Economics Vocabulary Fall 2018

1. Scarcity – limited resources to meet unlimited wants –always exists2. Factor Market – a place for the factors of production3. Factors of production – land, labor, capital, and entrepreneurship4. Productivity – producing something

5. Standard of living – level of economic prosperity

6. Land – all natural resources7. Labor – the work done by the people8. Capital – human-made resources to create goods and services.9. Entrepreneur – ambitious person who combines capital with new ideas10. Human capital – skills and knowledge gained by a worker

11. Production possibilities curve – graph showing most efficient use of resources

12. Opportunity cost – most desirable alternative that is given up

13. Trade-off – an alternative we sacrifice in making a decision14. Division of Labor – the separation of tasks based on the skills of the worker

15. Specialization – an area in which a person is an expert or more skilled

16. Traditional economy – relies on habit, custom, or tradition to decide economic questions. think: Native Americans17. Command economy– (aka. Centrally planned economy) central government makes all economic decisions18. Market economy – (aka. free enterprise) decisions made on a voluntary basis by individuals19. Mixed economy – market economy with government involvement20. Public Good – something created for use by the people: like roads and parks

21. Free Enterprise – private business operates in competition and is free from government control22. Voluntary exchange – people decide what they want to buy and sell23. Profit – The money that left after you take out costs Price = $20, Cost = $15, Profit = $524. Consumer Sovereignty – Consumers decide what to buy25. Incentive – something done to get a response (money for grades)

26. Externality – economic benefits or costs to someone other than the person deciding how much to produce or consume

27. Social Security – government payments to retired workers or those with very low income

28. Medicare – government provided medical care for older Americans29.a. Private Sector – part of the national economy not controlled by the government 29.b. Public Sector – part of the economy Controlled by the government

30. Product market – market in which household purchase goods and services31. Subsidy- an amount of money paid (usually by government) to reduce the price32. Demand – desire to own something and the ability to pay for it33. Quantity Demanded - Amount consumers are willing and able to buy at a certain price34. Law of Demand – Consumers buy more when the price decreases and less when the prices increase.

35. Income effect – change in consumption resulting from change in real income36. Substitution effect – when the price increases consumers buy more of another good.37. Substitutes – Goods used in place of one another. Think: ski or snowboard38. Complements – Two goods bought and used together. Think: Skis and ski boots39. Supply – Amount of good available

40. Quantity Supplied – Amount suppliers are willing and able to supply at a certain price41. Law of Supply – Suppliers offer more when the price increases42. Market Equilibrium – Where the price and demand meet that clears the market43. Surplus – an excess of production; more supplied than demand44. Shortage – when the producers can’t satisfy the demand – short term ie. Think: oil45. Price Ceiling – A maximum price for a good or service. Think: rent control

46. Price Floor – A minimum price for a good or service. Think: minimum wage47. Perfect Competition – A market in which a large number of firms produce the same product. think: vegetables48. Monopolistic Competition – sellers the same item but slightly different (think: Jeans)49. Product Differentiation – Basically the same product but slightly different (Pepsi/Coca Cola)50. Oligopoly – A market structure dominated by a few large firms. Think: NFL

51. Monopoly – A market dominated by a single seller. Think: water supply52. Sole proprietorship – A business owned and managed by a single person53. Partnership – A business organization owned by two or more people who split responsibilities and profits.54. Corporation – A legal entity owned by individual stockholders55. Stocks – (also called shares) Certificates of ownership in a corporation

56. Dividend – Payment made to stockholders 57. Liability – The legally bound obligation to pay debts58. Double Taxation – A person pays taxes twice on the same earned money59. Gross Domestic Product (GDP) – total value of all final goods and services in a country in a calendar year60. Gross Domestic Product per Capita– total value of all final goods and services in a country in a calendar year divided by the population

61. Aggregate Supply – the total supply of all goods and services available62. Aggregate Demand – the total demand of all goods and services63. Real GDP – measures GDP and includes inflation or deflation64. Intermediate Products – Goods used in the final production of final goods65. Underground Economy – economic activity that is not recorded or taxed (aka Black Market)

66. Net Exports – value of exports minus imports

67. Unemployed – a person without a job but available for

work

68. Unemployment Rate – the share of the workforce that is jobless

69. Frictional Unemployment – When people take time to find a job – always exists

70. Structural Unemployment – When a workers’ skills do not

match the job. Think: changes in technology

71. Cyclical Unemployment – Employment that rises and falls with the

economic conditions. Think: business cycle

72. Seasonal Unemployment – Employment associated with the

season. Think: time of year

73. Inflation – increase in prices due to excess money

74. Deflation – A sustained drop in prices

75. Consumer Price Index (CPI) – Economic measure of the cost of

living based on a “market basket” of goods and services

76. Hyperinflation – Out of control inflation

77. Stagflation – slow economic growth and high

unemployment

78. Demand-Pull Inflation – when aggregate demand is greater

than aggregate supply, prices will rise

79. Cost- push theory – Producers raise prices in order to

meet increasing costs

80. Business cycle – periods of contraction and expansion

81. Recession – prolonged economic contraction

82. Peak – height of economic expansion

83. Trough – lowest point of economic contraction

84. Expansion – employment, GDP, economic activity surge

85. Depression – a long and sustained recession

86. Medium of Exchange – something that is exchanged for a

good or service – usually money

87. Measure of Value – money can be measured and

exchanged because of the numbers

88. Store of Value – an assets that maintains its value, like

gold

89. Financial Institutions – business that provide financial

services

90. Principal – The amount of money borrowed

91. Interest – Price paid for the use of borrowed money92. Credit Union – a non-profit money loaning business but with limits on membership. Military Credit Union93. Certificate of Deposit (CD) – a product offered by banks/credit unions in exchange for lump of money left for several years. Very safe94. Risk – the amount of chances something can go wrong. More risk = more reward95. Bond – a financial investment that is a loan for set time. Very safe

96. Maturity – the date of the final payment of a loan

97. Beneficiary – a person who gets an advantage

98. Mutual Fund – puts the money of a group of investors in different

assets such as bonds and stocks

99. Diversification – spreading the risk – but lowers the reward

100. Premium – Money paid to an insurance agency for a policy

101. Deductible – what you pay to an insurance company

before they address your claim

102. Collateral – something used to secure repayment

103. Federal Reserve System (FED) – the federal banking

system in America and has 12 regional banks

104. Federal Deposit Insurance Corporation (FDIC) –

Government agency that insures money in banks

105. Monetary Policy – the FED controls the money supply

and/or interest rates to help the economy

106. Reserve Requirement – the amount of cash banks must keep in

their vaults

107. Interest Rate – the amount charged to lend money, expressed as

APR (annual percentage rate)

108. Federal Open Market Committee (FOMC) – group that makes the key decisions of the FED

109. Discount Rate – The rate the FED charges for loans to commercial banks

110. Sales Tax – a tax imposed on a good or service. It is regressive

111. Proportional tax - % paid remains same for all incomes

112. Progressive tax - % paid increases as income increases –

what is used in America

113. Regressive tax - % paid decreases as income increases –

sales tax

114. Medicaid – federal program that helps pay medical bills

for people with limited funds

115. FICA – Federal Insurance Contribution Act – money that

is taken out of the paycheck to pay for Social Security and

Medicare

116. Property Tax – Tax paid on the value of your house. Pays for schools117. Fiscal Policy – Government policy to control the economy by taxing and spending118. Budget Deficit – The govt. spends more than it collects 119. Money Supply – All the money in the U.S. economy120. Monetary Policy – Actions of the FED to monitor the economy

121. Absolute Advantage – the ability to produce a greater quantity than a competitor

122. Comparative Advantage – when a country is more efficient at producing a product of service than a competitor

123. Tariffs – A tax on imports

124. Quotas – Limits set on imports by the government

125. Embargo – an official ban on trade with a country

126. Protectionist – shielding domestic industry by taxing imports127. Free Traders – trading with other countries without quotas or tariffs128. NAFTA – North American Free Trade Agreement created a free trade zone (also EU and ASEAN)129. Foreign Exchange Rate – the exchange between to currencies130. Economics – study of satisfying needs and wants