Holt McDougal: Economics Concepts and Choices – Flashcards

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absolute advantage
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n. the ability of one trading nation to make a product more efficiently than another trading nation (p. 513)
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aggregate demand
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n. the sum of all the demand in the economy (p. 360)
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aggregate supply
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n. the sum of all the supply in the economy (p. 360)
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antitrust legislation
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n. laws that deļ¬ne monopolies and give government the power to control or dissolve them (p. 214)
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appropriations
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n. set amounts of money put aside for speciļ¬c purposes (p. 431)
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authoritarian
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adj. requiring absolute loyalty and obedience to authority (p. 43)
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automated teller machine (ATM)
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n. an electronic device that allows bank customers to make transactions without seeing a bank ofļ¬cer (p. 308)
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automatic stabilizer
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n. a feature of ļ¬ scal policy that works automatically to steady the economy (p. 447)
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balanced budget
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n. a budget in which total government revenue is equal to total government spending (p. 436)
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balance of payments
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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)
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balance of trade
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n. the difference between the value of a country's imports and exports (p. 529)
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bank exam
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n. an audit, conducted by the Federal Reserve, of a bank's ļ¬nancial practices (p. 481)
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bank holding company
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n. a company that owns more than one bank (p. 481)
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barrier to entry
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n. anything that hinders a business from entering a market (p. 198)
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barter
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n. the exchange of goods and services without using money (p. 288)
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bear market
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n. a situation in which stock market prices decline steadily over time (p. 335)
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binding arbitration
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n. a process by which an impartial third party resolves disputes between management and unions (p. 280)
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black market
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n. the illegal business of buying or selling goods or services in violation of price controls or rationing (p. 183)
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Board of Governors
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n. the board of seven appointed members that supervises the operations of the Federal Reserve System and sets monetary policy (p. 476)
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bond
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n. a contract a corporation issues that promises to repay borrowed money, plus interest, on a ļ¬xed schedule (p. 240)
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break-even point
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n. a situation in which total costs and total revenues are the same (p. 142)
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budget
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n. a plan for allocating income for saving and spending (p. 574)
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budget deļ¬cit
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n. a situation in which the government spends more than it takes in (p. 462)
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budget surplus
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n. a situation in which the government takes in more than it spends (p. 462)
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bull market
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n. a situation in which stock market prices rise steadily over time (p. 335)
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business cycle
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n. the series of growing and shrinking periods of economic activity, measured by increases or decreases in real gross domestic product (p. 358)
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business organization
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n. an enterprise that produces goods or provides services, usually to make a proļ¬t (p. 226)
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capital
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n. all the resources people make and use to produce and distribute goods and services (p. 8)
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capital budget
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n. a plan for major expenses or investments (p. 436)
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capital deepening
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n. an increase in the ratio of capital to labor (p. 371)
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capital ļ¬‚ight
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n. a situation in which capital from a country is invested outside the country (p. 558)
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capital gain
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n. the proļ¬t made from the sale of securities (p. 330)
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capitalism
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n. an economic system based on private ownership of the factors of production (p. 49)
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capital market
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n. a market in which long-term ļ¬nancial assets are bought and sold (p. 322)
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cartel
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n. a formal organization of sellers or producers who regulate the production, pricing, and marketing of a product (pp. 198, 535)
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cease and desist order
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n. a ruling requiring a ļ¬rm to stop an unfair business practice (p. 217)
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central bank
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n. a nation's main monetary authority (p. 474)
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centrally planned economy
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n. a system in which the society's leaders make all economic decisions (p. 42)
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change in demand
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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)
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change in quantity demanded
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n. a change in the amount of a product that consumers will buy because of a change in price (p. 108)
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change in quantity supplied
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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)
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change in supply
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n. a situation in which a change in the marketplace prompts producers to offer different amounts for sale at every price (p. 148)
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check clearing
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n. a service provided by the Federal Reserve to record receipts and expenditures of bank clients (p. 480)
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circular ļ¬‚ow model
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n. a visualization of all interactions in a market economy (p. 52)
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civilian labor force
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n. people age 16 or older who are employed or actively looking for and available to do work (p. 266)
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claim
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n. a request to an insurance company for payment on an insured loss (p. 596)
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closed shop
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n. a business in which an employer can hire only union members (p. 279)
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coincident indicators
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n. measures of economic performance that usually change at the same time as real gross domestic product changes (p. 364)
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collective bargaining
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n. the process of negotiation between a business and its organized employees to establish wages and improve working conditions (p. 280)
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command economy
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n. an economic system in which the government makes all economic decisions (p. 39)
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commodity money
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n. money that has intrinsic value based on the material from which it is made (p. 291)
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common stock
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n. a share of ownership in a corporation that gives the holder voting rights and a share of proļ¬ts (p. 331)
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communism
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n. an economic system in which there is no private ownership of property and little or no political freedom (p. 43)
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comparative advantage
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n. the ability of one trading nation to produce something at a lower opportunity cost than that of another trading nation (p. 513)
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competition
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n. the effort of two or more people acting independently to get business by offering the best deal (p. 49)
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competitive pricing
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n. a situation in which producers sell goods and services at prices that best balance the twin desires of making the highest proļ¬t and luring customers away from rival producers (p. 174)
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complements
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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)
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conglomerate
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n. a business composed of companies that produce unrelated goods or services (p. 243)
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consumer
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n. a person who buys goods or services for personal use (p. 5)
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consumer price index (CPI)
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n. a measure of changes in the prices of goods and services that consumers commonly purchase (p. 396)
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consumer sovereignty
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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)
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contingent employment
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n. temporary or part-time work (p. 270)
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contract
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n. a formal, legally binding agreement (p. 598)
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contraction
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n. a decrease in economic activity (p. 359)
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contractionary ļ¬scal policy
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n. a plan to reduce aggregate demand and slow down the economy during a period of too rapid economic expansion (p. 446)
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contractionary monetary policy
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n. a plan to reduce the amount of money in circulation; also called tight-money policy (p. 492)
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cooperative
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n. a type of business operated for the shared beneļ¬t of the owners, who are also its customers (p. 250)
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co-pay
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n. an amount the insured owes when an insured receives health care (p. 596)
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corporate income tax
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n. a tax based on a corporation's proļ¬ts (p. 412)
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corporation
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n. a business owned by shareholders, also called stockholders, who own the rights to the company's proļ¬ts but face only limited liability for the company's debts and losses (p. 238)
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cosigner
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n. a person who assumes responsibility for the debt if the borrower fails to repay the loan (p. 583)
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cost-beneļ¬t analysis
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n. the practice of examining the costs and the expected beneļ¬ts of a choice as an aid to decision making (p. 15)
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cost-push inļ¬‚ation
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n. a situation in which increases in production costs push up prices (p. 399)
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Council of Economic Advisers
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n. the three-member group that advises the President on ļ¬scal policy and other economic issues (p. 452)
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coupon rate
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n. the interest rate a bond-holder receives every year until the bond matures (p. 338)
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craft union
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n. an organization of workers with similar skills who work in different industries for different employers (p. 274)
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credit
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n. the practice of buying goods or services now and paying for them in the future (p. 582)
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credit report
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n. a statement by a credit bureau that details a consumer's credit record (p. 586)
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credit score
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n. a number that summarizes a consumer's creditworthiness (p. 586)
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crowding-out effect
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n. a situation in which the government outbids private bond interest rates to gain loanable funds (p. 466)
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currency
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n. paper money and coins (pp. 293, 475)
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customs duty
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n. a tax on goods imported into the United States (p. 425)
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customs unions
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n. agreements that abolish trade barriers among the members and establish uniform tariffs for nonmembers (p. 532)
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cyclical unemployment
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n. unemployment caused by the part of the business cycle with decreased economic activity (p. 384)
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debit card
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n. a card one can use like an ATM card to withdraw cash or like a check to make purchases (p. 308)
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debt restructuring
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n. a method countries with outstanding debt obligations use to alter the terms of debt agreements to achieve some advantage (p. 559)
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deductible
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n. the amount the insured pays before the insurance company pays (p. 596)
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default
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n. the condition that occurs when a nation cannot pay interest or principle on a loan (p. 559)
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deļ¬cit spending
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n. the government practice of spending more than it collects in revenue for a speciļ¬c ļ¬scal year (p. 462)
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deļ¬‚ation
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n. a decrease in the general price level (p. 398)
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demand
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n. the desire to have some good or service and the ability to pay for it (p. 98)
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demand curve
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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)
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demand deposits
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n. checking accounts, so called because checking accounts can be converted into currency "on demand" (p. 293)
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demand-pull inļ¬‚ation
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n. a condition that occurs when total demand rises faster than the production of goods and services (p. 399)
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demand schedule
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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)
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demand-side ļ¬scal policy
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n. a plan to stimulate aggregate demand (p. 454)
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deposit multiplier formula
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n. a mathematical formula that tells how much the money supply will increase after an initial cash deposit in a bank (p. 485)
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depreciate
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v. to decrease in value (p. 590)
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depression
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n. an extended period of high unemployment and reduced business activity (p. 359)
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deregulation
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n. the reduction or elimination of government oversight and control of business (p. 218)
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derived demand
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n. a demand for a product or resource based on its contribution to the ļ¬ nal product (p. 259)
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developed nations
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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)
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diminishing returns
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n. a situation in which new workers cause marginal product to grow but at a decreasing rate (p. 139)
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discount rate
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n. the interest rate that the Federal Reserve charges when it lends money to other banks (p. 491)
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discretionary ļ¬scal policy
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n. actions taken by the federal government by choice to correct economic instability (p. 446)
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discretionary spending
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n. spending that the government must authorize each year (p. 428)
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disequilibrium
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n. a situation in which quantity supplied and quantity demanded are not in balance (p. 169)
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disposable personal income (DPI)
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n. personal income minus taxes (p. 355)
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diversiļ¬cation
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n. the practice of distributing investments among different ļ¬nancial assets to maximize return and limit risk (p. 327)
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dividend
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n. the part of a corporation's proļ¬t that the company pays the stockholders (p. 238)
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dumping
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n. the sale of a product in another country at a price lower than that charged in the home market (p. 521)
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Dumpster diving
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n. technique used by identity thieves to gather personal information in the garbage (p. 588)
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economic growth
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n. an increase in a nation's real gross domestic product (p. 358)
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economic interdependence
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n. a situation in which producers in one nation depend on others to provide goods and services they do not produce (p. 510)
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economic model
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n. a simpliļ¬ed representation of economic activities, systems, or problems (p. 18)
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economics
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n. the study of how individuals and societies satisfy their unlimited wants with limited resources (p. 4)
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economic system
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n. the way in which a society uses its scarce resources to satisfy its people's unlimited wants (p. 38)
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economies of scale
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n. a situation in which the average cost of production falls as the producer grows larger (p. 201)
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economize
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v. to make decisions according what is believed to be the best combination of costs and beneļ¬ts (p. 12)
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efļ¬ciency
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n. the condition in which economic resources are used to produce the maximum amount of goods and services (p. 20)
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elastic
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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)
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elasticity of demand
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n. a measure of how responsive consumers are to price changes in the marketplace (p. 117)
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elasticity of supply
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n. a measure of how responsive producers are to price changes in the marketplace (p. 154)
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embargo
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n. a law that cuts off most or all trade with a speciļ¬c country (p. 521)
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entitlement
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n. a social welfare program with speciļ¬c eligibility requirements (p. 428)
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entrepreneurship
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n. the combination of vision, skill, ingenuity, and willingness to take risks that is needed to create and run new businesses (p. 9)
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equilibrium price
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n. the price at which the quantity demanded equals the quantity supplied (p. 164)
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equilibrium wage
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n. the wage at which the quantity of workers demanded equals the quantity of workers supplied; the market price for labor (p. 258)
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estate tax
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n. a tax on the assets of a person who has died (p. 425)
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European Union (EU)
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n. the economic and political union of European nations that was established in 1993 (p. 532)
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euro
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n. the single currency of the European Union (p. 533)
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excise tax
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n. a tax on the production or sale of a speciļ¬c good or service (pp. 149, 425)
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expansion
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n. an increase in economic activity (p. 358)
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expansionary ļ¬scale policy
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n. a plan to increase aggregate demand and stimulate a weak economy (p. 446)
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expansionary monetary policy
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n. a plan to increase the amount of money in circulation; also called easy-money policy (p. 492)
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exports
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n. goods or services produced in one country and sold to other countries (p. 516)
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externality
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n. a side effect of a transaction that affects someone other than the producer or buyer (p. 87)
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factor market
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n. the market for the factors of productionā€”land, labor, capital, and entrepreneurship (p. 52)
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factors of production
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n. the economic resources needed to produce goods and services (p. 8)
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federal budget
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n. a plan for spending federal tax money (p. 431)
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federal funds rate (FFR)
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n. the interest at which a depository institution lends available funds to another depository institution overnight (p. 490)
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Federal Insurance Contributions Act (FICA)
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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)
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Federal Open Market Committee (FOMC)
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n. the Federal Reserve System board that supervises the sale and purchase of federal government securities (p. 477)
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Federal Reserve System
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n. the central bank of the United States; commonly called the Fed (p. 474)
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ļ¬at money
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n. money that has no tangible backing but is declared by the government and accepted by citizens to have worth (p. 291)
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ļ¬ling status
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n. for ļ¬ling taxes, based on marital status or support of dependents (p. 604)
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ļ¬nancial asset
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n. a claim on a borrower's property (p. 319)
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ļ¬nancial intermediary
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n. an institution that collects funds from savers and invests these funds in ļ¬nancial assets (p. 319)
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ļ¬nancial market
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n. a situation in which buyers and sellers exchange ļ¬nancial assets (p. 319)
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ļ¬nancial system
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n. all the institutions that help transfer funds between savers and investors (p. 318)
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ļ¬scal
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adj. of or relating to government revenue and spending (p. 446)
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ļ¬scale policy
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n. the federal government's use of taxing and spending to affect the economy (p. 446)
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ļ¬scal year
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n. a 12-month period for which an organization plans its expenditures (p. 431)
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ļ¬xed costs
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n. expenses that business owners incur no matter how much they produce (p. 140)
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ļ¬xed rate of exchange
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n. a system in which the currency of one nation is ļ¬ xed or constant in relation to other currencies (p. 526)
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ļ¬‚exible exchange rate
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n. a system in which the exchange rate for currency changes as supply and demand for the currency changes; also called the ļ¬‚oating rate (p. 527)
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focus group
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n. a moderated discussion with small groups of consumers (p. 208)
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foreign exchange market
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n. a market in which currencies of different countries are bought and sold (p. 526)
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foreign exchange rate
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n. the price of one currency in the currencies of other nations (p. 526)
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franchise
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n. a business made up of semi-independent businesses that all offer the same products or services (p. 248)
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franchisee
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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)
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free contract
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n. a situation in which people decide for themselves which legal agreements to enter into (p. 73)
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free enterprise system
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n. another name for capitalism, an economic system based on private ownership of productive resources (p. 70)
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free rider
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n. a person who does not pay for a good or service but who beneļ¬ts from it when it is provided (p. 85)
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free-trade zone
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n. a speciļ¬ c region in which trade between nations takes place without protective tariffs (p. 532)
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frictional unemployment
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n. the temporary unemployment of workers moving from one job to another (p. 384)
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full employment
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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)
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future
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n. a contract to buy or sell a stock on a speciļ¬ed future date at a preset price (p. 333)
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general partnership
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n. a partnership in which each partner shares the management of the business and is liable for all business debts and losses (p. 233)
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geographic monopoly
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n. a monopoly that exists because there are no other producers or sellers within a certain region (p. 201)
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gift tax
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n. a tax on money or property given by one living person to another (p. 425)
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glass ceiling
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n. an unseen, artiļ¬cial barrier to advancement that women and minorities sometimes face (p. 262)
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global economy
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n. all the economic interactions that cross international boundaries (p. 61)
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gold standard
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n. a system in which the basic monetary unit is equal to a set amount of gold (p. 299)
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goods
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n. physical objects, such as food, clothing, and furniture, that can be purchased (p. 5)
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government monopoly
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n. a monopoly that exists because the government either owns and runs the business or authorizes only one producer (p. 201)
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grant-in-aid
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n. a transfer payment from the federal government to state or local governments (p. 432)
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gross domestic product (GDP)
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n. the market value of all ļ¬nal goods and services produced within a nation in a given time period (p. 350)
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gross national product (GNP)
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n. the market value of all ļ¬nal goods and services produced by a country in a given time period (p. 355)
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hacking
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n. technique used by identity thieves to gather personal information using computers and related technology (p. 588)
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horizontal merger
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n. the joining of two or more companies that offer the same or similar products or services (p. 243)
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human capital
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n. the knowledge and skills that enable workers to be productive (p. 261)
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human development index (HDI)
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n. a combination of a nation's real GDP per capita, life expectancy, adult literacy rate, and student enrollment ļ¬ gures that indicates what life is like in a speciļ¬c country (p. 547)
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hyperinļ¬‚ation
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n. a rapid, uncontrolled rate of inļ¬‚ation in excess of 50 percent (p. 398)
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identity theft
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n. the use of someone else's personal information for criminal purposes (p. 588)
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imperfect competition
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n. a market structure that lacks one or more of the conditions needed for perfect competition (p. 195)
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imports
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n. goods or services produced in one country and purchased by another (p. 516)
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incentive
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n. a beneļ¬t offered to encourage people to act in a certain way (pp. 12, 176)
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incidence of a tax
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n. the nal burden of a tax (p. 415)
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income distribution
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n. the way income is divided among people in a nation (p. 390)
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income effect
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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)
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income inequality
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n. the unequal distribution of income (p. 390)
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increasing returns
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n. a situation in which hiring new workers cause marginal product to increase (p. 139)
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independent contractor
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n. someone who sells his or her services on a contract basis (p. 270)
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individual income tax
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n. a tax based on an individual's income from all sources (p. 412)
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industrial union
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n. an organization of workers with many different skills who work in the same industry (p. 274)
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inelastic
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n. a situation in which quantity demanded or quantity supplied changes little as price changes (pp. 117, 155)
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infant industries
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n. new industries that are often unable to compete against larger, more established competitors (p. 523)
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infant mortality rate
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n. the number of children who die within the ļ¬rst year of life per 1,000 births (p. 547)
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inferior goods
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n. goods that consumers demand less of when their incomes rise (p. 110)
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inļ¬‚ation
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n. a sustained rise in the general price level, or a sustained fall in the purchasing power of money (p. 396)
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inļ¬‚ation rate
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n. the rate of change in prices over a set period of time (p. 397)
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infrastructure
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n. the basic set of support systemsā€”such as power, communications, transportation, water, sanitation, and education systemsā€”needed to keep an economy and society going (pp. 86, 545)
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input costs
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n. the price of the resources needed to produce a good or service (p. 148)
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insourcing
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n. the practice of foreign companies establishing operations in, and therefore bringing jobs to, the United States (p. 269)
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interest
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n. a fee a bank pays for the use of money (p. 578)
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International Monetary Fund (IMF)
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n. the international organization established to promote international monetary cooperation, foster economic growth, and provide temporary ļ¬nancial assistance to countries to help ease balance-of payments adjustment (p. 559)
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investment
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n. the use of income today in a way that allows for a future beneļ¬ t (p. 318)
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investment objective
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n. a ļ¬nancial goal that is used to determine if an investment is appropriate (p. 324)
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junk bond
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n. a high-risk, high-yield corporate bond (p. 339)
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Keynesian economics
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n. the idea, ļ¬ rst advanced by John Maynard Keynes, that the government needs to stimulate aggregate demand in times of recession (p. 454)
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labor
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n. all the human time, effort, and talent used to produce goods and services (p. 8)
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labor input
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n. the size of the labor force multiplied by the length of the workweek (p. 371)
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labor productivity
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n. the amount of goods and services a person can produce in a given time (p. 149)
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labor union
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n. an organization of workers that seeks to improve wages, working conditions, fringe beneļ¬ts, job security, and other work-related matters for its members (p. 274)
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Laffer Curve
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n. a graph that illustrates how tax cuts affect tax revenues and economic growth (p. 459)
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lagging indicators
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n. measures of economic performance that usually change after real gross domestic product changes (p. 364)
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laissez faire
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n. the principle that the government should not interfere in the economy (p. 49)
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land
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n. all the natural resources on or under the ground that are used to produce goods and services (p. 8)
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landlord
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n. the owner of rental property (p. 609)
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law of comparative advantage
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n. the law stating that countries gain when they produce items that they are most efļ¬cient at producing and that are at the lowest opportunity cost (p. 514)
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law of demand
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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)
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law of diminishing marginal utility
answer
n. states that the marginal beneļ¬t 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 speciļ¬c 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 beneļ¬t
answer
n. the beneļ¬t 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 beneļ¬t 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 playersā€”such as individuals, families, and businessesā€”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
modiļ¬ed 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 inļ¬‚ 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 ļ¬nancial 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 ļ¬nancial 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 ļ¬rm 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 stockā€”in other words, the value of ļ¬nal 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 priceā€”such as style, service, advertising, or giveawaysā€”to try to convince customers to buy from one producer rather than another (p. 207)
question
nonproļ¬t organization
answer
n. an institution that acts like a business but exists to beneļ¬t society rather than to make a proļ¬t (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, proļ¬ 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
PIN
answer
n. personal identiļ¬cation 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 beneļ¬ts 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 ofļ¬ 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 proļ¬ts 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 ļ¬xing
answer
n. conspiring among or between businesses to set the prices of competing products (p. 216)
question
price ļ¬‚oor
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 ļ¬rm 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 ļ¬nancial 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
proļ¬t
answer
n. the ļ¬nancial 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
proļ¬t-maximizing output
answer
n. the point in production at which a business has reached its highest level of proļ¬t (p. 143)
question
proļ¬t 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 ļ¬rms expect changes in ļ¬scal 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 proļ¬t 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 speciļ¬ 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 ļ¬ 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 surļ¬ng
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 proļ¬t (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 deļ¬cits and external debt, eliminating price controls, closing inefļ¬cient public enterprises, and slashing budget deļ¬cits (p. 559)
question
stagļ¬‚ation
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 beneļ¬t 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 ļ¬scal 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 ofļ¬ cial who determines the value of property to be taxed (p. 437)
question
tax base
answer
n. a form of wealthā€”such as income, property, goods, or servicesā€”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 ļ¬rm controls a manufacturing method, invention, or type of technology (p. 201)
question
technology
answer
n. the application of scientiļ¬c methods and innovations to production (p. 149)
question
telecommuting
answer
n. the practice of doing ofļ¬ce work in a location other than the ofļ¬ ce (p. 270)
question
thrift institution
answer
n. a ļ¬ nancial institution that serves savers (p. 478)
question
total cost
answer
n. the sum of ļ¬xed 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 deļ¬cit
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 ļ¬ rms combined in order to reduce competition in an industry (p. 214)
question
trust fund
answer
n. a fund held for a speciļ¬ 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 beneļ¬ 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 beneļ¬ts 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 speciļ¬c 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 satisļ¬ 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 beneļ¬ts (p. 393)
question
World Bank
answer
n. a ļ¬nancial 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)
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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 deļ¬ne monopolies and give government the power to control or dissolve them (p. 214)
question
appropriations
answer
n. set amounts of money put aside for speciļ¬c 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 ofļ¬cer (p. 308)
question
automatic stabilizer
answer
n. a feature of ļ¬ 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 ļ¬nancial 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 ļ¬xed 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 deļ¬cit
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 proļ¬t (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 ļ¬‚ight
answer
n. a situation in which capital from a country is invested outside the country (p. 558)
question
capital gain
answer
n. the proļ¬t 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 ļ¬nancial 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 ļ¬rm 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 ļ¬‚ow 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 proļ¬ts (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 proļ¬t 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 ļ¬scal 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 beneļ¬t 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 proļ¬ts (p. 412)
question
corporation
answer
n. a business owned by shareholders, also called stockholders, who own the rights to the company's proļ¬ts 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-beneļ¬t analysis
answer
n. the practice of examining the costs and the expected beneļ¬ts of a choice as an aid to decision making (p. 15)
question
cost-push inļ¬‚ation
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 ļ¬scal 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
deļ¬cit spending
answer
n. the government practice of spending more than it collects in revenue for a speciļ¬c ļ¬scal year (p. 462)
question
deļ¬‚ation
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 inļ¬‚ation
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 ļ¬scal 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 ļ¬ 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 ļ¬scal 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
diversiļ¬cation
answer
n. the practice of distributing investments among different ļ¬nancial assets to maximize return and limit risk (p. 327)
question
dividend
answer
n. the part of a corporation's proļ¬t 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 simpliļ¬ed 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 beneļ¬ts (p. 12)
question
efļ¬ciency
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 speciļ¬c country (p. 521)
question
entitlement
answer
n. a social welfare program with speciļ¬c 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 speciļ¬c good or service (pp. 149, 425)
question
expansion
answer
n. an increase in economic activity (p. 358)
question
expansionary ļ¬scale 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 productionā€”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
ļ¬at 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
ļ¬ling status
answer
n. for ļ¬ling taxes, based on marital status or support of dependents (p. 604)
question
ļ¬nancial asset
answer
n. a claim on a borrower's property (p. 319)
question
ļ¬nancial intermediary
answer
n. an institution that collects funds from savers and invests these funds in ļ¬nancial assets (p. 319)
question
ļ¬nancial market
answer
n. a situation in which buyers and sellers exchange ļ¬nancial assets (p. 319)
question
ļ¬nancial system
answer
n. all the institutions that help transfer funds between savers and investors (p. 318)
question
ļ¬scal
answer
adj. of or relating to government revenue and spending (p. 446)
question
ļ¬scale policy
answer
n. the federal government's use of taxing and spending to affect the economy (p. 446)
question
ļ¬scal year
answer
n. a 12-month period for which an organization plans its expenditures (p. 431)
question
ļ¬xed costs
answer
n. expenses that business owners incur no matter how much they produce (p. 140)
question
ļ¬xed rate of exchange
answer
n. a system in which the currency of one nation is ļ¬ xed or constant in relation to other currencies (p. 526)
question
ļ¬‚exible 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 ļ¬‚oating 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 beneļ¬ts from it when it is provided (p. 85)
question
free-trade zone
answer
n. a speciļ¬ 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 speciļ¬ed 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, artiļ¬cial 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 ļ¬nal 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 ļ¬nal 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 ļ¬ gures that indicates what life is like in a speciļ¬c country (p. 547)
question
hyperinļ¬‚ation
answer
n. a rapid, uncontrolled rate of inļ¬‚ation 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 beneļ¬t 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 ļ¬rst 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
inļ¬‚ation
answer
n. a sustained rise in the general price level, or a sustained fall in the purchasing power of money (p. 396)
question
inļ¬‚ation 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 systemsā€”such as power, communications, transportation, water, sanitation, and education systemsā€”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 ļ¬nancial 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 beneļ¬ t (p. 318)
question
investment objective
answer
n. a ļ¬nancial 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, ļ¬ 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 beneļ¬ts, 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 efļ¬cient 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 beneļ¬t 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 speciļ¬c 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 beneļ¬t
answer
n. the beneļ¬t 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 beneļ¬t 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 playersā€”such as individuals, families, and businessesā€”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
modiļ¬ed 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 inļ¬‚ 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 ļ¬nancial 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 ļ¬nancial 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 ļ¬rm 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 stockā€”in other words, the value of ļ¬nal 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 priceā€”such as style, service, advertising, or giveawaysā€”to try to convince customers to buy from one producer rather than another (p. 207)
question
nonproļ¬t organization
answer
n. an institution that acts like a business but exists to beneļ¬t society rather than to make a proļ¬t (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, proļ¬ 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
PIN
answer
n. personal identiļ¬cation 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 beneļ¬ts 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 ofļ¬ 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 proļ¬ts 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 ļ¬xing
answer
n. conspiring among or between businesses to set the prices of competing products (p. 216)
question
price ļ¬‚oor
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 ļ¬rm 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 ļ¬nancial 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
proļ¬t
answer
n. the ļ¬nancial 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
proļ¬t-maximizing output
answer
n. the point in production at which a business has reached its highest level of proļ¬t (p. 143)
question
proļ¬t 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 ļ¬rms expect changes in ļ¬scal 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 proļ¬t 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 speciļ¬ 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 ļ¬ 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 surļ¬ng
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 proļ¬t (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 deļ¬cits and external debt, eliminating price controls, closing inefļ¬cient public enterprises, and slashing budget deļ¬cits (p. 559)
question
stagļ¬‚ation
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 beneļ¬t 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 ļ¬scal 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 ofļ¬ cial who determines the value of property to be taxed (p. 437)
question
tax base
answer
n. a form of wealthā€”such as income, property, goods, or servicesā€”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 ļ¬rm controls a manufacturing method, invention, or type of technology (p. 201)
question
technology
answer
n. the application of scientiļ¬c methods and innovations to production (p. 149)
question
telecommuting
answer
n. the practice of doing ofļ¬ce work in a location other than the ofļ¬ ce (p. 270)
question
thrift institution
answer
n. a ļ¬ nancial institution that serves savers (p. 478)
question
total cost
answer
n. the sum of ļ¬xed 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 deļ¬cit
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 ļ¬ rms combined in order to reduce competition in an industry (p. 214)
question
trust fund
answer
n. a fund held for a speciļ¬ c purpose to be expended at a future date (p. 465)
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underemployed
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n. people employed part-time who want to work full-time, or those who work at a job below their skill level (p. 383)
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underground economy
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n. market activities that go unreported because they are illegal or because those involved want to avoid taxation (p. 354)
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underutilization
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n. the condition in which economic resources are not being used to their full potential, resulting in fewer goods and services (p. 20)
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unemployment rate
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n. the percentage of the labor force that is jobless and actively looking for work (p. 382)
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union shop
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n. a business in which workers are required to join a union within a set time period after being hired (p. 279)
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unit elastic
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adj. relating to a situation in which the percentage change in price and quantity demanded are the same (p. 118)
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unlimited liability
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n. a situation in which a business owner is responsible for all the losses and debts of a business (p. 228)
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unlimited life
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n. a situation in which a corporation continues to exist even after a change in ownership (p. 240)
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user fee
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n. money charged for the use of a good or service (p. 425)
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utility
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n. the beneļ¬ t or satisfaction gained from using a good or service (p. 12)
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variable costs
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n. business costs that vary with the level of production output (p. 140)
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vertical merger
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n. the combining of two or more businesses involved in different steps of producing or marketing a product or service (p. 243)
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voluntary exchange
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n. a trade in which the parties involved anticipate that the beneļ¬ts will outweigh the cost (p. 49)
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voluntary export restraint (VER)
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n. a self-imposed limit on exports to certain countries to avoid quotas or tariffs (p. 521)
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wage and price controls
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n. government limits on increases in wages and prices (p. 501)
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wage-price spiral
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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)
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wage rate
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n. the established rate of pay for a speciļ¬c job or work performed (p. 261)
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wages
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n. the payments workers receive in return for work (p. 258)
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wants
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n. desires that can be satisļ¬ ed by consuming a good or service (p. 4)
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welfare
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n. government economic and social programs that provide assistance to the needy (p. 392)
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withholding
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n. the money taken from a worker's pay before the worker receives the pay (p. 421)
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workfare
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n. a program that requires welfare recipients to do some kind of work in return for their beneļ¬ts (p. 393)
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World Bank
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n. a ļ¬nancial institution that provides loans, policy advice, and technical assistance to low and middle income countries to reduce poverty (p. 559)
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World Trade Organization (WTO)
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n. an organization that negotiates and administers trade agreements, resolves trade disputes, monitors trading policies, and supports developing countries (p. 535)
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yield
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n. the annual rate of return on a bond (p. 338)