question

absolute advantage

answer

n. the ability of one trading nation to make a product more efficiently than another trading nation (p. 513)

question

aggregate demand

answer

n. the sum of all the demand in the economy (p. 360)

question

aggregate supply

answer

n. the sum of all the supply in the economy (p. 360)

question

antitrust legislation

answer

n. laws that deﬁne monopolies and give government the power to control or dissolve them (p. 214)

question

appropriations

answer

n. set amounts of money put aside for speciﬁc purposes (p. 431)

question

authoritarian

answer

adj. requiring absolute loyalty and obedience to authority (p. 43)

question

automated teller machine (ATM)

answer

n. an electronic device that allows bank customers to make transactions without seeing a bank ofﬁcer (p. 308)

question

automatic stabilizer

answer

n. a feature of ﬁ scal policy that works automatically to steady the economy (p. 447)

question

balanced budget

answer

n. a budget in which total government revenue is equal to total government spending (p. 436)

question

balance of payments

answer

n. a record of all the transactions that occurred between the individuals, businesses, and government units of one nation and those of the rest of the world (p. 529)

question

balance of trade

answer

n. the difference between the value of a country's imports and exports (p. 529)

question

bank exam

answer

n. an audit, conducted by the Federal Reserve, of a bank's ﬁnancial practices (p. 481)

question

bank holding company

answer

n. a company that owns more than one bank (p. 481)

question

barrier to entry

answer

n. anything that hinders a business from entering a market (p. 198)

question

barter

answer

n. the exchange of goods and services without using money (p. 288)

question

bear market

answer

n. a situation in which stock market prices decline steadily over time (p. 335)

question

binding arbitration

answer

n. a process by which an impartial third party resolves disputes between management and unions (p. 280)

question

black market

answer

n. the illegal business of buying or selling goods or services in violation of price controls or rationing (p. 183)

question

Board of Governors

answer

n. the board of seven appointed members that supervises the operations of the Federal Reserve System and sets monetary policy (p. 476)

question

bond

answer

n. a contract a corporation issues that promises to repay borrowed money, plus interest, on a ﬁxed schedule (p. 240)

question

break-even point

answer

n. a situation in which total costs and total revenues are the same (p. 142)

question

budget

answer

n. a plan for allocating income for saving and spending (p. 574)

question

budget deﬁcit

answer

n. a situation in which the government spends more than it takes in (p. 462)

question

budget surplus

answer

n. a situation in which the government takes in more than it spends (p. 462)

question

bull market

answer

n. a situation in which stock market prices rise steadily over time (p. 335)

question

business cycle

answer

n. the series of growing and shrinking periods of economic activity, measured by increases or decreases in real gross domestic product (p. 358)

question

business organization

answer

n. an enterprise that produces goods or provides services, usually to make a proﬁt (p. 226)

question

capital

answer

n. all the resources people make and use to produce and distribute goods and services (p. 8)

question

capital budget

answer

n. a plan for major expenses or investments (p. 436)

question

capital deepening

answer

n. an increase in the ratio of capital to labor (p. 371)

question

capital ﬂight

answer

n. a situation in which capital from a country is invested outside the country (p. 558)

question

capital gain

answer

n. the proﬁt made from the sale of securities (p. 330)

question

capitalism

answer

n. an economic system based on private ownership of the factors of production (p. 49)

question

capital market

answer

n. a market in which long-term ﬁnancial assets are bought and sold (p. 322)

question

cartel

answer

n. a formal organization of sellers or producers who regulate the production, pricing, and marketing of a product (pp. 198, 535)

question

cease and desist order

answer

n. a ruling requiring a ﬁrm to stop an unfair business practice (p. 217)

question

central bank

answer

n. a nation's main monetary authority (p. 474)

question

centrally planned economy

answer

n. a system in which the society's leaders make all economic decisions (p. 42)

question

change in demand

answer

n. a situation in which a change in the marketplace prompts consumers to buy different amounts of a good or service at every price (p. 109)

question

change in quantity demanded

answer

n. a change in the amount of a product that consumers will buy because of a change in price (p. 108)

question

change in quantity supplied

answer

n. an increase or decrease in the amount of a good or service that producers are willing to sell because of a change in price (p. 146)

question

change in supply

answer

n. a situation in which a change in the marketplace prompts producers to offer different amounts for sale at every price (p. 148)

question

check clearing

answer

n. a service provided by the Federal Reserve to record receipts and expenditures of bank clients (p. 480)

question

circular ﬂow model

answer

n. a visualization of all interactions in a market economy (p. 52)

question

civilian labor force

answer

n. people age 16 or older who are employed or actively looking for and available to do work (p. 266)

question

claim

answer

n. a request to an insurance company for payment on an insured loss (p. 596)

question

closed shop

answer

n. a business in which an employer can hire only union members (p. 279)

question

coincident indicators

answer

n. measures of economic performance that usually change at the same time as real gross domestic product changes (p. 364)

question

collective bargaining

answer

n. the process of negotiation between a business and its organized employees to establish wages and improve working conditions (p. 280)

question

command economy

answer

n. an economic system in which the government makes all economic decisions (p. 39)

question

commodity money

answer

n. money that has intrinsic value based on the material from which it is made (p. 291)

question

common stock

answer

n. a share of ownership in a corporation that gives the holder voting rights and a share of proﬁts (p. 331)

question

communism

answer

n. an economic system in which there is no private ownership of property and little or no political freedom (p. 43)

question

comparative advantage

answer

n. the ability of one trading nation to produce something at a lower opportunity cost than that of another trading nation (p. 513)

question

competition

answer

n. the effort of two or more people acting independently to get business by offering the best deal (p. 49)

question

competitive pricing

answer

n. a situation in which producers sell goods and services at prices that best balance the twin desires of making the highest proﬁt and luring customers away from rival producers (p. 174)

question

complements

answer

n. products that are used together, so the increase or decrease in demand for one will result in an increase or decrease in demand for the other (p. 112)

question

conglomerate

answer

n. a business composed of companies that produce unrelated goods or services (p. 243)

question

consumer

answer

n. a person who buys goods or services for personal use (p. 5)

question

consumer price index (CPI)

answer

n. a measure of changes in the prices of goods and services that consumers commonly purchase (p. 396)

question

consumer sovereignty

answer

n. the idea that consumers have the ultimate control over what is produced because they are free to buy what they want and refuse products they do not want (p. 50)

question

contingent employment

answer

n. temporary or part-time work (p. 270)

question

contract

answer

n. a formal, legally binding agreement (p. 598)

question

contraction

answer

n. a decrease in economic activity (p. 359)

question

contractionary ﬁscal policy

answer

n. a plan to reduce aggregate demand and slow down the economy during a period of too rapid economic expansion (p. 446)

question

contractionary monetary policy

answer

n. a plan to reduce the amount of money in circulation; also called tight-money policy (p. 492)

question

cooperative

answer

n. a type of business operated for the shared beneﬁt of the owners, who are also its customers (p. 250)

question

co-pay

answer

n. an amount the insured owes when an insured receives health care (p. 596)

question

corporate income tax

answer

n. a tax based on a corporation's proﬁts (p. 412)

question

corporation

answer

n. a business owned by shareholders, also called stockholders, who own the rights to the company's proﬁts but face only limited liability for the company's debts and losses (p. 238)

question

cosigner

answer

n. a person who assumes responsibility for the debt if the borrower fails to repay the loan (p. 583)

question

cost-beneﬁt analysis

answer

n. the practice of examining the costs and the expected beneﬁts of a choice as an aid to decision making (p. 15)

question

cost-push inﬂation

answer

n. a situation in which increases in production costs push up prices (p. 399)

question

Council of Economic Advisers

answer

n. the three-member group that advises the President on ﬁscal policy and other economic issues (p. 452)

question

coupon rate

answer

n. the interest rate a bond-holder receives every year until the bond matures (p. 338)

question

craft union

answer

n. an organization of workers with similar skills who work in different industries for different employers (p. 274)

question

credit

answer

n. the practice of buying goods or services now and paying for them in the future (p. 582)

question

credit report

answer

n. a statement by a credit bureau that details a consumer's credit record (p. 586)

question

credit score

answer

n. a number that summarizes a consumer's creditworthiness (p. 586)

question

crowding-out effect

answer

n. a situation in which the government outbids private bond interest rates to gain loanable funds (p. 466)

question

currency

answer

n. paper money and coins (pp. 293, 475)

question

customs duty

answer

n. a tax on goods imported into the United States (p. 425)

question

customs unions

answer

n. agreements that abolish trade barriers among the members and establish uniform tariffs for nonmembers (p. 532)

question

cyclical unemployment

answer

n. unemployment caused by the part of the business cycle with decreased economic activity (p. 384)

question

debit card

answer

n. a card one can use like an ATM card to withdraw cash or like a check to make purchases (p. 308)

question

debt restructuring

answer

n. a method countries with outstanding debt obligations use to alter the terms of debt agreements to achieve some advantage (p. 559)

question

deductible

answer

n. the amount the insured pays before the insurance company pays (p. 596)

question

default

answer

n. the condition that occurs when a nation cannot pay interest or principle on a loan (p. 559)

question

deﬁcit spending

answer

n. the government practice of spending more than it collects in revenue for a speciﬁc ﬁscal year (p. 462)

question

deﬂation

answer

n. a decrease in the general price level (p. 398)

question

demand

answer

n. the desire to have some good or service and the ability to pay for it (p. 98)

question

demand curve

answer

n. a graph that shows a demand schedule, or how much of a good or service an individual is willing and able to purchase at each price (p. 102)

question

demand deposits

answer

n. checking accounts, so called because checking accounts can be converted into currency "on demand" (p. 293)

question

demand-pull inﬂation

answer

n. a condition that occurs when total demand rises faster than the production of goods and services (p. 399)

question

demand schedule

answer

n. a table that shows how much of a good or service an individual is willing and able to purchase at each price (p. 100)

question

demand-side ﬁscal policy

answer

n. a plan to stimulate aggregate demand (p. 454)

question

deposit multiplier formula

answer

n. a mathematical formula that tells how much the money supply will increase after an initial cash deposit in a bank (p. 485)

question

depreciate

answer

v. to decrease in value (p. 590)

question

depression

answer

n. an extended period of high unemployment and reduced business activity (p. 359)

question

deregulation

answer

n. the reduction or elimination of government oversight and control of business (p. 218)

question

derived demand

answer

n. a demand for a product or resource based on its contribution to the ﬁ nal product (p. 259)

question

developed nations

answer

n. nations that have a market economy, a relatively high standard of living, a high GDP, industrialization, widespread private ownership of private property, and stable and effective governments (p. 544)

question

diminishing returns

answer

n. a situation in which new workers cause marginal product to grow but at a decreasing rate (p. 139)

question

discount rate

answer

n. the interest rate that the Federal Reserve charges when it lends money to other banks (p. 491)

question

discretionary ﬁscal policy

answer

n. actions taken by the federal government by choice to correct economic instability (p. 446)

question

discretionary spending

answer

n. spending that the government must authorize each year (p. 428)

question

disequilibrium

answer

n. a situation in which quantity supplied and quantity demanded are not in balance (p. 169)

question

disposable personal income (DPI)

answer

n. personal income minus taxes (p. 355)

question

diversiﬁcation

answer

n. the practice of distributing investments among different ﬁnancial assets to maximize return and limit risk (p. 327)

question

dividend

answer

n. the part of a corporation's proﬁt that the company pays the stockholders (p. 238)

question

dumping

answer

n. the sale of a product in another country at a price lower than that charged in the home market (p. 521)

question

Dumpster diving

answer

n. technique used by identity thieves to gather personal information in the garbage (p. 588)

question

economic growth

answer

n. an increase in a nation's real gross domestic product (p. 358)

question

economic interdependence

answer

n. a situation in which producers in one nation depend on others to provide goods and services they do not produce (p. 510)

question

economic model

answer

n. a simpliﬁed representation of economic activities, systems, or problems (p. 18)

question

economics

answer

n. the study of how individuals and societies satisfy their unlimited wants with limited resources (p. 4)

question

economic system

answer

n. the way in which a society uses its scarce resources to satisfy its people's unlimited wants (p. 38)

question

economies of scale

answer

n. a situation in which the average cost of production falls as the producer grows larger (p. 201)

question

economize

answer

v. to make decisions according what is believed to be the best combination of costs and beneﬁts (p. 12)

question

efﬁciency

answer

n. the condition in which economic resources are used to produce the maximum amount of goods and services (p. 20)

question

elastic

answer

adj. referring to a situation in which a change in price, either up or down, leads to a relatively larger change in the quantity demanded or the quantity supplied (pp. 117, 154)

question

elasticity of demand

answer

n. a measure of how responsive consumers are to price changes in the marketplace (p. 117)

question

elasticity of supply

answer

n. a measure of how responsive producers are to price changes in the marketplace (p. 154)

question

embargo

answer

n. a law that cuts off most or all trade with a speciﬁc country (p. 521)

question

entitlement

answer

n. a social welfare program with speciﬁc eligibility requirements (p. 428)

question

entrepreneurship

answer

n. the combination of vision, skill, ingenuity, and willingness to take risks that is needed to create and run new businesses (p. 9)

question

equilibrium price

answer

n. the price at which the quantity demanded equals the quantity supplied (p. 164)

question

equilibrium wage

answer

n. the wage at which the quantity of workers demanded equals the quantity of workers supplied; the market price for labor (p. 258)

question

estate tax

answer

n. a tax on the assets of a person who has died (p. 425)

question

European Union (EU)

answer

n. the economic and political union of European nations that was established in 1993 (p. 532)

question

euro

answer

n. the single currency of the European Union (p. 533)

question

excise tax

answer

n. a tax on the production or sale of a speciﬁc good or service (pp. 149, 425)

question

expansion

answer

n. an increase in economic activity (p. 358)

question

expansionary ﬁscale policy

answer

n. a plan to increase aggregate demand and stimulate a weak economy (p. 446)

question

expansionary monetary policy

answer

n. a plan to increase the amount of money in circulation; also called easy-money policy (p. 492)

question

exports

answer

n. goods or services produced in one country and sold to other countries (p. 516)

question

externality

answer

n. a side effect of a transaction that affects someone other than the producer or buyer (p. 87)

question

factor market

answer

n. the market for the factors of production—land, labor, capital, and entrepreneurship (p. 52)

question

factors of production

answer

n. the economic resources needed to produce goods and services (p. 8)

question

federal budget

answer

n. a plan for spending federal tax money (p. 431)

question

federal funds rate (FFR)

answer

n. the interest at which a depository institution lends available funds to another depository institution overnight (p. 490)

question

Federal Insurance Contributions Act (FICA)

answer

n. a payroll tax that provides coverage for the elderly, the unemployed due to disability, and surviving family members of wage earners who have died (p. 423)

question

Federal Open Market Committee (FOMC)

answer

n. the Federal Reserve System board that supervises the sale and purchase of federal government securities (p. 477)

question

Federal Reserve System

answer

n. the central bank of the United States; commonly called the Fed (p. 474)

question

ﬁat money

answer

n. money that has no tangible backing but is declared by the government and accepted by citizens to have worth (p. 291)

question

ﬁling status

answer

n. for ﬁling taxes, based on marital status or support of dependents (p. 604)

question

ﬁnancial asset

answer

n. a claim on a borrower's property (p. 319)

question

ﬁnancial intermediary

answer

n. an institution that collects funds from savers and invests these funds in ﬁnancial assets (p. 319)

question

ﬁnancial market

answer

n. a situation in which buyers and sellers exchange ﬁnancial assets (p. 319)

question

ﬁnancial system

answer

n. all the institutions that help transfer funds between savers and investors (p. 318)

question

ﬁscal

answer

adj. of or relating to government revenue and spending (p. 446)

question

ﬁscale policy

answer

n. the federal government's use of taxing and spending to affect the economy (p. 446)

question

ﬁscal year

answer

n. a 12-month period for which an organization plans its expenditures (p. 431)

question

ﬁxed costs

answer

n. expenses that business owners incur no matter how much they produce (p. 140)

question

ﬁxed rate of exchange

answer

n. a system in which the currency of one nation is ﬁ xed or constant in relation to other currencies (p. 526)

question

ﬂexible exchange rate

answer

n. a system in which the exchange rate for currency changes as supply and demand for the currency changes; also called the ﬂoating rate (p. 527)

question

focus group

answer

n. a moderated discussion with small groups of consumers (p. 208)

question

foreign exchange market

answer

n. a market in which currencies of different countries are bought and sold (p. 526)

question

foreign exchange rate

answer

n. the price of one currency in the currencies of other nations (p. 526)

question

franchise

answer

n. a business made up of semi-independent businesses that all offer the same products or services (p. 248)

question

franchisee

answer

n. a semi-independent business that pays a fee for the right to sell the parent company's products or services in a particular area (p. 248)

question

free contract

answer

n. a situation in which people decide for themselves which legal agreements to enter into (p. 73)

question

free enterprise system

answer

n. another name for capitalism, an economic system based on private ownership of productive resources (p. 70)

question

free rider

answer

n. a person who does not pay for a good or service but who beneﬁts from it when it is provided (p. 85)

question

free-trade zone

answer

n. a speciﬁ c region in which trade between nations takes place without protective tariffs (p. 532)

question

frictional unemployment

answer

n. the temporary unemployment of workers moving from one job to another (p. 384)

question

full employment

answer

n. a level of unemployment in which none of the unemployment is caused by decreased economic activity; generally marked by an unemployment rate of 4 to 6 percent (p. 383)

question

future

answer

n. a contract to buy or sell a stock on a speciﬁed future date at a preset price (p. 333)

question

general partnership

answer

n. a partnership in which each partner shares the management of the business and is liable for all business debts and losses (p. 233)

question

geographic monopoly

answer

n. a monopoly that exists because there are no other producers or sellers within a certain region (p. 201)

question

gift tax

answer

n. a tax on money or property given by one living person to another (p. 425)

question

glass ceiling

answer

n. an unseen, artiﬁcial barrier to advancement that women and minorities sometimes face (p. 262)

question

global economy

answer

n. all the economic interactions that cross international boundaries (p. 61)

question

gold standard

answer

n. a system in which the basic monetary unit is equal to a set amount of gold (p. 299)

question

goods

answer

n. physical objects, such as food, clothing, and furniture, that can be purchased (p. 5)

question

government monopoly

answer

n. a monopoly that exists because the government either owns and runs the business or authorizes only one producer (p. 201)

question

grant-in-aid

answer

n. a transfer payment from the federal government to state or local governments (p. 432)

question

gross domestic product (GDP)

answer

n. the market value of all ﬁnal goods and services produced within a nation in a given time period (p. 350)

question

gross national product (GNP)

answer

n. the market value of all ﬁnal goods and services produced by a country in a given time period (p. 355)

question

hacking

answer

n. technique used by identity thieves to gather personal information using computers and related technology (p. 588)

question

horizontal merger

answer

n. the joining of two or more companies that offer the same or similar products or services (p. 243)

question

human capital

answer

n. the knowledge and skills that enable workers to be productive (p. 261)

question

human development index (HDI)

answer

n. a combination of a nation's real GDP per capita, life expectancy, adult literacy rate, and student enrollment ﬁ gures that indicates what life is like in a speciﬁc country (p. 547)

question

hyperinﬂation

answer

n. a rapid, uncontrolled rate of inﬂation in excess of 50 percent (p. 398)

question

identity theft

answer

n. the use of someone else's personal information for criminal purposes (p. 588)

question

imperfect competition

answer

n. a market structure that lacks one or more of the conditions needed for perfect competition (p. 195)

question

imports

answer

n. goods or services produced in one country and purchased by another (p. 516)

question

incentive

answer

n. a beneﬁt offered to encourage people to act in a certain way (pp. 12, 176)

question

incidence of a tax

answer

n. the nal burden of a tax (p. 415)

question

income distribution

answer

n. the way income is divided among people in a nation (p. 390)

question

income effect

answer

n. a change in the amount of a good or service a consumer will buy because his or her income (and therefore purchasing power) changes (p. 107)

question

income inequality

answer

n. the unequal distribution of income (p. 390)

question

increasing returns

answer

n. a situation in which hiring new workers cause marginal product to increase (p. 139)

question

independent contractor

answer

n. someone who sells his or her services on a contract basis (p. 270)

question

individual income tax

answer

n. a tax based on an individual's income from all sources (p. 412)

question

industrial union

answer

n. an organization of workers with many different skills who work in the same industry (p. 274)

question

inelastic

answer

n. a situation in which quantity demanded or quantity supplied changes little as price changes (pp. 117, 155)

question

infant industries

answer

n. new industries that are often unable to compete against larger, more established competitors (p. 523)

question

infant mortality rate

answer

n. the number of children who die within the ﬁrst year of life per 1,000 births (p. 547)

question

inferior goods

answer

n. goods that consumers demand less of when their incomes rise (p. 110)

question

inﬂation

answer

n. a sustained rise in the general price level, or a sustained fall in the purchasing power of money (p. 396)

question

inﬂation rate

answer

n. the rate of change in prices over a set period of time (p. 397)

question

infrastructure

answer

n. the basic set of support systems—such as power, communications, transportation, water, sanitation, and education systems—needed to keep an economy and society going (pp. 86, 545)

question

input costs

answer

n. the price of the resources needed to produce a good or service (p. 148)

question

insourcing

answer

n. the practice of foreign companies establishing operations in, and therefore bringing jobs to, the United States (p. 269)

question

interest

answer

n. a fee a bank pays for the use of money (p. 578)

question

International Monetary Fund (IMF)

answer

n. the international organization established to promote international monetary cooperation, foster economic growth, and provide temporary ﬁnancial assistance to countries to help ease balance-of payments adjustment (p. 559)

question

investment

answer

n. the use of income today in a way that allows for a future beneﬁ t (p. 318)

question

investment objective

answer

n. a ﬁnancial goal that is used to determine if an investment is appropriate (p. 324)

question

junk bond

answer

n. a high-risk, high-yield corporate bond (p. 339)

question

Keynesian economics

answer

n. the idea, ﬁ rst advanced by John Maynard Keynes, that the government needs to stimulate aggregate demand in times of recession (p. 454)

question

labor

answer

n. all the human time, effort, and talent used to produce goods and services (p. 8)

question

labor input

answer

n. the size of the labor force multiplied by the length of the workweek (p. 371)

question

labor productivity

answer

n. the amount of goods and services a person can produce in a given time (p. 149)

question

labor union

answer

n. an organization of workers that seeks to improve wages, working conditions, fringe beneﬁts, job security, and other work-related matters for its members (p. 274)

question

Laffer Curve

answer

n. a graph that illustrates how tax cuts affect tax revenues and economic growth (p. 459)

question

lagging indicators

answer

n. measures of economic performance that usually change after real gross domestic product changes (p. 364)

question

laissez faire

answer

n. the principle that the government should not interfere in the economy (p. 49)

question

land

answer

n. all the natural resources on or under the ground that are used to produce goods and services (p. 8)

question

landlord

answer

n. the owner of rental property (p. 609)

question

law of comparative advantage

answer

n. the law stating that countries gain when they produce items that they are most efﬁcient at producing and that are at the lowest opportunity cost (p. 514)

question

law of demand

answer

n. states that when the price of a good or service goes down, quantity demanded increases, and when the prices go up, quantity demanded falls (p. 99)

question

law of diminishing marginal utility

answer

n. states that the marginal beneﬁt from using each additional unit of a good or service during a given time period tends to decline as each is used (p. 106)

question

law of increasing opportunity costs

answer

n. states that as production switches from one product to another, increasingly more resources are needed to increase the production of the second product, which causes opportunity costs to rise (p. 21)

question

law of supply

answer

n. states that producers are willing to sell more of a good or service at a higher price than they are at a lower price (p. 131)

question

leading indicators

answer

n. measures of economic performance that usually change before real gross domestic product changes (p. 364)

question

lease

answer

n. a contract for renting an apartment, vehicle, or other item for a speciﬁc period of time (p. 609)

question

legal equality

answer

n. a situation in which everyone has the same economic rights under the law (p. 73)

question

less developed countries (LDCs)

answer

n. countries with lower GDPs, less well-developed industry, and lower standards of living; sometimes called emerging economies (p. 545)

question

life expectancy

answer

n. the average number of years a person could expect to live if current mortality trends were to continue for the rest of that person's life (p. 547)

question

limited liability

answer

n. a situation in which a business owner's liability for business debts and losses is limited (p. 240)

question

limited liability partnership (LLP)

answer

n. a partnership in which all partners are not responsible for the debts and other liabilities of the other partners (p. 233)

question

limited life

answer

n. a situation in which a business ceases to exist if the owner dies, retires, or leaves (p. 228)

question

limited partnership

answer

n. a partnership in which at least one partner is not involved in running the business and is liable only for the funds he or she invested (p. 233)

question

literacy rate

answer

n. the percentage of people older than 15 who can read and write (p. 547)

question

loan

answer

n. borrowed money that is usually repaid with interest (p. 582)

question

Lorenz curve

answer

n. a curve that shows the degree of income inequality in a nation (p. 391)

question

macroeconomic equilibrium

answer

n. the point where aggregate demand equals aggregate supply (p. 361)

question

macroeconomics

answer

n. the study of the behavior of the economy as a whole; concerned with large-scale economic activity (p. 27)

question

mandatory spending

answer

n. government spending that is required by current law (p. 428)

question

marginal beneﬁt

answer

n. the beneﬁt or satisfaction gained from using one more unit of a good or service (p. 16)

question

marginal cost

answer

n. the additional cost of producing or using one more unit of a good or service (pp. 16, 140)

question

marginal product

answer

n. the change in total output that results from adding one more worker (p. 138)

question

marginal revenue

answer

n. the money made from each additional unit sold (p. 142)

question

market

answer

n. any place or situation in which people buy and sell goods and services (p. 48)

question

market allocation

answer

n. an agreement among or between competing businesses to divide up a market (p. 216)

question

market demand curve

answer

n. a graph that shows data from a market demand schedule, or how much of a good or service all consumers are willing and able to purchase at each price (p. 102)

question

market demand schedule

answer

n. a table that shows how much of a good or service all consumers are willing and able to purchase at each price in a market (p. 100)

question

market economy

answer

n. an economic system based on individual choice and voluntary exchange (p. 39)

question

market equilibrium

answer

n. a situation in which the quantity supplied and the quantity demanded at a particular price are equal (p. 164)

question

market failure

answer

n. a situation in which people who are not part of a marketplace interaction beneﬁt from it or pay part of its costs (p. 84)

question

market research

answer

n. the gathering and evaluation of information about consumer preferences for goods and services (p. 208)

question

market share

answer

n. a company's percent of total sales in a particular market (p. 209)

question

market structure

answer

n. an economic model of competition among businesses in the same industry (p. 192)

question

market supply curve

answer

n. a graph that shows data from a market supply schedule (p. 134)

question

market supply schedule

answer

n. how much of a good or service all producers in a market are willing and able to offer for sale at each price (p. 132)

question

maturity

answer

n. the date when a bond is due to be repaid (p. 338)

question

Medicaid

answer

n. a government-run medical insurance program for low-income people (p. 429)

question

Medicare

answer

n. a government-run, national health insurance program mainly for citizens over age 65 (p. 423)

question

medium of exchange

answer

n. a means through which goods and services can be exchanged (p. 288)

question

merger

answer

n. the combining of two or more companies to form a single company (p. 214)

question

microeconomics

answer

n. the study of the behavior of individual players—such as individuals, families, and businesses—in an economy (p. 27)

question

minimum balance requirement

answer

n. the amount of money needed in an account to avoid fees (p. 576)

question

minimum wage

answer

n. the lowest amount, established by law, that an employer may pay a worker for one hour of work (pp. 182, 262)

question

mixed economy

answer

n. an economic system that has elements of traditional, command, and market economies; the most common economic system (p. 58)

question

modiﬁed free enterprise economy

answer

n. a mixed economic system that includes some government protections, provisions, and regulations to adjust the free enterprise system (p. 80)

question

monetarism

answer

n. an economic theory that suggests that rapid changes in the money supply are the main cause of economic instability (p. 496)

question

monetary

answer

adj. of or relating to money (p. 474)

question

monetary policy

answer

n. the Federal Reserve's actions that change the money supply to inﬂ uence the economy (p. 490)

question

money

answer

n. anything that people will accept as payment for goods and services (p. 288)

question

money market

answer

n. a market in which short-term ﬁnancial assets are bought and sold (p. 322)

question

monopolistic competition

answer

n. a market structure in which many sellers offer similar, but not standardized, products to consumers (p. 206)

question

monopoly

answer

n. a market structure in which only one seller sells a product for which there are no close substitutes (p. 198)

question

monopsony

answer

n. market structure in which there are many sellers but only one large buyer (p. 212)

question

multifactor productivity

answer

n. the ratio between an industry's economic output and its labor and capital inputs (p. 372)

question

multinational corporation

answer

n. a corporation with branches in several countries (p. 243)

question

mutual fund

answer

n. an investment company that gathers money from individual investors and uses the money to purchase a range of ﬁnancial assets (p. 320)

question

NAFTA

answer

n. the North America Free Trade Agreement, which ensures free trade throughout the continent and constitutes the largest free-trade zone in the world (p. 533)

question

national bank

answer

n. a bank chartered by the national government (p. 299)

question

national debt

answer

n. the total amount of money that the federal government owes (p. 462)

question

national income (NI)

answer

n. the total income earned in a nation from the production of goods and services in a given time period (p. 355)

question

national income accounting

answer

n. a way of analyzing a country's economy using statistical measures of its income, spending, and output (p. 350)

question

nationalize

answer

v. to change from private ownership to government or public ownership (p. 61)

question

natural monopoly

answer

n. a market situation in which the costs of production are lowest when only one ﬁrm supplies a product or service (p. 201)

question

near money

answer

n. savings accounts and other similar time deposits that can be converted into cash relatively easily (p. 293)

question

needs

answer

n. things such as food, clothing, and shelter that are necessary for survival (p. 4)

question

negative externality

answer

n. an externality that costs people who were not involved in the original economic activity (p. 87)

question

net national product (NNP)

answer

n. the gross national product minus depreciation of capital stock—in other words, the value of ﬁnal goods and services less the value of capital goods that became worn out during the year (p. 355)

question

nominal GDP

answer

n. the gross domestic product stated in terms of the current value of goods and services (p. 352)

question

nonmarket activities

answer

n. services that have potential economic value but are performed without charge (p. 354)

question

nonprice competition

answer

n. the use of factors other than price—such as style, service, advertising, or giveaways—to try to convince customers to buy from one producer rather than another (p. 207)

question

nonproﬁt organization

answer

n. an institution that acts like a business but exists to beneﬁt society rather than to make a proﬁt (p. 250)

question

normal goods

answer

n. goods that consumers demand more of when their incomes rise (p. 110)

question

normative economics

answer

n. a way of describing and explaining what economic behavior ought to be, not what it actually is (p. 29)

question

oligopoly

answer

n. a market structure in which only a few sellers offer a similar product (p. 209)

question

OPEC

answer

n. the Organization of Petroleum Exporting Countries, a regional trade group (p. 535)

question

open market operations

answer

n. the Federal Reserve's sale and purchase of federal government securities; the monetary policy tool most used by the Federal Reserve to adjust the money supply (p. 490)

question

open opportunity

answer

n. the ability of everyone to enter and compete in the market of his or her own free choice (p. 73)

question

operating budget

answer

n. a plan for day-to-day expenses (p. 436)

question

opportunity cost

answer

n. the value of something that is given up by choosing one alternative over another (p. 14)

question

option

answer

n. a contract giving an investor the right to buy or sell stock at a future date at a preset price (p. 333)

question

outsourcing

answer

n. the practice of contracting with an outside company, often in a foreign country, to provide goods or services (p. 269)

question

overdraft

answer

n. a check or other withdrawal that exceeds the existing account balance (p. 576)

question

par value

answer

n. the amount that a bond issuer promises to pay the buyer at maturity (p. 338)

question

partnership

answer

n. a business co-owned by two or more people, or "partners," who agree on how responsibilities, proﬁ ts, and losses should be divided (p. 232)

question

patent

answer

n. a legal registration of an invention or a process that gives the inventor the exclusive property rights to that invention or process for a certain number of years (p. 202)

question

peak

answer

n. the end of an expansion in the economy (p. 359)

question

per capita gross domestic product

answer

n. a nation's GDP divided by its total population (p. 546)

question

perestroika

answer

n. Russian leader Mikhail Gorbachev's plan to gradually incorporate markets into the Soviet Union's command economy (p. 564)

question

perfect competition

answer

n. the ideal model of a market economy; the market structure in which none of the many well-informed and independent sellers or buyers has control over the price of a standardized good or service (p. 192)

question

personal income (PI)

answer

n. the annual income received by a country's people from all sources (p. 355)

question

phishing

answer

n. technique used by identity thieves to gather personal information through deceptive telephone calls (p. 588)

question

answer

n. personal identiﬁcation number (p. 577)

question

positive economics

answer

n. a way of describing and explaining economics as it is (p. 29)

question

positive externality

answer

n. an externality that beneﬁts people who were not involved in the original economic activity (p. 87)

question

poverty

answer

n. the situation in which a person's income and resources do not allow him or her to achieve a minimum standard of living (p. 388)

question

poverty rate

answer

n. the percentage of people living in households that have incomes below the poverty threshold (p. 389)

question

poverty threshold

answer

n. the ofﬁ cial minimum income needed to pay for the basic expenses of living (p. 388)

question

predatory pricing

answer

n. the setting of prices below cost for a time to drive smaller competitors out of a market (p. 216)

question

preferred stock

answer

n. a share of ownership in a corporation giving the holder a share of proﬁts but, in general, no voting rights (p. 331)

question

premium

answer

n. an amount paid for insurance (p. 596)

question

price ceiling

answer

n. an established maximum price that sellers may charge for a product (p. 180)

question

price ﬁxing

answer

n. conspiring among or between businesses to set the prices of competing products (p. 216)

question

price ﬂoor

answer

n. an established minimum price that buyers must pay for a product (p. 182)

question

price maker

answer

n. a business that does not have to consider competitors when setting its prices (p. 198)

question

price taker

answer

n. a ﬁrm that must accept the market price set by the interaction of supply and demand (p. 193)

question

primary market

answer

n. a market for buying newly created ﬁnancial assets directly from the issuing entity (p. 322)

question

prime rate

answer

n. the interest rate that banks charge their best customers (p. 491)

question

private company

answer

n. a corporation that controls who can buy or sell its stock (p. 238)

question

private property rights

answer

n. the rights of individuals and groups to own resources and businesses (p. 48)

question

private sector

answer

n. the part of the economy that is owned by individuals or businesses (p. 432)

question

privatization

answer

n. the process of transferring state-owned property and businesses to individuals (p. 563)

question

privatize

answer

v. to change from government or public ownership to private ownership (p. 61)

question

producer

answer

n. a person who makes goods or provides services (p. 5)

question

producer price index (PPI)

answer

n. a measure of changes in wholesale prices (p. 397)

question

product differentiation

answer

n. the attempt to distinguish a product from similar products (p. 206)

question

product market

answer

n. the market in which goods and services are bought and sold (p. 52)

question

production possibilities curve (PPC)

answer

n. a graph used to illustrate the impact of scarcity on an economy (p. 18)

question

productivity

answer

n. the amount of output produced from a set amount of inputs (p. 372)

question

proﬁt

answer

n. the ﬁnancial gain a seller makes from a business transaction (p. 49); the money left over after the costs of producing a product are subtracted from the income gained by selling that product (p. 78)

question

proﬁt-maximizing output

answer

n. the point in production at which a business has reached its highest level of proﬁt (p. 143)

question

proﬁt motive

answer

n. the incentive that encourages people and organizations to improve their material well-being by seeking to gain from economic activities (p. 73)

question

progressive tax

answer

n. a tax that places a higher percentage rate of taxation on high-income earners than on low-income earners (p. 412)

question

property tax

answer

n. a tax based on the value of an individual's or a business's assets (p. 412)

question

proportional tax

answer

n. a tax that takes the same percentage of income from all taxpayers regardless of income level (p. 412)

question

protectionism

answer

n. the use of trade barriers between nations to protect domestic industries (p. 523)

question

protective tariff

answer

n. a tax on imported goods to protect domestic goods (p. 521)

question

public company

answer

n. a corporation that issues stock that can be freely traded (p. 238)

question

public disclosure

answer

n. a policy requiring businesses to reveal product information to consumers (p. 217)

question

public goods

answer

n. goods and services provided by the government and consumed by the public as a group (p. 84)

question

public transfer payment

answer

n. a transfer payment in which the government transfers income from taxpayers to recipients who do not provide anything in return (p. 89)

question

quota

answer

n. a limit on the amount of a product that can be imported (p. 520)

question

rational expectations theory

answer

n. the theory that states that individuals and business ﬁrms expect changes in ﬁscal policy will have particular effects and take action to protect their interests against those effects (p. 452)

question

rationing

answer

n. a system in which the government allocates goods and services using factors other than price (p. 183)

question

real GDP

answer

n. the gross domestic product corrected for changes in prices from year to year (p. 352)

question

real GDP per capita

answer

n. the real gross domestic product divided by total population (p. 369)

question

recession

answer

n. a prolonged economic contraction lasting two or more quarters (six months or more) (p. 359)

question

regressive tax

answer

n. a tax that takes a larger percentage of income from low-income earners than from high-income earners (p. 412)

question

regulation

answer

n. a set of rules or laws designed to control business behavior (pp. 150, 214)

question

representative money

answer

n. paper money that is backed by something tangible (p. 291)

question

required reserve ratio (RRR)

answer

n. the fraction of a bank's deposits, determined by the Federal Reserve, that it must keep in reserve so that it can loan out money (p. 484)

question

return

answer

n. the proﬁt or loss made on an investment (p. 327)

question

revenue

answer

n. government income from taxes and nontax sources (p. 410)

question

revenue tariff

answer

n. a tax on imports speciﬁ cally to raise money; are rarely used today (p. 521)

question

right-to-work laws

answer

n. legislation that makes it illegal to require workers to join unions (p. 279)

question

risk

answer

n. the possibility for loss on an investment (p. 327)

question

safety net

answer

n. government programs designed to protect people from economic hardships (p. 89)

question

sales tax

answer

n. a tax based on the value of goods or services at the time of sale (p. 412)

question

savings

answer

n. income not used for consumption (p. 318)

question

scarcity

answer

n. a situation that exists when there are not enough resources to meet human wants (p. 4)

question

seasonal unemployment

answer

n. unemployment linked to seasonal work (p. 384)

question

secondary market

answer

n. a market in which ﬁ nancial assets are resold (p. 322)

question

service

answer

n. work that one person does for another for payment (p. 5)

question

share

answer

n. part of the stock of a corporation (p. 238); see stock

question

shock therapy

answer

n. an economic program involving the abrupt shift from a command economy to a free-market economy (p. 563)

question

shortage

answer

n. a situation in which demand is greater than supply, usually the result of prices being set too low (p. 167)

question

shoulder surﬁng

answer

n. technique used by identity thieves to gather personal information as you disclose private information in public (p. 588)

question

socialism

answer

n. an economic system in which the government owns some or all of the factors of production (p. 43)

question

Social Security

answer

n. a federal program to aid older citizens, orphaned children, and the disabled (p. 423)

question

sole proprietorship

answer

n. a business owned and controlled by one person (p. 226)

question

spamming

answer

n. technique used by identity thieves to gather personal information through deceptive e-mails (p. 588)

question

special economic zone (SEZ)

answer

n. a geographic region that has economic laws that are different from a country's usual economic laws, with the goal of increasing foreign investment (p. 567)

question

specialization

answer

n. a situation that occurs when individuals or businesses concentrate their efforts in the areas in which they have an advantage for increased productivity and proﬁt (pp. 50, 138, 510)

question

spending multiplier effect

answer

n. a situation in which a small change in spending eventually results in a much larger change in GDP (p. 455)

question

stabilization programs

answer

n. programs that require troubled nations to carry out reforms such as reducing foreign trade deﬁcits and external debt, eliminating price controls, closing inefﬁcient public enterprises, and slashing budget deﬁcits (p. 559)

question

stagﬂation

answer

n. a period during which prices rise at the same time that there is a slowdown in business activity (p. 359)

question

standardized product

answer

n. a product that consumers consider identical in all essential features to other products in the same market (p. 192)

question

standard of value

answer

n. the yardstick of economic worth in the exchange process (p. 289)

question

start-up costs

answer

n. the expenses that a new business must pay to enter a market and begin selling to consumers (p. 209)

question

state bank

answer

n. a bank chartered by a state government (p. 296)

question

statistics

answer

n. numerical data (p. 24)

question

stock

answer

n. shares of ownership in a corporation (p. 238)

question

stockbroker

answer

n. an agent who buys and sells securities for customers (p. 332)

question

stock exchange

answer

n. a secondary market where securities are bought and sold (p. 330)

question

stock index

answer

n. an instrument used to measure and report the change in prices of a set of stocks (p. 334)

question

stored-value card

answer

n. a card that represents money that the card holder has on deposit with the card issuer (p. 308)

question

store of value

answer

n. something that holds its value over time (p. 289)

question

strike

answer

n. a work stoppage used to gain negotiating power while attempting to convince an employer to improve wages, working conditions, or other work-related matters (p. 274)

question

structural unemployment

answer

n. unemployment that exists when the available jobs do not match the skills of available workers (p. 384)

question

subsidy

answer

n. a government payment that helps cover the cost of an economic activity that can beneﬁt the public as a whole (p. 88)

question

substitutes

answer

n. products that can be used in place of other products to satisfy consumer wants (p. 112)

question

substitution effect

answer

n. the pattern of behavior that occurs when consumers react to a change in price of a product by buying a substitute product that offers a better relative value (p. 107)

question

supply

answer

n. the willingness and ability of a producer to produce and sell a product (p. 130)

question

supply curve

answer

n. a graph that shows data from a supply schedule (p. 134)

question

supply schedule

answer

n. a table that shows how much of a good or service an individual producer is willing and able to offer for sale at each price (p. 132)

question

supply-side ﬁscal policy

answer

n. a plan designed to provide incentives to producers to increase aggregate supply (p. 458)

question

surplus

answer

n. a situation in which supply is greater than demand, usually the result of prices being set too high (p. 167)

question

tariff

answer

n. a fee charged for goods brought into a country from another country (p. 521)

question

tax

answer

n. a mandatory payment to a government (p. 410)

question

taxable income

answer

n. the portion of income subject to taxation after all deductions and exemptions (pp. 421, 604)

question

tax assessor

answer

n. a government ofﬁ cial who determines the value of property to be taxed (p. 437)

question

tax base

answer

n. a form of wealth—such as income, property, goods, or services—that is subject to taxes (p. 412)

question

tax incentive

answer

n. the use of taxes to encourage or discourage certain economic behaviors (p. 417)

question

tax return

answer

n. a form used to report income and taxes owed to the government (p. 421)

question

technological monopoly

answer

n. a monopoly that exists because a ﬁrm controls a manufacturing method, invention, or type of technology (p. 201)

question

technology

answer

n. the application of scientiﬁc methods and innovations to production (p. 149)

question

telecommuting

answer

n. the practice of doing ofﬁce work in a location other than the ofﬁ ce (p. 270)

question

thrift institution

answer

n. a ﬁ nancial institution that serves savers (p. 478)

question

total cost

answer

n. the sum of ﬁxed and variable costs (p. 140)

question

total revenue

answer

n. the income a business receives from selling its products (pp. 122, 142)

question

total revenue test

answer

n. a method of measuring elasticity by comparing the total revenue a business would receive when offering its product at various prices (p. 122)

question

trade barrier

answer

n. any law passed to limit free trade between nations (p. 520)

question

trade deﬁcit

answer

n. an unfavorable balance of trade that occurs when a nation imports more than it exports (p. 529)

question

trade-off

answer

n. the alternative someone gives up when making an economic choice (p. 14)

question

trade surplus

answer

n. a favorable balance of trade that occurs when a nation exports more than it imports (p. 529)

question

trade war

answer

n. a succession of trade barriers between nations (p. 522)

question

trade-weighted value of the dollar

answer

n. a measure of the international value of the dollar that determines if the dollar is strong or weak as measured against another currency (p. 528)

question

traditional economy

answer

n. an economic system in which people make economic decisions based on customs and beliefs that have been handed down from one generation to the next (p. 38)

question

transfer payment

answer

n. money distributed to individuals who do not provide goods or services in return (pp. 89, 432)

question

transitional economy

answer

n. a country that has moved (or is moving) from a command economy to a market economy (p. 545)

question

Treasury bill (T bill)

answer

n. a short-term bond that matures in less than one year (p. 464)

question

Treasury bond

answer

n. a long-term bond that matures in 30 years (p. 464)

question

Treasury note

answer

n. an intermediate-term bond that matures in between two and ten years (p. 464)

question

trough

answer

n. the end of a contraction in the economy (p. 359)

question

trust

answer

n. a group of ﬁ rms combined in order to reduce competition in an industry (p. 214)

question

trust fund

answer

n. a fund held for a speciﬁ c purpose to be expended at a future date (p. 465)

question

underemployed

answer

n. people employed part-time who want to work full-time, or those who work at a job below their skill level (p. 383)

question

underground economy

answer

n. market activities that go unreported because they are illegal or because those involved want to avoid taxation (p. 354)

question

underutilization

answer

n. the condition in which economic resources are not being used to their full potential, resulting in fewer goods and services (p. 20)

question

unemployment rate

answer

n. the percentage of the labor force that is jobless and actively looking for work (p. 382)

question

union shop

answer

n. a business in which workers are required to join a union within a set time period after being hired (p. 279)

question

unit elastic

answer

adj. relating to a situation in which the percentage change in price and quantity demanded are the same (p. 118)

question

unlimited liability

answer

n. a situation in which a business owner is responsible for all the losses and debts of a business (p. 228)

question

unlimited life

answer

n. a situation in which a corporation continues to exist even after a change in ownership (p. 240)

question

user fee

answer

n. money charged for the use of a good or service (p. 425)

question

utility

answer

n. the beneﬁ t or satisfaction gained from using a good or service (p. 12)

question

variable costs

answer

n. business costs that vary with the level of production output (p. 140)

question

vertical merger

answer

n. the combining of two or more businesses involved in different steps of producing or marketing a product or service (p. 243)

question

voluntary exchange

answer

n. a trade in which the parties involved anticipate that the beneﬁts will outweigh the cost (p. 49)

question

voluntary export restraint (VER)

answer

n. a self-imposed limit on exports to certain countries to avoid quotas or tariffs (p. 521)

question

wage and price controls

answer

n. government limits on increases in wages and prices (p. 501)

question

wage-price spiral

answer

n. a cycle that begins with increased wages, which lead to higher production costs, which in turn result in higher prices, which result in demands for even higher wages (p. 400)

question

wage rate

answer

n. the established rate of pay for a speciﬁc job or work performed (p. 261)

question

wages

answer

n. the payments workers receive in return for work (p. 258)

question

wants

answer

n. desires that can be satisﬁ ed by consuming a good or service (p. 4)

question

welfare

answer

n. government economic and social programs that provide assistance to the needy (p. 392)

question

withholding

answer

n. the money taken from a worker's pay before the worker receives the pay (p. 421)

question

workfare

answer

n. a program that requires welfare recipients to do some kind of work in return for their beneﬁts (p. 393)

question

World Bank

answer

n. a ﬁnancial institution that provides loans, policy advice, and technical assistance to low and middle income countries to reduce poverty (p. 559)

question

World Trade Organization (WTO)

answer

n. an organization that negotiates and administers trade agreements, resolves trade disputes, monitors trading policies, and supports developing countries (p. 535)

question

yield

answer

n. the annual rate of return on a bond (p. 338)

Holt McDougal: Economics Concepts and Choices – Flashcards

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards