FBLA Economics Flashcards
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Action by Congress to stabilize the economy
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Fiscal Policy
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Actions by the Federal Reserve Bank to stabilize the economy
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Monetary Policy
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When consumers spend a certain amount of money, no matter what, regardless of their income
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Autonomous Consumption
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Income after taxes
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Disposable Income
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Non-mandatory changes in taxation, spending, or other fiscal activities by a government in response to economic events or changes in economic conditions
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Discretionary Fiscal Policy
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Automatic stabilizers
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Non-Discretionary Fiscal Policy
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Laws that reduce inflation and decrease GDP (closes an inflationary gap) a. Decreases Government spending b. Increases taxes (decreasing disposable income) c. Combinations of the two
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Contractionary Fiscal Policy (THE BREAK)
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Laws that reduce unemployment and increases GDP (closes a recessionary gap) a. Increases Government spending b. Decrease taxes (increases disposable income c. Combinations of the two
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Expansionary Fiscal Policy (THE GAS)
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Shows the trade off between inflation and unemployment; they are inversely proportional
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The Philips Curve
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A system of government where most of the important decisions are made by state officials rather than by elected representatives
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Bureaucracy
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Pure Competition, Monopolistic, Oligopoly, and Pure Monopoly
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Market Models
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Monopolistic, Oligopoly, and Pure Competition
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Imperfect Competition
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Large numbers of firms producing a product; market prices determined by consumer demand; suppliers had no influence on market prices; low entry barriers
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Pure Competition
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Many suppliers; suppliers try to achieve some price advantages by differentiating their products from similar products; low entry bariers
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Monopolistic Competition
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Market dominated by a few suppliers; firms have considerable influence over the market price of their product; high entry barriers
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Oligopoly
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Only one supplier who has significant market power and determines the price of its product; has pricing power within the market; high entry barriers
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Pure Monopoly
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Increase in the general level of prices for goods and services
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Inflation
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A general slowdown in economic activity; decrease in real GDP that lasts at least two quarters
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Recession
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A system of government in which power is divided between a national (federal) government and various regional governments
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Federalism
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A social system or theory in which the government owns and controls the means of production
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Socialism
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A political system in which a country's trade and industry are controlled by private owners for profit
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Capitalism
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An economic ideology and movement whose ultimate goal is the establishment the common ownership of the means of production and the absence of social classes, money, and the state
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Communism
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Focuses on the concept of opportunity cost; limited government interference
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Austrian
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Theories about how in the short run, and especially during recessions, economic output is strongly influenced by aggregate demand (total spending in the economy).
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Keynesian
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study of how people and societies use limited resources to satisfy unlimited wants; the management of scarcity and choice
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Economics
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Tax levied by a government directly on income, especially an annual tax on personal income.
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Income Tax
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Taxes paid when purchases are made on a specific good, such as gasoline
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Excise Tax
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States that other things remaining the same, if the price of a good rises, the quantity demanded decreases and vice versa
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Law of Demand
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The amount of a good that people are willing and able to buy at a certain time at a certain price
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Quantity Demanded
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A graph of the relationship between the price of a good and the quantity demanded.
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Demand Curve
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Prices of related goods, income, future expectations, number of buyers, and personal preferences
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Determinants of Demand
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A good that can be consumed in place of another Two or more goods that satisfy a similar need, so that one good can be used instead of the other. If two goods are substitutes, an increase in the price of one leads to an increase in the demand for the other.
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Substitute Goods
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Goods used together; when one demand rises the other one rises, when one demand falls the other one falls (peanut butter and jelly)
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Complement Goods
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A good for which, other things being equal, an increase in income leads to an increase in demand and vice versa
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Normal Good
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A good that consumers demand less of when their incomes increase
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Inferior Good
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States that other things remaining the same, if the price of a good rises, the quantity supplied increases and vice versa
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Law of Supply
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The amount of a good that people are willing and able to sell at a certain time at a certain price
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Quantity Supplied
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A graph of the relationship between the price of a good and the quantity supplied.
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Supply Curve
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Costs of inputs, technology and productivity, taxes/subsidies, producer speculation, price of other goods that could be produced, and number of sellers all influence supply
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Determinants of Supply
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When the quantity demanded equals the quantity supplied (buyers and sellers are in agreement)
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Market Equilibrium
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The Quantity bought and sold at equilibrium price
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Equilibrium Quantity
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When there is a shortage, the price rises; when there is a surplus the price falls
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Law of Market Forces
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when the government's expenditures exceed the sum of what they can collect in tax revenues
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Hyperinflation
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The total quantity of goods and services produced in an economy over a particular time period, at different price levels.
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Aggregate Supply
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A measure of economic growth that is accounted for inflation
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Real GDP
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The total quantity of goods and services that all buyers in an economy (Consumers, Firms, the Government, and Foreigners) want to buy over a particular time period, at different possible price levels.
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Aggregate Demand
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amount by which aggregate expenditures at full employment GDP exceed required to achieve full employment GDP; brings a rising price level
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Inflationary Gap
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A situation where real GDP is less than potential GDP, and unemployment is greater than the natural rate of unemployment; brings a falling price level
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Recessionary Gap
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Additional
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Marginal
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Satisfaction
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Utility
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An original economic system in which traditions, customs, and beliefs shape the goods and the services the economy produces, as well as the rules and manner of their distribution
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Traditional Economy
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Economic system combining private and public enterprise
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Mixed Economy
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A written guarantee, issued to the purchaser of an article by its manufacturer, promising to repair or replace it if necessary within a specified period of time.
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Warrenty
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Limited to just the specified parts, certain types of defects, or other conditions
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Limited Warranty
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Provides complete coverage for repairs and replacement of any defect in a consumer product
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Full Warranty
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Assurances that are presumed to be made in the sale of products or real property, due to the circumstances of the sale
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Implied Warranty
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Pay and benefits an employee receives when he or she leaves employment at a company
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Severance Pay
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Sum of money paid to a new employee by a company as an incentive to join that company
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Sign off Bonus
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The ease with which an asset can be accessed and used as a medium of exchange
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Liquidity
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Something that preforms the function of money and has intrinsic value
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Commodity Money
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Something that preforms the function of money but has no intrinsic value
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Fiat Money
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Highest Liquidity
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M1
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Near money
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M2
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Anything tangible or intangible that is owned
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Asset
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Anything that is owed
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Liability
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An agreement between lender and borrower
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Loan
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The current worth of some future amount of money
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Present Value
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People demand a certain amount of liquid assets
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Demand for Money
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People hold money for every day transactions
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Transaction Demand for Money
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People hold money since it is less risky than other assets
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Asset Demand for Money
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Goods and services are traded directly
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The Barter System
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Business spending on tools and machinery
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Investment
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Loans or IOU's that represent the debt that the government, business, or individual must repay to the lender
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Bonds
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Represent ownership of the cooperation
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Stocks
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Network of institutions that link borrowers and lenders
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Financial Sector
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Nothing/Faith
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What backs the money supply?
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Generally accepted, scarce, portable and dividable, and its purchasing power
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What makes money effective?
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The amount of goods and services a unit of money can buy
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Purchasing Power
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Medium of exchange, unit of account, and store of value
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Functions of Money
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A flow of earnings over a unit of time
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Income
