because it makes the decisions that affect the economy as a whole by manipulating the money supply
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Federal Reserve System (Fed)
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the central bank of the United States
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financial capital
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money used to buy the tools and equipment used in production
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financial institution
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a bank, credit union, savings and loan, or other organization that offers services related to saving and borrowing money
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fiscal policy
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the government program of increasing or decreasing taxes and government spending to control inflation and unemployment
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fiscal year (FY)
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12-month planning cycle in business and government (October 1 through September 30 for government)
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foreign aid
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aid that one country gives to another in the form of money, capital resources, and food
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foreign exchange market
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the place where foreign exchange dealers in major cities around the world trade the money of different countries
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free enterprise
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economic system in which individuals and businesses are allowed to compete for profit with a minimum of government interference
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free trade
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unrestricted trade between countries
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goods
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real items or things, such as cars, watches, and clothing
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government revenue
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tax dollars received by the government
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Gross Domestic Product (GDP)
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the total dollar value of the final goods and services produced in a country each year
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import - (noun)
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a good that is brought into one country from another; (verb) to bring goods into one country from another
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import quota
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a law that sets a fixed limit on the amount of imports
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incentive
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something that encourages people to work harder or to produce more
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income
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the money a person gets from salary or wages, profits, interest, investments, and other sources
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income tax
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a tax on a person's income
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inflation
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an economic condition characterized by rising prices (increase in the average price of all goods and services)
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interest
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the money a person pays to borrow money, or the money a bank pays depositors for using their money
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intergovernmental revenue
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funds one level of government receives from another level of government
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international trade
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trade between nations
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invest
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to use money to earn interest or income, or in the hopes of making a profit; for example, to buy stocks or bonds
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investment
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the risking of money and time to get something in return (usually interest or other income)
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laissez faire
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a basic economic policy that calls for noninterference by the government in business matters
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loan
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a sum of money borrowed for a certain amount of time
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mandatory spending
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federal spending required by law that continues without the need for annual approvals (appropriations) by Congress
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market system
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an economic system in which individuals, not the government control the production and distribution of goods and services; also called capitalism
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mature
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able to be redeemed
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Medicare
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government program that provides health care for the aged (elderly)
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medium of exchange
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anything that a group of people agree has a certain worth
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minimum balance
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a fixed amount of money that remains in a customer's account to avoid paying bank fees
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minimum deposit
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the least amount of money required to open a bank account
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mixed system
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an economic system that includes both private ownership of property and government control (or regulation) of some services and industries
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monetary policy
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the Federal Reserve System program of increasing or decreasing the money supply to control inflation and unemployment
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money
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anything a group of people accept in exchange for goods and services
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money supply
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the value of all currency and checking account balances in a country
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national debt
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the amount of money that the government owes
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natural resource
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a supply of something that is found naturally on earth
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need
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something that you must have to survive
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nonprofit
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a business not intending to make a profit
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open market operations
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purchase or sale of U.S. government bonds and Treasury bills
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payroll tax
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tax on wages and salaries to finance Social Security and Medicare costs
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prime rate
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the lowest rate of interest that banks offer their best business customers
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principal
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a sum of money in an account, not including interest earned; in a loan, the original amount of money borrowed
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private sector
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the part of the economy produced by individuals and businesses
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producer
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the people or businesses that provide goods and services
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profit
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the money a business makes after expenses are paid
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promissory note
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a written promise to pay a sum of money
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property tax
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tax on land and property
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protectionism
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the policy of limiting trade with other countries to protect domestic industries
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protective tariff
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a tax meant to raise the price of an imported good in order to protect a certain industry from foreign competition
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public sector
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the part of the economy produced by the government
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recession
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An extended decline in general business activity.
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reserve
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money that is kept in the bank and not loaned to customers a period of time when the demand for goods declines, unemployment rises, and the flow of money slows down
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revenue
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money brought in by a business
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risk
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the chance of loss
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savings
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money that is put away to be used later
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savings and loan association (S&L)
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financial institutions that traditionally loaned money to people buying homes
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savings rate
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the percent of income that people save
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scarcity
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not enough of a certain resource to satisfy people's needs and wants
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services
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work that is done for other people, such as by waiters, lawyers, and nurses
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social insurance program
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a program meant to prevent poverty; Social Security, workers' compensation, unemployment insurance, and Medicare are well-known examples
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Social Security
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a system of federal financial support for retired workers and workers unable to continue working because of a disability
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standard of living
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way to measure how well the needs and wants of citizens are being met by a country's economic system
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subsidize
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to aid or promote with money
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surcharge
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an extra cost added to an original cost
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surplus
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situation in which quantity supplied is greater than quantity demanded; situation in which government spends less than it collects in revenues
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tariff
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a tax on imports
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taxes
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money that a government collects from people and businesses
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tax-exempt
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not required to pay taxes
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tax return
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annual report filed with local, state, or federal government detailing income earned and taxes owed
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trade deficit
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a condition in which the value of a nation's imports is greater than the value of its imports
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traditional system
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an economic system based on past ways of life and culture
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transaction
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any business done with a the bank, such as a withdrawal or deposit
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unearned income
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money received from investments such as savings accounts and bonds
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unemployed
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being without a job but looking for one
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unemployment
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the total number of people out of work, but wanting to work
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value
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the worth of something as measured in goods, services, or a medium of exchange
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wages
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money paid to an employee for work done
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want
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something that you would like to have but don't necessarily need
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welfare
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income paid by the government to people who need it to live
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withdrawal
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taking money from a bank account
