Economics part 7
Equilibrium
A state of balance such that there is no tendency to change.
Value added tax
A type of consumption tax that is placed on a product whenever value is added at the stage of production and at final sale.
Negative externality (also known as spillover costs)
A type of externality where the side-effects on third parties are negative or harmful.
Demand-pull inflation
A type of inflation caused by an increase in AGGREGATE DEMAND.
material
Economics is the study of that ______ side of life in which everything has to be worked for and paid for.
Milennium Development Goals.
Eight MDG's (need to know word for word): 1. Eradicate extreme poverty and hunger 2. Achieve universal primary education 3. Promote gender equality and empower women 4. Reduce child mortality 5. Improve maternal health 6. Combat HIV/AIDS, malaria, and other diseases 7. Ensure environmental stability 8. Global partnership for development
private goods
Goods that are both excludable and rival in consumption, Goods that, when consumed by one individual, cannot be consumed by another
complementary goods
Goods that are commonly used with other goods (e.g. ketchup/mustard)
Corporate indebtedness
The degree to which corporations have debts.
Household indebtedness
The degree to which households have debt.
debit card
a card that can be used to withdraw money from a bank account
stock
a certificate documenting the shareholder's ownership in the corporation
CEO
a chief executive officer, the highest-ranking person in a company or other institution, ultimately responsible for making managerial decision
scarcity
a situation in which unlimited wants exceed the limited resources available to fulfill those wants
business organization
an enterprise that produces goods or provides services, usually in order to make a profitp
producer
maker of goods or provider of services
Producer
any person who makes products
manufacturing
making goods with machines
geographic monopoly
market situation where a firm has a monopoly because of its location or the small size of the market
mixed economy
market-based economic system with limited government involvement.
limited liability
means that a business owner's liability for debts and losses of the business is limited
mixed economy
n. an economic system that has elements of traditional, command, and market economies; the most common economic system (p. 58)
suburban
area outside the city
law of demand
as price goes up, quantity demanded goes down.
real income effect
as prices rise and your income stays the same, quantity demanded for all goods or services goes down.
law of demand
as the price of a product falls, the quantity demanded of that product will usually increase, ceteris paribus
natural resources
gifts of nature that are used in the production of goods and services. EX: water, soil, minerals, coal and oil
free enterprise system
n. another name for capitalism, an economic system based on private ownership of productive resources (p. 70)
market
n. any place or situation in which people buy and sell goods and services (p. 48)
wants
n. desires that can be satisfied by consuming a good or service (p. 4)
voluntary exchange
is a trade in which both traders believe that what they are getting is worth more than what they are giving up
market
is any place where people buy and sell goods and services
Thomas Jefferson
leader of the Antifederalists, he opposed the formation of a national, central bank
Alexander Hamilton
leader of the Federalists, and the first Secretary of the Treasury, he believed the nation needed a strong central bank
price ceiling
legal maximum on the price at which a good can be sold
Trade liberalization
The policy of liberalizing international trade by eliminating trade protection and barriers to trade.
Consumer sovereignty
The power of consumers to decide what gets produced.
frictional unemployment
n. the temporary unemployment of workers moving from one job to another (p. 384)
economic system
n. the way in which a society uses its scarce resources to satisfy its people's unlimited wants (p. 38)
income distribution
n. the way income is divided among people in a nation (p. 390)
needs
n. things such as food, clothing, and shelter that are necessary for survival (p. 4)
cyclical unemployment
n. unemployment caused by the part of the business cycle with decreased economic activity (p. 384)
shortage
situation in which quantity demanded is greater than quantity supplied
marginal change
small incremental adjustment to a plan of action
2 tools of fiscal policy
taxes, spending
nominal GDP
n. the gross domestic product stated in terms of the current value of goods and services (p. 352)
good
term for a tangible item that people want and for which they will pay
economic models
term for sets of information used to show the relationships among the various components of an economy
marginal benefit
the additional satisfaction or benefit received when one more unit is produced
principal
the amount of money borrowed, or in the case of a savings account, the amount of money deposited by the owner of the account
output gap
the gap between real GDP and potential GDP
demand curve
the graphical representation of a demand scheduale
contraction
the half of the business cycle during which economic growth is decreasing (import expenditure falls, export revenues rise)
opportunity costs
the highest-valued alternative that must be forgone when a choice is made
Incentive
the hope of reward or fear of penalty that encourages a person to behave in a certain way.
utilitarianism
the idea of evaluating all of the good and bad things produced by an act and considering an action "right" if it produces more happiness than unhappiness
scarcity
the idea that a resource is limited
classical economics
the idea that free markets can regulate themselves
human resource
the people that make goods and provide services
old age dependency ratio
the percentage of population above working age (above 64) divided by the percentage of the population of working age (15-64)
unemployment rate
the percentage of the labor force that is unemployed
negative externality
the situation in which costs spill over onto someone who is not involved in producing or consuming the good
federal income tax
the taxes that the federal government imposes on personal income in order to provide services
needs
the things that are necessary for survival
GDP
the total dollar value of goods and services produced by the US in a year
Gross Domestic Product
the total value of all the final goods and services produced in a country in one year.
consumer sovereignty
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)
profit motive
n. the incentive that encourages people and organizations to improve their material well-being by seeking to gain from economic activities (p. 73)
factor market
n. the market for the factors of production—land, labor, capital, and entrepreneurship (p. 52)
product market
n. the market in which goods and services are bought and sold (p. 52)
macroeconomic equilibrium
n. the point where aggregate demand equals aggregate supply (p. 361)
Specialization
Producing fewer kinds of goods and services based on the productive resources.
Superior goods
Products that have a high income elasticity; the demand for them will change significantly if income rises (e.g. holidays).
Perfectly elastic supply
Refers to a price elasticity of supply value of infinity, and arises in the case of a horizontal supply curve.
Unit elastic supply
Refers to a price elasticity of supply value of one.
Perfectly inelastic demand
Refers to a price elasticity of supply value of zero, and arises in the case of a vertical demand curve.
Perfectly inelastic supply
Refers to a price elasticity of supply value of zero, and arises in the case of a vertical supply curve.
Social optimum
Refers to a situation that is best from the social point of view, determined by the achievement of allocative efficiency.
Balanced Budget
Refers to a situation where the government's tax revenues equals the government expenditures.
Fixed exchange rate
Refers to an exchange rate that is fixed by the central bank of the country, and is not permitted to change in response to changes in currency supply and demand. Maintaining the value of a currency at its fixed rate requires constant intervention by the central bank.
Leakages (CIRCULAR FLOW OF INCOME)
Refers to withdrawals from the income flow of funds corresponding to savings, taxes, or imports.
Free trade
The absence of government intervention of any kind in international trade, so that trade takes place without any restrictions between individuals or firms in different countries.
Unemployment
The number of unemployed people, defined as all people above a particular age who are not working and not actively searching for work.
rule of 72
The number of years it takes for a certain amount to double in value is equal to 72 divided by its annual rate of interest.
Private sector
The part of the economy that involves the transactions of individuals and businesses.
Public sector
The part of the economy that involves the transactions of the government.
Human Resources
The people who do the work to create a product.
Thinking at the margin
The process of deciding wether to do or use one additional unit of some resource.
Economics
The study of how people seek to satisfy their needs and wants by making choices.
economics
The study of how people, businesses and countries use limited resources, such as money and materials. There are different types of economic systems that all answer the 3 questions: What to produce, How to produce, For whom to produce?
Microeconomics
The study of individual choice, and how that choice is influenced by economic forces.
Economics
The study of the choices made with unlimited wants and limited resources.
Privatization
The process of selling businesses or services operated by the government to individual investors, and then allowing them to compete in the marketplace.
Human Environmental Interaction
The processes, patterns, and functions of human settlement.
Coase theorem
The proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own.
Microeconomics
The study of the economic behavior and decision-making in small units, such as households and firms.
Macroeconomics
The study of the economy as a whole.
Positive Economics
The study of what is, and how the economy works.
Normative Economics
The study of what the goals of the economy should be.
Social surplus
The sum of consumer and producer surplus.
Gross Domestic Product
The sum total of the value of all the goods and services produced in a nation
bank run
a widespread panic in which many people try to withdraw their money from a bank at the same time
property rights
ability of an individual to own and exercise control over scare resources
divisible
able to be divided (as in making change); one of the six characteristics of money
capitalism
economic system in which the means of production are privately owned and operated for profit
services
actions or activities that one person performs for another
positive economics
economics that can be proven right or wrong
credit card
actually a loan, it is a card used to buy goods and services
marginal cost
additional cost of producing one more unit
authoritarian
adj. requiring absolute loyalty and obedience to authority (p. 43)
planned economies
economies in which decisions as to what to, how to, and who to produce for are made by a central government
demand deposits
another term for funds held in a checking account, because they can be used to pay for something at any time.
money
any item that is generally acceptable to sellers in exchange for goods and services.
economic good
anything that has market value
money
anything that is generally accepted as payment for goods and services
medium of exchange
anything that is used to determine value during the exchange of goods and services
resources
anything that is used to produce goods or services
money
anything that serves as a medium of exchange, a unit of account, and a store of value
capitol resources
anything used to reproduce other goods or services
law of supply
as the price of a product rises, the quantity supplied of the product will usually increase, ceteris paribus
substitution effect
as the price of one good or service goes up, quantity demanded for all of its substitutes goes up.
free market economies
economies in which prices are used to ration goods and services, production is in private hands, and which rely on demand and supply
specialization
focusing on one product or service, usually one becomes skilled
Federal Reserve Note
the currency we use today in the United States
economic choice
the decision to buy one thing rather than another
supply
the degree of availability of an item
demand
the desire for a certain good or service
balance of trade
the difference between a country's total exports and total imports
laissez faire
the doctrine that states that government generally should have little or no involvement in the marketplace
mercantilism
the economic system that aims for exports being greater than imports
income redistribution
government activity that takes income from some people through taxation and uses it to help citizens in need
subsides
government payment to an individual/business/group for certain actions... lowers cost of production... when repealed-cost goes up
What role does the government play in market system?
government's role limited- mostly to ensure market forces are free to work
M2
includes all money that is easily accessible, as well as money in savings accounts, certificates of deposit, and money market accounts.
2 causes in shifts
income and expectations
determinants of demand/demand shifters
income, population, price of substitutes, price of complements, expectations, tastes
superior goods
income-elastic goods with a positive YED
necessity goods
income-inelastic goods with a positive YED
government policies
increase government regulations & restrict supply :( (curve shifts left)
services
jobs that we pay people to do for us
types of bonds
junk, municipal, savings, treasury
saving
keeping your money to spend at a later time
inputs
labor, machinery, buildings, and other resources used to produce output
factors of production
land, labor, capital, entrepreneurship
income-elastic
large change in quantity demanded with a change in consumer income
elastic PED
large change in quantity demanded with a change in price
elastic PES
large change in quantity supplied with a change in price
Taxes
money people pay to the government to pay for services such as roads, schools, and police
taxes
money taken out of pay; addional charge when paying for goods/ services; used by government to provide services
expense
money that a person spends
taxes
money that is collected by a government
M1
money that is easily accessible, such as cash or money in checking accounts
Saving
money that is not spent
income
money that people earn
Trade
money used in particular country to buy goods and services.
Income
money you get after working
Securities and Exchange Comission
monitors the stock market and enforces laws regulating the sale of stocks and bonds
number of suppliers
more suppliers=greater the market supply...if one goes out of business-less market and curve shifts less
distribution
moving a product to make available for sale
incentive
n. a benefit offered to encourage people to act in a certain way (pp. 12, 176)
demand-pull inflation
n. a condition that occurs when total demand rises faster than the production of goods and services (p. 399)
Lorenz curve
n. a curve that shows the degree of income inequality in a nation (p. 391)
wage-price spiral
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)
deflation
n. a decrease in the general price level (p. 398)
subsidy
n. a government payment that helps cover the cost of an economic activity that can benefit the public as a whole (p. 88)
production possibilities curve (PPC)
n. a graph used to illustrate the impact of scarcity on an economy (p. 18)
full employment
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)
consumer price index (CPI)
n. a measure of changes in the prices of goods and services that consumers commonly purchase (p. 396)
producer price index (PPI)
n. a measure of changes in wholesale prices (p. 397)
modified free enterprise economy
n. a mixed economic system that includes some government protections, provisions, and regulations to adjust the free enterprise system (p. 80)
stagflation
n. a period during which prices rise at the same time that there is a slowdown in business activity (p. 359)
consumer
n. a person who buys goods or services for personal use (p. 5)
free rider
n. a person who does not pay for a good or service but who benefits from it when it is provided (p. 85)
producer
n. a person who makes goods or provides services (p. 5)
workfare
n. a program that requires welfare recipients to do some kind of work in return for their benefits (p. 393)
recession
n. a prolonged economic contraction lasting two or more quarters (six months or more) (p. 359)
hyperinflation
n. a rapid, uncontrolled rate of inflation in excess of 50 percent (p. 398)
externality
n. a side effect of a transaction that affects someone other than the producer or buyer (p. 87)
legal equality
n. a situation in which everyone has the same economic rights under the law (p. 73)
cost-push inflation
n. a situation in which increases in production costs push up prices (p. 399)
free contract
n. a situation in which people decide for themselves which legal agreements to enter into (p. 73)
market failure
n. a situation in which people who are not part of a marketplace interaction benefit from it or pay part of its costs (p. 84)
scarcity
n. a situation that exists when there are not enough resources to meet human wants (p. 4)
specialization
n. a situation that occurs when individuals or businesses concentrate their efforts in the areas in which they have an advantage for increased productivity and profit (pp. 50, 138, 510)
inflation
n. a sustained rise in the general price level, or a sustained fall in the purchasing power of money (p. 396)
centrally planned economy
n. a system in which the society's leaders make all economic decisions (p. 42)
voluntary exchange
n. a trade in which the parties involved anticipate that the benefits will outweigh the cost (p. 49)
public transfer payment
n. a transfer payment in which the government transfers income from taxpayers to recipients who do not provide anything in return (p. 89)
circular flow model
n. a visualization of all interactions in a market economy (p. 52)
national income accounting
n. a way of analyzing a country's economy using statistical measures of its income, spending, and output (p. 350)
positive economics
n. a way of describing and explaining economics as it is (p. 29)
normative economics
n. a way of describing and explaining what economic behavior ought to be, not what it actually is (p. 29)
global economy
n. all the economic interactions that cross international boundaries (p. 61)
labor
n. all the human time, effort, and talent used to produce goods and services (p. 8)
land
n. all the natural resources on or under the ground that are used to produce goods and services (p. 8)
capital
n. all the resources people make and use to produce and distribute goods and services (p. 8)
market economy
n. an economic system based on individual choice and voluntary exchange (p. 39)
capitalism
n. an economic system based on private ownership of the factors of production (p. 49)
traditional economy
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)
command economy
n. an economic system in which the government makes all economic decisions (p. 39)
Distribution
the commercial activity of transporting and selling goods from producer to consumer
socialism
n. an economic system in which the government owns some or all of the factors of production (p. 43)
communism
n. an economic system in which there is no private ownership of property and little or no political freedom (p. 43)
depression
n. an extended period of high unemployment and reduced business activity (p. 359)
efficiency
the condition in which economic resources are being used to produce the maximum amount of goods and services
positive externality
n. an externality that benefits people who were not involved in the original economic activity (p. 87)
negative externality
n. an externality that costs people who were not involved in the original economic activity (p. 87)
economic growth
n. an increase in a nation's real gross domestic product (p. 358)
capital deepening
n. an increase in the ratio of capital to labor (p. 371)
public goods
n. goods and services provided by the government and consumed by the public as a group (p. 84)
welfare
n. government economic and social programs that provide assistance to the needy (p. 392)
safety net
n. government programs designed to protect people from economic hardships (p. 89)
underground economy
n. market activities that go unreported because they are illegal or because those involved want to avoid taxation (p. 354)
opportunity cost
the cost of what you have to give up in order to get something else
marginal social cost curve
the cost to society (the supply curve)
lagging indicators
n. measures of economic performance that usually change after real gross domestic product changes (p. 364)
coincident indicators
n. measures of economic performance that usually change at the same time as real gross domestic product changes (p. 364)
leading indicators
n. measures of economic performance that usually change before real gross domestic product changes (p. 364)
transfer payment
n. money distributed to individuals who do not provide goods or services in return (pp. 89, 432)
statistics
n. numerical data (p. 24)
underemployed
n. people employed part-time who want to work full-time, or those who work at a job below their skill level (p. 383)
disposable personal income (DPI)
n. personal income minus taxes (p. 355)
goods
n. physical objects, such as food, clothing, and furniture, that can be purchased (p. 5)
nonmarket activities
n. services that have potential economic value but are performed without charge (p. 354)
law of increasing opportunity costs
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)
open opportunity
n. the ability of everyone to enter and compete in the market of his or her own free choice (p. 73)
marginal cost
n. the additional cost of producing or using one more unit of a good or service (pp. 16, 140)
trade-off
n. the alternative someone gives up when making an economic choice (p. 14)
productivity
n. the amount of output produced from a set amount of inputs (p. 372)
personal income (PI)
n. the annual income received by a country's people from all sources (p. 355)
infrastructure
n. the basic set of support systems—such as power, communications, transportation, water, sanitation, and education systems—needed to keep an economy and society going (pp. 86, 545)
utility
n. the benefit or satisfaction gained from using a good or service (p. 12)
marginal benefit
n. the benefit or satisfaction gained from using one more unit of a good or service (p. 16)
entrepreneurship
n. the combination of vision, skill, ingenuity, and willingness to take risks that is needed to create and run new businesses (p. 9)
underutilization
n. the condition in which economic resources are not being used to their full potential, resulting in fewer goods and services (p. 20)
factors of production
n. the economic resources needed to produce goods and services (p. 8)
competition
n. the effort of two or more people acting independently to get business by offering the best deal (p. 49)
profit
n. the financial gain a seller makes from a business transaction (p. 49); the money left over after the costs of producing a product are subtracted from the income gained by selling that product (p. 78)
real GDP
n. the gross domestic product corrected for changes in prices from year to year (p. 352)
net national product (NNP)
n. the gross national product minus depreciation of capital stock—in other words, the value of final goods and services less the value of capital goods that became worn out during the year (p. 355)
gross national product (GNP)
n. the market value of all final goods and services produced by a country in a given time period (p. 355)
gross domestic product (GDP)
n. the market value of all final goods and services produced within a nation in a given time period (p. 350)
poverty threshold
n. the official minimum income needed to pay for the basic expenses of living (p. 388)
poverty rate
n. the percentage of people living in households that have incomes below the poverty threshold (p. 389)
unemployment rate
n. the percentage of the labor force that is jobless and actively looking for work (p. 382)
cost-benefit analysis
n. the practice of examining the costs and the expected benefits of a choice as an aid to decision making (p. 15)
laissez faire
n. the principle that the government should not interfere in the economy (p. 49)
inflation rate
n. the rate of change in prices over a set period of time (p. 397)
multifactor productivity
n. the ratio between an industry's economic output and its labor and capital inputs (p. 372)
real GDP per capita
n. the real gross domestic product divided by total population (p. 369)
private property rights
n. the rights of individuals and groups to own resources and businesses (p. 48)
business cycle
n. the series of growing and shrinking periods of economic activity, measured by increases or decreases in real gross domestic product (p. 358)
poverty
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)
labor input
n. the size of the labor force multiplied by the length of the workweek (p. 371)
economics
n. the study of how individuals and societies satisfy their unlimited wants with limited resources (p. 4)
microeconomics
n. the study of the behavior of individual players—such as individuals, families, and businesses—in an economy (p. 27)
macroeconomics
n. the study of the behavior of the economy as a whole; concerned with large-scale economic activity (p. 27)
aggregate demand
n. the sum of all the demand in the economy (p. 360)
aggregate supply
n. the sum of all the supply in the economy (p. 360)
national income (NI)
n. the total income earned in a nation from the production of goods and services in a given time period (p. 355)
income inequality
n. the unequal distribution of income (p. 390)
opportunity cost
n. the value of something that is given up by choosing one alternative over another (p. 14)
seasonal unemployment
n. unemployment linked to seasonal work (p. 384)
structural unemployment
n. unemployment that exists when the available jobs do not match the skills of available workers (p. 384)
service
n. work that one person does for another for payment (p. 5)
factors of productions
natural resources, capital, human resources that are used to produce goods and services.
4 limitations of GDP
negative externalities, underground activities, nonmarket activities, quality of life
consumer surplus
the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it
producer surplus
the amount a seller is paid for a good minus the amount the seller would be willing to sell it at
shortage
the amount by which the quantity demanded is higher than the quantity supplied- signals price is to low
supply
the amount of a good or service available
demand
the amount of a good or service that consumers are willing and able to buy
Supply
the amount of goods and services people want
supply
the amount of goods or services that is available for use
Savings
the amount of income that is not spent
supply
the amount of items AVAILABLE
demand
the amount of items WANTED
profit
the amount of money left over after expenses are taken out
income
the amount of money recieved during a period of time in exchange for labor or service. AKA wages
total revenue
the amount paid by buyers and received by sellers of a good, computed as the price of the good times the quantity sold
utility
the benefit or satisfaction received from using a good or service
labor
the effort that an individual person puts into making or selling a product
capital resources
the equipment and buildings used to operate a business
profit
the financial gain; the positive difference between the revenue and cost of doing business
All goods have to be worked for.
the first thing to understand about economics
human resources
the people who do the work
child dependency ratio
the percentage of population below working age (below 15) divided by the percentage of the population of working age (15-64)
markets
the places where the price of goods and services are determined as exchanges take place
trough
the time in the business cycle when a contraction ends
boom
the time in the business cycle when the economy nears potential output
bilateral
the type of trade agreement that involves two countries, usually with the aim of reducing or removing tariffs or quotas, decreasing trade barriers, or harmonizing fiscal policy
marginal utility
the utility of the next unit
Consumption
the utilization of economic goods to satisfy need
opportunity cost
the value of something that is given up to get something else that is wanted
opportunity cost
the value of the next best alternative foregone when an economic choice is made
Currency
the voluntary exchange of goods and services among people and countries benefitting both parties.
economy
the way people use/organize their environment to meet their material needs
transportation
the way we move goods from one place to another
macroeconomics
the wider-view study of considering all economic activity (inflation, unemployment, distribution of income...)
demand
the willingness and ability to buy or consume something
supply and demand
the willingness of people to buy a product- customers need to 1) want the product 2) be willing to buy it 3) have the right resources to buy it ; as demand increases so does price and the opposite too (are balanced)
goods and services
what firms exchange for consumer expenditure in the circular flow model
expenditure
what households exchange for goods & services in the circular flow model
Price
what people pay for goods and services
three fundamental economic questions
what to produce, how to produce, for whom to produce
Opportunity cost
what you choose to give up when you buy one thing over another
efficiency
what you put in versus what you get out
opportunity cost
whatever must be given up to obtain some item
trade deficit
when a country imports more than it exports
sanction
when countries place restrictions on trade with a certain country in order to force it to change a policy
capital widening
when extra capital is used with an increased amount of labour, but the ratio of capital per worker does not change (usually, total production will rise while productivity remains unchanged)
capital deepening
when extra capital is used with the same amount of labour, this increasing the ratio of capital per worker (usually, improvements to technology)
market failures
when free market doesn't provide needed good/services or when free market hurts people
competition
when more than one business is selling the same, or similar, good or service
Opportunity Cost
when one chooses to buy one item over another, the item he/she didn't buy opportunity cost
Interdependence
when people and/or countries depend on one another to provide their goods and services
Spending
when people pay for goods and services
interdependence
when producers and consumers depend on each other
allocative efficiency
when resources are allocated in the most efficient way from society's point of view (community surplus maximized)
conspicuous consumption
when satisfaction increases as price increases ("snob value")
cost of resources
when the cost of resources goes down so does the price of the product
Experimental Economics
A branch of economics that studies the economy through controlled laboratory experiments.
corporation
A business owned by stockholders who share in its profits but are not personally responsible for its debts.
Law of Supply
A law stating that there is a positive causal relationship between the price of a good and quantity of the good supplied, over a particular time.
scarcity
A situation in which unlimited wants exceed the limited resources available to fulfill those wants
Competition
A situation that occurs when there are many buyers and sellers acting independently, so that no one has the ability to influence the price at which the product is sold in the market.
Crowding-out
A situation where increasing government spending causes a higher rate of interest, reducing private investment spending. Thus, reversing expansionary fiscal policy (BTW: it's fiscal policy because it's increasing government spending).
Inflationary gap
A situation where real GDP is greater than potential GDP, and unemployment is lower than the natural rate of unemployment.
Recessionary gap
A situation where real GDP is less than potential GDP, and unemployment is greater than the natural rate of unemployment.
Competitive supply
A situation where two goods compete for the same resources. Example: A farmer can produce wheat or corn, but producing ore of one means producing less of the other.
depression
A stage in the business cycle in which there is little or no economic growth
What was Woodrow Wilson's 14 point plan?
A statement that encouraged peace and negotiations between countries during WW1
Gini coefficient
A summary measure of the information contained in the Lorenz Curve of an economy. The closer the Gini coefficient is to 1, the greater the income inequality. The closer the Gini coefficient is to 0, the greater the income equality.
Market
A system of commercial exchange shaped by the forces of supply and demand and regulated by the price mechanism.
Capitalism
A system of generalized commodity production in which wealth is owned privately and economic life is organized according to market principles.
Specific tax
A tax calculated as an absolute amount per unit of the good or service sold.
Corrective tax
A tax designed to induce private decision makers to take account of the social costs that arise from a negative externality.
regressive tax
A tax for which the percentage of income paid in taxes decreases as income increases
progressive tax
A tax for which the percentage of income paid in taxes increases as income increases
income tax
A tax on a person's income
tariff
A tax on imported goods; results in increased prices
Carbon tax
A tax per unit of carbon emissions of fossil fuels.
Lump-sum tax
A tax that is the same amount for every person.
Invisible hand
A term coined by Adam Smith to describe the self-regulating nature of the marketplace
NAFTA
A trade agreement between Canada, the United States and Mexico that encourages free trade between these North American countries.
Regional trade agreement
A trade agreement between several countries that are located within a geographical region. Example: NAFTA.
Multilateral trade agreement
A trade agreement to lower trade barriers between many countries.
Credit
A trade when payment comes later.
Privatisation
A transfer of ownership of the public sector (the government) to the private sector (the private owners).
Positive externality (also known as Spillover Benefits)
A type of externality where the side-effects on third parties are positive or beneficial.
Grant
A type of foreign aid consisting of funds that are in effect gifts (they do not have to be paid).
Cost-push inflation
A type of inflation caused by a fall in AGGREGATE SUPPLY, resulting from an increase in COSTS OF PRODUCTION.
labor, freedom
According to Albert Einstein, "Everything really great and inspiring is created by the individual who can ____ in _____."
Law of increasing costs
An economic principle which states that as production shifts from making one good or service to another, more and more resources are needed to increase production of the second good or service.
Market Force
An economic force that is given relatively free rein by society to work through the market.
Mercantilism
An economic policy under which nations sought to increase their wealth and power by obtaining large amounts of gold and silver and by selling more goods than they bought. It benefits the mother country over colonies.
Externality
An economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume.
Capital
An economic system based on private ownership and on the investment of money in business ventures in order to make a profit.
Free Enterprise System
An economic system characterized by private or corporate ownership of capital goods
Free Enterprise
An economic system characterized by private or corporate ownership of capital goods; investments that are determined by private decision rather than by state control; and determined in a free market.
Free Market Economy
An economic system in which decisions on the three key economic questions are based on voluntary exchange in markets.
Market Economy
An economic system in which people choose freely what to buy and sell
Centrally Planned Economy
An economic system in which the central government makes all decisions on the production and consumption of goods and services.
Command Economy
An economic system in which the central government, instead of the free market, answers the three economic questions.
command economy
An economic system in which the government controls a country's economy.
Centrally Planned Economy
An economic system in which the government makes all decisions on the three key economic questions.
Traditional Economy
An economic system that relies on habit, custom, or ritual to decide the three key economic questions.
Traditional Economy
An economic system where custom and habit determine what will be bought and sold.
Market Economy
An economic system where decisions about production, price and other economic factors are all determined by the law of supply and demand.
Mixed Economy
An economy in which private enterprise exists in combination with a considerable amount of government regulation and promotion.
mixed economy
An economy in which private enterprise exists in combination with a considerable amount of government regulation and promotion.
Bilateral trade agreement
Any trade agreement involving two trading partners.
What does a producer make?
Any type of product
Money
Anything generally accepted in exchange for goods and services
Money
Anything that is acceptable as payment for goods and services.
Goods
Anything you buy that you can hold or touch
Human resources
Are people
GDP per capita
Gross domestic product divided by the number of people in the population.
Interest rate
Interest expressed as a percentage.
Trade-off
The act of giving up one benefit in order to gain another, greater benefit.
Services
The actions or activities that one person performs for another.
Marginal Benefit
The additional benefit above what you've already desired.
Marginal Cost
The additional cost to you over and above the costs you have already incurred.
opportunity cost
The cost of passing up the next best choice when making a decision
Transaction cost
The costs that parties incur in the process of agreeing to and following through on a bargain.
Federal Reserve System
The country's central banking system, which is responsible for the nation's monetary policy by regulating the supply of money and interest rates
Aggregate demand curve
The curve that shows that relationship between total quantity of goods and services that all buyers in an economy want to buy over a particular time period.
Underallocation of resources
Occurs when too few resources are allocated to the production of a good relative to what is socially most desirable.
Overallocation of resources
Occurs when too many resources are allocated to the production of a good relative to what is socially most desirable, resulting in its overproduction.
Specialization
The concentration of the productive efforts of individuals and businesses on a limited number of activities.
Scarcity
The condition in which available resources are limited.
Equity
The condition of being fair or just.
Education
The largest percentage of state funds is spent on this.
Consumer
The last buyer of something.
Ceteris Paribus
"other things being equal"
Consumer
Someone who buys goods or services.
What is a producer?
Someone who creates and sells a product.
Need
Something essential for survival.
import
Something that a country buys from another country
export
Something that a country sells to another country
Revenues
Source of income for the state.
اختلاس
embezzlement
سعر الصرف
exchange rate
استغلال
exploitation
تصدير
exporting
صادرات
exports
إخفاق
failure
إغراق
flooding
Undervalued currency
A currency whose value is lower than its free-market value.
green GDP
GDP minus environmental costs of production
GDP per capita
GDP per head
Factors of production
The resources that are used to make goods and services.
Eminent Domain
The right of a government to take private property for public use.
property rights
The rights of an individual or business to own, use, rent, invest in, buy, and sell property.
conservation
The saving of natural resources
Human capital
The skills, abilities, and knowledge acquired by people, as well as good levels of health, all of which make them more productive.
underutilization
producing fewer goods and services than possible
Barter
trade without money
preferential trading area
trading bloc that grants preferential access to certain products from certain countries, usually to reduce tariffs (for example, the one between the EU and the ACP — the Pacific Group of States)
customs union
trading bloc where countries agree to trade freely amongst themselves and adapt common external barriers (for example, Switzerland-Lichenstein or the East African Community)
free trade area
trading bloc where countries agree to trade freely amongst themselves, but choose individually how to trade with outside countries (for example, NAFTA, EFTA, or SAFTA)
innovation
turning new ideas and inventions into marketable products or services
recession
two consecutive quarters of negative GDP growth in the business cycle
fixed cost
an expense that does not change no matter how much a business prodcues
labor union
Organization dedicated to improving working conditions
Productivity
(economics) the ratio of the quantity and quality of units produced to the labor per unit of time. A measure of efficiency
Keynesianism
.Approach to macroeconomic policy that has favours state stimulation /regulation og aggregate demand through increasing/reducing taxes and /or increasing/reducing public spending. Main aim : to achieve full employment . The market is seen as unable to achieve economic equlibrium (balance)
want
Something that is not necessary for life, but makes life more enjoyable
عائدات
revenues
مبيعات
sales
حساب التوفير
savings account
تخصص
specialization
إحصائيات
statistics
العرض والطلب
supply and demand
فائض
surplus
capitalism
system in which private citizens own most, if not all, of the means of production and decide how to use them within limits by laws
ضريبة , الضرائب
tax /taxes
marginal cost
the additional or extra opportunity cost associated with each increase of one unit of sales
demand
the amount of a good or service that consumers are willing and able to buy over a range of prices
supply
the amounts of goods and services that producers are willing and able to sell at a range of prices
total cost
the combination of all fixed and variable costs
opportunity cost
the cost of the next-best use of time and money when choosing to do one thing or another
monetary policy
A form of government regulation in which the nation's money supply and interest rates are controlled.
municipal bond
A form of lending to a company or the government (city, state, or federal)
What is a proprietorship?
A type of business owned by 1 person who takes all the risks and all the profits.
Trade
Exchange of goods and services, Exchange between two or more parties of one entity or another.
assembly line
Production method that breaks down a complex job into a series of smaller tasks
economics
Production, distribution, and consumption of goods and services
consumer goods
Products people buy for personal use
Opportunity Cost
The benefit that you might have gained from choosing the next-best alternative.
Number of substitutes
The more substitutes there are for a product, the more elastic will be the demand for it.
Incentives
A cost or benefit that motivates a decision or action by consumers, workers, firms or other participants in the economy.
imperfect competition
a market structure that does not meet the conditions of perfect competition
consumer
a person who buys or uses goods or services
3 C's
capital, character, capacity
command economic system
central government makes all economic decisions
innovation
change in an existing product
marketing
changing the way something is sold
urban
city
nominal gdp
currrent prices
زبون , زبائن
customer / customers
عميل , عملاء
customer / customers
Economic Model
A framework that places the generalized insights of the theory in a more specific contextual setting.
demand-pull inflation
A general rise in prices that occurs when overall demand for goods increases faster than the output of goods.
cost-push inflation
A general rise in prices that results from a rise in the costs of production.
Want
A good or service that you desire.
natural resource
A good that comes from the environment is
inelastic good
A good that does not have a change in demand based upon price (e.g. medicine)
Production Possibilities Frontier
A line on a production possibilities curve that shows the maximum possible output an economy can produce.
secured loan
A loan that is backed by collateral.
monopoly
A market in which there are many buyers but only one seller.
Consumer
A person or household that purchases goods or services.
What is a consumer?
A person who buys and uses a product?
Entrepreneur
A person who decides how to combine resources to create goods and services.
budget
A plan for using money
recession
A six month period of time where there is little business growth and unemployment rises
Socialism
A socio-economic system in which property and the distribution of wealth are subject to the control by the community.
Natural Resources
"Gifts of nature" that can be used to produce goods and services, such as oceans, air, minerals, forests and fields of land.
entrepreneur
(n.) a person who starts up and takes on the risk of a business
free, work
*No* goods are really ___, for someone has had to ____ to produce them.
3 disadvantages of market economy
1. no mechanism for providing public goods and services because it is not profitable 2. cannot provide security for old/sick people 3. unequal distribution of wealth
beliefs of Karl Marx
-19th century German philosopher, historian and economist -believed that all of history is a struggle between classes -with means of production owned by the government, the class struggle would be resolved
Be able to give an example of of economic compettition in our community
...
Macroeconomic objectives
1) Full employment. 2) Low rate of inflation. 3) Economic growth. 4) An equitable distribution of income. 5) Avoidance of balance of payments problems.
Quota
1) in a centralized command economy, being told by the government what and how much to produce in a certain time.2) a limit placed on the # of imports that enter a country.
Advantages of FDI on developing countries.
1. FILLS SAVING GAP: •saving is necessary for economic growth 2. EMPLOYMENT, EDUCATION AND TRAINING: •Improving skill levels of work force and the managerial capabilities •increase earnings stimulate growth 3. BETTER RESEARCH AND DEVELOPMENT, TECHNOLOGY AND MARKETING EXPERTISE: •enhancing industrialisation 4. INCREASE GOV TAX REVENUE: •can be used to gain growth by investing in infrastructure, improve public services, promote economic development 5. IMPROVE INFRASTRUCTURE BOTH PHYSICALLY AND FINANCIALLY 6. GREATER CHOICE AND LOWER PRICE: •may be able to provide essential goods that are not provided domestically 7. MORE EFFICIENT ALLOCATION OF RESOURCES
What are the International barriers to economic development.
1. Over-specialization on a narrow range of products 2. Price volatility of primary products 3. Inability to access international markets
PARADOX OF VALUE
A SITUATION WHERE SOME NECESSITIES, SUCH AS WATER, HAVE LITTLE MONETARY VALUE, WHEREAS SOME NON-NECESSITIES SUCH AS DIAMONDS, HAVE A MUCH HIGHER VALUE.
Fiscal Year
A budgetary spending year.
stock
A certificate of ownership in a corporation
Rivalrous
A characteristic of a good according to which its consumption by one person reduces its availability for another person.
Non-rivalrous
A characteristic of some goods where the consumption of the good by one person does not reduce consumption by someone else; it is one of the two characteristics of public goods.
Non-excludable
A characteristics of some goods where it is not possible to exclude someone from using a good, because it is not possible to charge a price. It is one of the characteristics of public goods.
Work ethic
A commitment to the value of work.
Economic Principle
A commonly held economic insight stated as a law or principle.
Human development index (HDI)
A composite indicator of development which includes indicators that measure three dimensions of development: income per capita, levels of health and educational attainment.
Economic efficiency
A condition that arises when allocative efficiency is achieved.
Deflation
A continuing decrease in the general price level
Gross national income (GNI)
A measure of total income received by the residents of the country, equal to the value of all final goods and services produced by the factors of production supplied by the country's residents. GNI = GDP + (income from abroad - income sent abroad).
Standard of Living
A measurement of of the quality of life based on ownership of necessities and luxuries that make life easier.
Income approach
A method used to measure the value of aggregate output of an economy, which adds up all income earned by factors of production in the course of producing all goods and services within a country in a given time period.
Expenditure approach
A method used to measure the value of aggregate output of an economy, which adds up all spending on final good sand services produced within a country within a given time period.
inflation
A rise in the general level of prices in an economy.
Composite indicator
A summary measure of more than one indicator. For example: Human Development Indicator includes income, education and health indicators.
Social safety net
A system of government transfers of cash or goods to vulnerable groups, undertaken to ensure that these groups do not fall below a socially acceptable minimum standard of living.
SERVICE
AN ECONOMIC PRODUCT THAT INVOLVES WORK THAT IS PERFORMED FOR SOMEONE.
Efficiency
Achieving a goal as cheaply as possible.
service
Actions or activities that one person performs for another
services
Actions or activities that one person performs for another
Economic Policies
Actions taken by government to influence economic actions.
Service
Actions that people buy.
Know two advantages and disadvantages for the specialization of labor
Advantages workers become experts , disadvantage the job gets boring for the workers
Distribution
All of the steps needed to get your good or service to a buyer.
Production
All of the steps needed to make a good or service.
Primary products
All products produced in the primary sector of an economy.
Anti-dumping
An argument that justifies trade protection policies: if a country's trading partner is suspected of practicising dumping, than the country should have the right to impose trade protection measures (tariffs or quotas) to limit quantities of the dumped good.
ticker
An arrangement of characters (usually letters) representing a particular security listed on an exchange or otherwise traded publicly same as stock symbol
Open economy
An economy that has international trade: (imports and exports) usually appears in connection with economic theories and models as virtually all economies in the real world are open economies (though to varying degrees).
Closed economy
An economy that has no international trade. THIS DOES NOT REALLY EXIST IN THE REAL WORLD.
Freely floating exchange rates
An exchange rate determined entirely by market forces (the forces of supply and demand.)
Incentive
An expectation or reward that encourages people to behave in a certain way.
International Monetary Fund (IMF)
An international financial institution composed of 185 member countries, whose purpose is to make short-term loans to governments on commercial terms in order to stabilize exchange rates, alleviate balance of payments difficulties, and help countries meet their foreign debt obligations.
World Trade Organization
An international organization that provides the institutional and legal framework for the trading system that exists between member nations worldwide, responsible for liberalizing trade, operating a system of trade rules and providing a forum for trade negotiations between governments, and for settling trade disputes.
Public Property
Any good that is owned by the government.
Carl Menger
Austrian economist who developed a solution to the Diamond-Water Paradox
18th Amendment
Banned consumption, transport, production, and sale of alcoholic beverages
Traditional Economy
Based on custom (jobs passed down from generation to generation), common to small, primitive, isolated societies. Labor intensive, subsistence farming and the use of barter. It has little chance to produce surplus.
What type of resources are machines used in factories?
Capital
Marginal external cost
Change in total cost incurred by households or firms, associated with a unit-change in the consumption or output of other households or businesses.
Where is the meat packing industry located?
Chicago
Economically more developed countries
Common characteristics: High levels of GDP per capita, relatively low levels of poverty, small agricultural sectors, and large industrial and services sectors.
Economically less developed countries
Common characteristics: Low levels of GDP per capita, high levels of poverty, large agricultural sectors, and large urban informal sectors.
2 major works by Karl Marx
Communist Manifesto Das Kapital
Define relative poverty.
Comparative level of poverty, they do not reach some specified level of income.
Foreign aid
Consists of concessional financial flows from the developed world to economically less developed countries, and includes CONCESSIONAL LOANS, and GRANTS.
Producer Price Index
Consists of several indices of prices received by the producers of goods at various stages in the production process.
law of diminishing returns
David Ricardo's law that as increasing amounts of labour and machinery are use on a fixed area of land, additions to total output will eventually diminish
theory of rents
David Ricardo's theory that as populations grow, landowners benefit the most as they are able to extract high levels of rent
Quintiles
Division of population into five equal groups with respect to the distribution of a variable, such as income. Example: The lowest income quintile refers to the 20% of the population with the lowest income.
Trade
Exchanging one thing for another
Define multinational corporations (MNC's).
Firms that produce goods and services in more than one country
Business cycle
Fluctuations in the growth of real GDP, consisting of alternating periods of expansions and contractions.
Humanitarian aid
Foreign aid extended in regions where there are emergencies caused by violent conflicts or natural disasters such as floods, earthquakes and tsunamis, intended to save lives, ensure access to basic necessities and provide assistance with reconstruction.
13th Amendment
Freed the slaves
Demerit goods
Goods that are considered to be undesirable for consumers and are over-provided by the market.Reasons for over-provision may be that the good has negative externalities. Example: cigarettes.
Merit goods
Goods that are held to be desirable for consumers, but which are underprovided by the market. Reasons for underprovision: Good may have positive externalities, or consumer ignorance about the benefits of the good.
Necessities
Goods that are necessary of essential. They have inelastic PED and inelastic YED.
public good
Goods that are neither excludable nor rival in consumption
Luxuries
Goods that are not necessary or essential; They have an elastic PED and elastic YED.
Who owns resources in Communism?
Government
Real GDP
Gross domestic product measured in constant prices.
Nominal GDP
Gross domestic product measured in terms of current (nominal) prices.
Green GDP
Gross domestic product which has been adjusted to take account environmental destruction and/or health consequences of environmental problems.
GNI per capita
Gross national income divided by the number of people in the population.
wealth
Having a large amount of money or property
Supply
How much a business has to sell.
Existence of unused capacity
If a firm has lots of unused capacity, it can increase output easily and without great cost increases. The elasticity of supply becomes relatively high.
Ability to store stock
If a firm is able to store high levels of stock, they will be able to react to price increases with large supply increases so PES will be relatively elastic.
Mobility of factors of production
If the factors of production are easily moved from one productive use to another then PES will be relatively elastic.
Cost rise as output is increased
If total costs rise significantly as a producer attempts to increase supply, the producer will be unlikely to continue his attempts. The elasticity will be relatively inelastic - large price rises will be needed to make the supply increase worth the producer's while.
technological monopoly
If you invent something, you are capable of having a right over your invention.
Assembly line
is a row of workers that complete steps to produce something
Competition
In Economics, the businesses that provide a good or service that is SIMILAR to another business. Businesses that COMPETE to gain consumers and sales.
Sources of economic growth.
Increase in quantity or quality of •NATURAL FACTORS •HUMAN CAPITAL FACTORS: →encouraging population growth or by increasing immigration levels →improve health care, education, training, retraining and access to fresh water and sanitation •PHYSICAL CAPITAL AND TECHNOLOGICAL FACTORS: →Two concepts: capital widening (extra capital is used with increased amount of labour but ratio of capital per worker does not change, production rise) →Capital deepening (increase in the amount of capital for each worker, improvements in labour productivity as well as total production) •INSTITUTIONAL FACTORS: →adequate banking system →structured legal system →good education system →reasonable infrastructure →political stability →good international relationships
Define economic growth.
Increase in real output of an economy over time.
Entrepreneurship (FACTOR OF PRODUCTION)
It involves a special human skill that includes the ability to innovate by developing new ways of doing things, to take business risks and to seek new opportunities for opening and running businesses.
Budget surplus
It is a situation where the government tax revenues are greater than government expenditures over a specific period of time.
Budget deficit
It is a situation where the government's tax revenues are less than the government expenditures over a specific period of time.
goods
Items purchased to satisfy needs and wants
Describe health measures.
LIFE EXPECTANCY AT BIRTH: •average number of years that a person may expect to live from the time they are born. INFANT MORTALITY RATE: •measure of the number of deaths of babies under the age of one year per thousand live births in a given year.
factors of production
Land, Labor, Capital, Entrepreneurship
Property Tax
Largest source of revenue for county government.
Public disclosure laws
Laws requiring companies to provide information about their products or services.
Multilateral development assistance
Lending to developing countries for the purpose of assisting their development on non-concessional terms by multilateral organizations. Example: World Bank and International Monetary Fund.
Describe the actions of IMF.
Lends funds to developing countries that need them but would only do so if they adopt Structural Adjustment policies: →Encouraging trade liberalisation →Encourage exports of primary agricultural commodities →Devaluing currency →Encouraging FDI →privatisation of nationalized industries →Charging for basic services such as education and health →Removing subsidies and price controls →Improving governance
standard of living
Level of economic prosperity
Standard of living
Level of economic prosperity.
Scarcity
Limited quantities of resources to meet unlimited wants.
Patriotism
Love of one's country.
Capitol
Machines, resources, money and workforce that is used to produce a good/product or service.
Natural resources
Made by nature
Producer
Makes goods or services
opportunity cost
Making a choice to give up one thing in order to get something else.
Specialization
Making one of a kind of good, or providing one of a kind service
Fiscal policy
Manipulations by the government of its own expenditures and taxes in order to influence the level of aggregate demand.
market structure
Market classification according to number and size of firms, type of product, and type of competition
How are resources allocated in Market System?
Market forces allocate resources
natural resources
Materials or substances such as minerals, forests, water, and fertile land that occur in nature and can be used for economic gain
Labor market flexibility
May be achieved by reducing or eliminating interference with market forces. Example: Reducing or eliminating minimum wages and labor union activities, or reducing job security.
Market
Meeting place or mechanism allowing buyers and sellers of an economic product to come together.
Price support
Minimum prices (price floors) set by governments for agricultural product.
profit
Money that remains after all the costs of producing a product have been paid
income
Money that you earn.
Currency
Money used in trades.
Debt
Money you owe from buying on credit.
embargo
More drastic than sanctions. Nations refuse to trade with a country at all because of a policy or decision
surplus
More than what is needed. If I have 35 students and 40 folders, I have a surplus of 5 folders
net national income
NNI; GNI minus depreciation (capital consumption)
What type of recourse is water and coal?
Natural
collective bargaining
Negotiations between representatives of labor unions and management to determine pay and acceptable working conditions.
Where is the textile industry located?
New England Industry
Opportunity costs
Next best choice/option. What choice were you unable to make because you made this choice.
What is command economy?
No consumer choice, government has all the say in government and they make all the decisions.
Necessity goods
Products that have a low income elasticity; the demand for them will change very little if income rises (e.g. bread).
Non-governmental organizations (NGOs)
Non-profit organizations that provide a very wide range of services and humanitarian functions. Activities are 1) Emergency assistance, 2) Promotion of sustainable development, 3) Protection of child health, 4) Health, 5) Provision of technical assistance.
modern-day examples of command economies
North Korea, Cuba
scarcity
Not enough items for the demand
Infrastructure
Numerous types of physical capital resulting from investments, making major contributions to economic growth and development by lowering costs of production and increasing productivity. Examples: roads, airports, and dams.
Transfer payments
Payments made by the government to individuals specifically for the purpose of redistributing income.
What is free market economy?
People have a choice at what they want, government doesn't really monitor much making monopolies a hazard.
What is mixed economy?
People have the choice to choose, government does monitor making monopolies impossible
traditional economy
People produce what people need to survive by farming, hunting, and/or gathering. The get their products by making their own.
market economy
People produce what people want to buy and sell; based on supply and demand. People get products determined by how much a person want to pay for a good or service.
consumers
People who buy and use goods and services.
consumers
People who buy goods or services
consumer
People who use the goods and services
economic wants
People's desires that can be satisfied by consuming goods and/or services.
per capita
Per person, or per head. For example, GDP per capita is total GDP divided by the number of people in the population.
Good
Physical things that people buy.
Capitalist or Market Economy
Property and resources are privately owned by individuals, and limited resource allocations are achieve through material incentives. Depends upon "Supply and Demand". A consumer economy.
Private Property
Property owned by individuals or companies, not by the government or the people as a whole.
Private Property
Property that is owned by individuals or companies, not by the government or the people as a whole.
Theorems
Propositions that are logically true based on the assumptions in a model.
Investing
Putting money aside to receive greater benefit the future.
What is interest?
Putting your money in a bank in hopes that when you withdraw it, there will be more money with it.
Welfare
Refers to the well-being of population.
Labor market reforms
Reforms intended to make labor markets more competitive and flexible, to make wages respond to the forces of supply and demand, to lower labor costs and increase employment by lowering the natural rate of unemployment. Example: Abolishing or reducing minimum wages, reducing job security, and reducing unemployment benefits.
Price elastic demand
Relatively high responsiveness of demand to changes in price. PED > 1
Price elastic supply
Relatively high responsiveness of supply to changes in price. PES > 1
Price inelastic demand
Relatively low responsiveness of demand to changes in price. PED < 1
Price inelastic supply
Relatively low responsiveness of supply to changes in price. PES < 1
21st Amendment
Repealed the 18th amendment; Made alcoholic beverages legal in all 50 states
Common access resources
Resources that are not owned by anyone, do not have a price, and are available for anyone to use without payments. Examples: Lakes, rivers, and fishes in open seas. These resources are a threat to sustainability.
Natural Resources
Resources that come from the Earth.
Price control
Setting of minimum or maximum prices by governments so that prices are unable to adjust to their equilibrium level determined by demand and supply.
Scarctity
Shortage, lack of
inelastic demand
Situation in which a producers price change has little impact on the quantity demanded by consumers
Purchasing power parity exchange rate
Special exchange rates between currencies that makes the buying power of each currency equal to the buying power of the US $1, and therefore, equaling each other.
Consumption
Spending by households (consumers) on goods and services (excludes spending on housing).
macroeconomics
Study of a nation's economy as a whole.
microeconomics
Study of individual consumers and businesses.
WEALTH
THE ACCUMULATION OF ECONOMIC PRODUCTS.
HUMAN CAPITAL
THE SUM OF THE SKILLS, ABILITIES, HEALTH, AND MOTIVATION OF PEOPLE.
PRODUCTIVITY
THIS IS A MEASURE OF THE AMOUNT OF OUTPUT PRODUCED BY A GIVEN AMOUNT OF INPUTS IN A SPECIFIC PERIOD OF TIME.
contractionary monetary policy
The Federal Reserve's adjusting of the money supply by increasing interest rates, resulting in less money in circulation (for the purpose of halting inflation)
What was FDR's program from bringing the country back to its feet during the Great Depression?
The New Deal: This was an act where FDR created several jobs for the unemployed, lowering the unemployment rate.
Infrastructure
The basic facilities that are necessary for a society to function and grow.
franchisee
is a semi-independent business that buys the right to run a franchise
Property rights
The ability of an individual to own and exercise control over scarce resources.
comparative advantage
The ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than other producers.
absolute advantage
The ability of an individual, firm, or country to produce more of a good or service than competitors using the same amount of resources.
Taxation
The action of the taxing authorities levying a tax.
Profit
The amount left after all the production costs are subtracted.
Productive Capacity
The amount of goods and services a region or country is able to produce.
demand
The amount of interest people have in the item
supply
The amount of items to be sold (inventory)
Profit
The amount of money a business receives in excess of its expenses.
Supply of money
The amount of money in circulation, determined by the central bank of a country.
balance
The amount of money people have in their bank account.
Total revenue
The amount of money received by firms when they sell a good or service. TR = P x Q.
What is profit?
The amount of money you make from selling something, after all the expenses are deducted.
Art of Economics
The application of the knowledge learned in positive economics to achieve the goals one has determined in normative economics (Political Economy).
Non-price rationing
The apportioning or distributing of goods among interested users/buyers through means other than price, often necessary when there are price ceilings (maximum prices); may include waiting in line (queues) and underground markets; to be contrasted with 'price rationing', which involves distributing goods among users by means of market-determined prices.
Public interest
The concerns of society as a whole.
Laissez-Faire
The doctrine or belief that the government should not intervene in the economy.
Laissez faire
The doctrine that government generally should not intervene in the marketplace.
Labor
The effort people devote to tasks for which they are paid.
Regulation
The policies involving government regulation of a private sector's activities, based on the argument that governments can help/improve the economy's performance.
Marginal benefit
The extra benefit of adding one unit.
Marginal private benefits
The extra benefit received by consumers when they consume one more unit of a good.
Marginal social benefits
The extra benefits to society of consuming one more unit of a good.
Marginal cost
The extra cost of adding one unit.
Marginal private costs
The extra costs to producers of producing one more unit of a good.
Marginal social costs
The extra costs to society of producing one more unit of good.
Marginal benefit
The extra or additional benefit received from consuming one more unit of a good.
Marginal cost
The extra or additional cost of producing one more unit of output.
Marginal tax rate
The extra taxes paid on an additional dollar of income.
Profit
The financial gain made in a transaction.
What is the Bill of Rights
The first 10 amendments to the Constitution
Command Economy
The government determines what goods are produced, how much is produced, how it is produced, how it is distributed, and the price of the item. Wages are government set and the government determines who has which job. The government controls all aspects of economic life.
free enterprise
The freedom of private businesses to operate competitively for profit with minimal government regulation.
Scarcity
The goods available are too few to satisfy individuals' desires.
command economy
The government decides what is to be produced and how they are to be produced. People get their products based on class, a reward system, or by waiting in line.
Command Economy (Communism/Marxism)
The government decides what to produce, how to produce, and who to produce for. Overthrow of the factory owners by the proletariat (the workers). Favors heavy industry, with few consumer goods. (USSR, China, N. Korea)
interest
The money that the bank pays you to store your money there.
Necessity of the product
The more necessary a product, the more inelastic the demand for it.
What is opportunity cost?
The item that is given up in order to make a different purchase.
Human Capital
The knowledge and skills a worker gains through education and experience.
Scarcity
The lack of resources to produce all the goods and services that people desire
Patriotism
The love of one's country; the passion that inspires a person to serve his or her country.
Unemployment rate
The measure of the amount of unemployment in an economy.
Government intervention
The practice of government to intervene in markets, preventing the free functioning of the market, usually for the purpose of achieving particular economic or social objectives.
Actual output
The quantity of output actually produced by an economy.
Exchange rate
The rate at which one currency can be exchanged for another, or the number of units of foreign currency that corresponds to the domestic currency.
supply/demand
The relationship between consumer needs and the amount of items that is available to be sold.
Economic System
The structure of methods and principles that a society uses to produce and distribute goods and services.
Time period
The time over which PES is measured will affect its value; the longer the time period, the more elastic PES will be because firms will have more time to increase the quantity of factors of production.
National income
The total income of an economy, often used interchangeable with the value of aggregate output.
Costs of production
The total opportunity costs incurred by firms in order to acquire resources for use in production.
Aggregate supply
The total quantity of goods and services produced in an economy over a particular time period, at different price levels.
Business cycle
The up and down pattern of change in the economy
Underutilization
The use of fewer resources than an economy is capable of using.
Efficiency
The use of resources in such a way as to maximize the output of goods and services.
utility, scarcity
The value of a good is determined by its _____ and its _____ at a particular time and at a particular place.
Opportunity Cost
The value of the next best alternative given up when an economic choice is made
Opportunity cost
The value of the next best alternative that must be given up or sacrificed in order to obtain something else.
Non-price determinants of supply
The variables that can influence supply: Costs of factor of production, Price of related goods (Joint Supply and Competitive Supply), Technology, Producer expectations, Taxes, The number of firms, Supply shocks and Subsidies.
Trade
The voluntary exchange of goods and services among people and countries.
economic systems
The ways in which a society answers the three basic economic questions to organize production, distribution, and consumption of goods and services to solve the economic problem of scarcity
Keynesian Economics
Theory based on the principles of John Maynard Keynes, stating that government spending should increase during business slumps and be curbed during booms.
Needs
Things like food, water, shelter, clothing, you can't survive without
Capital resources
Things that are used to make goods or services such as buildings, factories, or tools.
profit motive
To be motivated by the desire to make money.
True
True or False: All needs are wants.
False
True or False: All wants are needs.
Nominal value
Value that is measured in prices that prevail at the time of measurement, and does not account for changes in the price level.
CAPITAL GOODS
WHEN MANUFACTURED GOODS ARE USED TO PRODUCE OTHER GOODS AND SERVICES.
What is the Preamble to the Constitution?
We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.
Costs and Benefit
Weighing the total expressed costs against the total expected benefits in order to choose the best option.
Perfectly elastic demand
When the price of a product will stay the same regardless of quantity demanded (PED=infinity; quantity demanded is infinite).
Perfectly elastic supply
When the price of a product will stay the same regardless of quantity supplied (PES=infinity; quantity supplied is infinite).
member bank
a bank that belongs to the Federal Reserve System
Demand
a desire for an item
incentive
a factor that encourages people to act in a certain way
external stability
a favorable balance of payments position
complete economic integration
a full monetary union with harmonization of fiscal policy (what the Eurozone is moving towards)
oligopoly
a market structure with few, independent firms with significant market power, depending differentiation and relatively significant barriers to entry (soda or airlines, for example)
monopolistic competition
a market structure with many firms with little/slight market power, heterogeneous products, and relatively insignificant barriers to entry (restaurants or clothes, for example)
monopoly
a market structure with one firm with exceptional market power, no differentiation and major barriers to entry (local utilities, for example)
producer
a person who makes a good or provides service
entrepreneur
a person who organizes and operates their own business
consumer
a person who purchases goods and services for personal use
Entrepreneur
a person who starts and/or owns a business
physical capital
all human-made goods that are used to produce other goods and services; tools and buildings
labor
all of the human effort used to produce goods and services
money supply
all of the money available in the United States economy, including both M1 and M2 money
capital
all of the resources made and used by people to produce goods and services
economic development
an improvement in welfare, expanding people's freedoms, reducing poverty, providing for the public, and maintaining law and order (civil rights, civic participation)
inflation
an increase in the overall level of prices in the economy
Goods
an object that people can want or hold
market
an organized way for producers and consumers to trade goods and services
marginal analysis
analysis that involves comparing marginal benefits and marginal costs
producers
are people who make, grow, or supply goods.
private property rights
are the rights of individuals and groups to own businesses and resources
مزاد علني
auction
Bad service
barely makes any money
salary
being paid on a contract or agreed upon amount.
wage
being paid on an hourly rate of pay.
positive externality
beneficial side effect that affects an uninvolved third party
صالح
benefit
municipal bond
bond, often tax exempt, issued by state and local governments
voluntary exchange
both parties must benefit from the exchange
sole proprietorship
business owned by one person
عمولة
commission
mutual fund
company that sells stock in itself and uses the proceeds to buy stocks and bonds issued by other companies
scarcity
condition of not being able to have all the goods and sevrices that you want
basic investment considerations
consistency, simplicity, risk-return relationship, investment objectives
currency
consists of coins and bills that are used as money
real gdp
constant prices
what do you use to measure inflation
consumer price index
community surplus
consumer surplus plus producer surplus
إسهام
contribution
only shows how we respond to changes in price
demand curve
Traditional Economy
describes economic system in place in societies with extensive subsistance agriculture
wants
desires that can be satisfied by consuming a good or a service
sustainable development
development that meets the needs of the present without compromising the ability of future generations to meet their own needs
certificate of deposit (CD)
document showing that an investor has made an interest-bearing loan to a financial institution
portable
easily carried, one of the six characteristics of money
Market Economy
economic activity is generated by private businesses rather than by the government
economic goals
economic growth, full employment, economic efficiency, price level stability, economic freedom, an equitable distribution of income, economic security, balance of trade
normative economics
economics that are a matter of opinion
Millennium Development Goals
eight goals adopted by world leaders in 2000 to be achieved by 2015, centered around eradicating extreme poverty and hunger, achieving universal primary education, promoting gender equality and empowering women, reducing child mortality, improving maternal health, combating HIV/AIDS, malaria, and other diseases, ensuring environmental stability, and developing global partnerships for development
in the longe run supply becomes more...
elatic
invention
entirely new product
surplus
extra supply of a product leftover after a demand has been met
Physical Capital
factories, machines, technologies, buildings, and property needed for a business to operate.
الرسوم
fees
price mechanism
forces of supply and demand that move the market to equilibrium
bonds
formal long-term contracts which require repayment of borrowed money and interest on the borrowed funds at regular intervals overtime
احتيال
fraud
inflation
general increase in price levels
trade-offs
giving up one thing in favor of another
barter
good for good, service for service, no money
normal good
good for which other things equal an increase in income leads to an increase in demand
market
group of buyers and sellers of a particular good or service
market
group of buyers and sellers of a particular good or service who come together to carry out an economic transaction
employed
having a job or work to do that supports an ability to pursue happiness
productivity
how many goods and services are produced over a certain amount of time
demand
how much a product is desired
supply
how much of a good can be had
supply
how much of something is available
demand
how much of something people want
supply
how much of something that exists
quantity demanded
how much people will buy at any given price
elasticity of demand
how much the demand for a product changes when there is a change in one of the factors that determine demand
income elasticity of demand
how much the demand for a product changes when there is a change in the consumer's income
cross elasticity of demand
how much the demand for a product changes when there is a change in the price of another product
price elasticity of demand
how much the quantity demanded of a product changes when there is a change in the price of the product
price elasticity of supply
how much the supply of a product changes when there is a change in the price of the product
Human Resources
humans used to produce goods and services
substitution effect
if price increase, consumer will look for substitute G/S
externality
impact of one person's actions on the well-being of a bystander
دخل
income
entrepreneurs
people who start and own private businesses
المؤشرات
indicators
statistics
information in numerical form
financial intermediary
institution that channels savings to investors
فائدة
interest
سعر الفائدة
interest rate
discount rate
intrest banks pay when they borrow money
capital
investment in physical (manufactured resources) and human (value of workforce) capital
competition
involves all the actions sellers, acting independently, do to get buyers to purchase their products
entrepreneurship
involves the vision, skills, and risk-taking needed to create and run businesses
conglomerate
is a business composed of several companies, each one producing unrelated goods or services
limited partnership
is one in which at least one partner is not involved in the day-to-day running of the business and is liable only for the funds he or she has invested
dividend
is part of a corporation's profit that is paid out to stockholders
vertical merger
is the combining of companies involved in different steps of producing or marketing a product
horizontal merger
is the combining of two or more companies that produce the same product or similar products
consumer sovereignty
is the idea that consumers have the ultimate control over what is produced because they are free to buy what they want and to reject what they don't want
laissez faire
is the principle that the government should not interfere in the marketplace
economic system
is the way a society uses resources to satisfy its people's wants
Specialize
is when you make one product or do one job
public company
issues stock that can be publicly traded
goods
items created by producers; will be purchased by consumers
Services
jobs that one person does for another
services
jobs that people do to help others
Quota
limit on imports
scarcity
limited nature of society's resources
price elasticity of demand
measure of how much the quantity demanded of a good responds to a change in the price of a good, computed as percentage change quantity demanded divided by percentage change in price
zero PED
no change in quantity demanded with a change in price
under perfect competition
no seller sells a product above the prevailing market price
real GDP
nominal GDP adjusted for inflation
limited supply
not easily available, one of the six characteristics of money, and the characteristic that helps it hold its value
unemployed
not having a job
Scarcity
not having enough of something
scarcity
not having enough resources to produce all of the things we would like to have
scarcity
not having enough resources to satisfy every need
economic good
object that people want that they can touch or hold
collusion
oligopolists may illegally agree to set prices
commodity money
one of the three types of money, this describes an object that has value in and of itself and that can also be used as money (salt, cattle, precious stones, etc. )
fiat money
one of the three types of money, this describes that have value because the government has determined that they are an acceptable means of paying debts. Our Federal Reserve Notes are an example of this type of money
representative money
one of the three types of money, this is an object that has value because the holder can exchange it for something else of value (an IOU, bills of credit, etc.)
Entrepreneur
one who risks his or her own money, time, ideas, and energy to start and run a business.
Consumer
people buy goods and services
Command Economy
price and supply are regulated
law of demand
price of G/S increase demand will decrease; price of G/S decrease demand will increase
equilibrium price
price that balances quantity supplied and quantity demanded
law of supply
producers offer more of a good as its price increases and less as its price falls
الإنتاج
production
labor
productive work (especially physical work done for wages)
goods
products that people buy
complements
products with negative XED
substitutes
products with positive XED
الأرباح
profits
efficiency
property of a resource allocation of maximizing the total surplus received by all members of society
equality
property of distributing economic prosperity uniformly among the members of society
primary commodities
raw materials
product differentiation
real or imagined differences between competing products in the same industry
global interdependence
reliance between countries for products that they want and need
market economy
relies on the interaction of the buyer and the seller
income
rent, wages, interest, profit; what firms exchange for factors of production in the circular flow model
needs
requirements for survival, such as food, clothing, and shelter
3 tools of monetary policy
reserve requirement ratio, discount rate, open market opperations
required reserve
reserves that a bank is legally required to hold, based on its checking account deposits
natural resources
resources coming from the earth
productive resources
resources needed to make goods and services: natural resources, capital resources, & human resources.
natural resources
resources that are found in nature
Natural Resources
resources that are made from nature and used to produce goods and services
competition
rivalry between sellers of a product- who can make the highest profit (wallmart vs target)
businesses
sell products for the highest profit
industries
services, finance, manufacturing, agriculture
consumer
someone who buys and uses goods
producer
someone who creates or manufactures a good or service through physical or mental effort
producer
someone who makes or grows something
scarcity
state of being short of supply
laws of increasing opportunity costs
states that as production switches from one product to another, increasing amounts of resources are needed to increase the production of the second product
if revenue is >operating costs should you stay open or close down
stay open
welfare economics
study of how the allocation of resources affects economic well-being
market demand
sum of all individual demands in the market
aggregate
sum of all of the parts
goal of traditional economy
survival
3 factors that influence demand
sustitution effect, real income effect, diminishing marginal utility
trading
swapping one good for another; bartering
near money
term that refers to money held in savings accounts, certificates of deposit, and money market accounts, that are not immediately accessible to pay for goods and services.
dividend
that part of the earnings of a corporation that is distributed to its shareholders
marginal social benefit curve
the benefit to society (the demand curve)
law of supply
the claim that, other things equal the quantity supplied of a good rises when price of supply rises
marginal cost
the cost of producing one more unit of a good.
barter
the direct exchange of one set of goods or services for another
Specialization
the division of labor
trade
the exchange of goods and services in a market
demand
the measure of WANT or DESIRE of consumers to have something
incentives
the methods used to encourage people to take certain actions
revenue
the money a business receives from setting its goods or services
income
the money a person earns
equilibrium
the price at which the amount producers are willing to supply is equal to the amount consumers are willing to buy
interest
the price paid for the use of borrowed money
Equilibrium Price
the price that balances quantity supplied and quantity demanded
production
the process of creating something for sale
division of labor
the process of dividing work into specialized jobs that are performed by separate individuals
consumption
the process of exchange or purchase of goods
market
the process of freely exchanging goods and services between buyers and sellers
Engel curve
the relationship between income and demand for a product over time
deregulation
the removal of some government controls over a market
Means of Production
the resources (lands, tools, equipment, factories, transportation, and labor) essential to the production and distribution of goods and services
factors of production
the resources needed to produce goods and services
capital resource
the resources used to produce goods and services
most favoured nation
the trading status that all members of the WTO have to grant each other, which means that trade concessions granted by a WTO country to another must be granted to all WTO members
multilateral
the type of trade agreement that involves multiple countries, usually with the aim of reducing or removing tariffs or quotas, decreasing trade barriers, or harmonizing fiscal policy
total utility
the utility of all units combined
goods
things that people make or grow
incentives
things used to attract customers
needs
things we must have to live
needs
things we need in order to survive
wants
things we would like to have
Wants
things we would like to have but aren't neccessary
what is the largest factor influencing elasticity
time
decrease
to become or make less
cyclical unemployment rate
unemployment directly related to swings in the business cycle
who is the best father in the whole wide world
your Daddy
zero PES
zero change in quantity supplied with a change in price
Describe Foreign direct investment (FDI).
•purchase of productive assets by a multinational corporation in another country. •The long-term investment by private multinational corporations in countries overseas •Occurs in two ways: →MNC's build new plants or expand their existing facilities in foreign countries →MNCs merge with or buy existing firms in foreign countries •Employ people->increasing economic activity->causing growth
رأس مال
capital
demand
Ability and willingness of consumers to buy a good at a certain price and time
Monetarism
An approach to economic policy that assumes a natural rate of unemployment determined by the labor market, emphasizes setting targets for the rate of growth of the monetary supply, gives highest priority to controlling inflation, and rejects the instrument of government spending to run budgetary deficits for stimulating the economy. (Focus : aggregate supply) The market creates its own equlibrium.( Economic policies in the US and UK in the 1980s)
Stagflation
An example : During the 60's and 70's, the U.S. was suffering from 5.3% inflation and 6% unemployment. Refers to the economic situation in which an economy is suffering both from inflation and from stagnation of its industrial growth.- This is a situation Keynesian macroecomic theory cannot explain.
Social market
E.g. Germany from the 1950s, the rest of northern Europe from late 1950s. A market economy AND a welfare state to maitain social cohesion, the market is not an end in itself. Stresses partnership and citizen involvement
mixed economy
Economic system in which the government and the individual (s) who own the company decide how the company is run
communism or command
Economic system where government controls production, distribution, and exchange of goods
Capitalism
Economic system where property, businesses, and industry are owned by individual people and not by government
Laissez-faire
French phrase that literally means "leave to do", principle of non intervention in economic affairs. The central assumption is that if the economy is left alone the market naturally tends towards equlibrium (balance between supply and demand)
employees
People who provide work
Demand
Quantity of a good or service that consumers ( including businesses, the state, etc.)are willing and able to buy.
Supply
Quantity of goods or services offered for sale at a specific time or price.
need
Something that is essential for life
Food and water are examples of needs or wants?
Something that is essential for life is a need
Multiplier effect
The mechanism through which a change in aggregate demand has an increased effect on national income as it circulates through the economy.
Privatization
The transfer of state assets from the public to the private sector, reflecting a contraction in the state's responsibilities. (E.g. Thatcherism in Britain in the 1980s)
mixed market economy
a market economy that has elements of command and tradition
producer
a person or business that provides good and services
variable cost
an expense that changes depending on how much a business produces
الموازن
balance
إفلاس
bankruptcy
ميزانية
budget
انهيار
collapse
تعويضات
compensation
تزوير
counterfeit
عملة
currency
صفقة
deal
هبوط
decline
العجز
deficit
الوديعة
deposit
الكساد
depression
الإصلاحات الاقتصادية
economic reforms
market economy
economic system in which individuals and businesses own all resources and make economic decisions on the basis of price
traditional economy
economic system in which the decisions of what, how, and for whom to produce are based on custom or habit
command economy
economic system in which the government makes the major economic decisions
نفاق
hypocrisy
المستوردة
importing
واردات
imports
التضخم
inflation
استثمار
investment
أدنى
lowest
الاحتكار
monopoly
all things are limited, but to get something you have to give up something
opportunity cost
التفاؤل
optimism
تشاؤم
pessimism
حصة
portion
مشتريات
purchases
إصلاح
reform
scarcity
the situation of not having enough resources to satisfy all one's wants
GDP (gross domestic product)
the total market value of all final products produced in a country during a single year
اقترض
to borrow
فرض حظر
to impose embargo
فرض عقوبات
to impose sanctions
اقرض
to lend
رفع الحظر
to lift embargo
law of scarcity
we have to make choices since we don't have an unlimited amount of resources
inferior goods
goods with a negative YED
normal goods
goods with a positive YED
partnership
two or more people who start a company
Mixed Economy
A blending of all three economies. EVERY country has a mixed economy
Economic growth
Increases in total real output produced by an economy over time.
Barter
Trading goods and services for goods and services.
unit of account
a way to compare the values of goods and services
2 factors influencing supply
incentive for greater profit and market entry
savings bonds
low-denomination, non-transferable bond issued by the federal government
profit
money left over after the expenses of the business have been paid
loss
money lost after costs are paid
specie
money made in the form of gold or silver coins
trade-off
the alternative people give up when they make choices
Identify and examine how domestic factors contribute to economic development.
1. EDUCATION AND HEALTH CARE: •More efficient and better quality work force, increasing production potential •better communication •Improve role of women in society •better living standards 2. USE OF APPROPRIATE TECHNOLOGY: •technology that makes use of the labour surplus 3. ACCESS TO CREDIT AND MICRO-CREDIT: •Micro credit is an enabling, empowering, and bottoms-up tool to poverty alleviation •Credit creates opportunities for self-employment liberating poor and women from poverty, gaining income •create institutions for financial services to the poor so they can manage their assets and allow them to increase in value, and thus enabling them to invest 4. EMPOWERMENT OF WOMEN: •lending to women tends to speed up development as they usually reinvest high portion in their families and communities •Improved welfare of women through greater education and improved social standing •women pass on their information to their children, better informed about health care, hygiene, and diet •slow rate of population growth 5. INCOME DISTRIBUTION: •High income inequality is a barrier to growth and development: →Tends to be lower saving because poor save very small proportion of their growth →Rich tend to dominate both politics and economy, policies favor rich →Rich move large amounts of funds out of economy
Common characteristics of developing countries.
1. LOW LEVELS OF GDP PER CAPITA: (low productivity, high unemployment, income inequality) 2. POVERTY: (low standards of living characterised by low incomes, inequality, poor health, and inadequate education) 3. LARGE AGRICULTURAL SECTORS: (easier to export due to tariff escalation. also dependent on primary product exports) 3. LARGE URBAN INFORMAL SECTORS (lack necessary factos to enable markets to work efficiently e.g. banking systems, infrastructure, 4. HIGH BIRTH RATES: (high dependency ratios. Those of working age usually have to support a much larger proportion of children than the work force) 5. PREVALENCE OF IMPERFECT MARKETS AND LIMITED INFORMATION 6. DOMINANCE, DEPENDENCE AND VULNERABILITY IN INTERNATIONAL RELATIONS •Some communities caught in poverty trap where poor communities unable to invest in physical, human and natural capital due to low or no savings •poverty is therefore transmitted from generation to generation.
5 advantages of traditional economy
1. clearly answers economic questions 2. produces what best ensures its survival 3. methods of production stay the same 4. systems of distribution are determined by custom and tradition 5. little disagreement over economic goals and roles
Explain and give examples of the diversity that exists between developing countries.
1. RESOURCE ENDOWMENT: Common for human resources to be undernourished and poorly educated and thus low skilled. 2. HISTORICAL BACKGROUND 3. GEOGRAPHICAL AND DEMOGRAPHIC FACTORS 4. ETHNIC AND RELIGIOUS BREAKDOWN 5. POLITICAL STRUCTURE AND POLITICAL STABILITY
Reasons for providing aid.
1. Relief after natural disasters or wars 2. Help developing countries achieve economic development 3. Create or strengthen political or strategic alliances 4. Fill savings gap to encourage investment 5. Improve quality of human resources in a developing country 6. Improve technology 7. Fund specific development projects.
3 questions of economics
1. What goods and services must be produced? 2. How should goods and services be produced? 3. Who uses or consumes those goods?
three economic questions
1. What should be produced? 2. How should it be produced? 3. For whom should it be produced?
4 disadvantages of command economy
1. central planners have little understanding of local conditions 2. workers have little motive to improve productivity because they are paid same wages regardless of output 3. set prices below those that would be established in a market system, so they face shortages 4. suffering- individual rights subordinate to needs of state
2 Trends in Modern Economies
1. changes in ownership 2. increasing global ties
4 advantages of market economy
1. economic and political freedom 2. accomodate changes quickly 3. profit 4. high quality products because of competition
7 fundamentals of a market economy
1. private property 2. specialization 3. consumer sovereignty 4. competition 5. profit 6. voluntary exchange 7. government involvement
4 disadvantages of traditional economy
1. resist change- less productive than they might be if they adopted new approaches 2. prevent people from doing jobs that they want to do or are best suited to do 3. lower productivity means that people do not acquire the material wealth that people in other societies do 4. lower standard of living
2 advantages of command economies
1. seek to provide for everyone 2. leaders use nation's resources to produce items that may not make money in a market economy
Relationship between economic growth and economic development.
1.HIGHER INCOMES: •improves standards of living •depends on how income is distributed 2. IMPROVED ECONOMIC INDICATORS OF WELFARE: •Economic growth lead to higher averages in terms of welfare •not necessarily case for all sections of the population 3. HIGHER GOVERNMENT REVENUES: •Government better able to provide essential services such as education, health care and infrastructure. 4. CREATIONS OF INEQUALITY: •Gap between rich and poor said to grow. 5. NEGATIVE EXTERNALITIES AND LACK OF SUSTAINABILITY: •Economic growth tends to lead to pollution. •As incomes rise behavior creates negative externalities of consumption, •problems can be linked to deforestation, soil degradation, and reduction in bio-diversity to economic growth. IN LONG TERM, ECONOMIC GROWTH IS USUALLY NECESSARY FOR ECONOMIC DEVELOPMENT
Describe the human development index.
1.LONG AND HEALTHY LIFE (life expectancy) 2.IMPROVED EDUCATION (literacy and school enrolment) 3.DECENT STANDARD OF LIVING (GDP per capita) •Three indicators combined to get a value between 0 and 1, with higher values representing a higher level of development.
Reasons why MNCs expand into economically less developed countries.
1.NATURAL RESOURCES (oil and minerals): MNCs have technology to extract the resources 2. GROWING MARKETS: •take advantage of access to large numbers of consumers with growing incomes 3. LOW COST LABOUR: •keep costs of production lower so they can sell final products at lower prices, making higher profit 4. LACK OF REGULATION: •having fewer rules means setting up costs of MNCs and running costs lower 5. TAX CONCESSIONS: •used to attract FDI
ECONOMIC INTERDEPENDENCE
A SITUATION WHEREBY WE RELY ON OTHERS, AND OTHERS RELY ON US, TO PROVIDE THE GOODS AND SERVICES THAT WE CONSUME.
Inflation
A continuous increase in the general price level.
Inflation
A continuous rise in the general price level of goods and services over a perios of ime. - Each unit of currency buys less goods or services.
Overvalued currency
A currency whose value is higher than its free-market value; may occur if the exchange rate is fixed (or pegged), or in a managed exchange rate system, but not in a freely floating exchange rater system.
Lorenz Curve
A curve illustrating the degree of equality of income distribution in an economy. It plots the cumulative percentage of income received by cumulative shares of the population.
Demand curve
A curve showing the relationship between the quantities of a good consumers are willing and able to buy during a particular time period and their respectable prices.
Law of Demand
A law stating that there is a negative causal relationship between the price of a good and quantity of the good demanded, over a particular time.
cost/benefit analysis
A decision-making process in which you compare what you will sacrifice and gain by a specific action.
Depreciation
A decrease in the value of currency in the context of a floating (or flexible) exchange rate system or managed exchange rate system.
Devaluation
A decrease in the value of the currency in the context of a fixed exchange rate system.
World Bank
A development assistance organization, composed of 185 member countries which are its joint owners, that extends long-term credit to developing country governments for the purpose of promoting economic development and structural changes. It consists of two organizations: The International Bank for Reconstruction and Development and the International Development Association.
patent
A document granting an inventor sole rights to an invention
Interest
A fee earned for the use of money.
Grant
A financial award given by a government agency to a private individual or group in order to carry out a specific task.
Central Bank
A financial institution that is responsible for regulating the country's financial system and commercial banks, and carrying out monetary policies.
Commercial bank
A financial institution whose main functions are to hold deposits for their customers, to make loans to their customers, to transfer funds by check from one bank to another, and to buy government bonds.
Multinational corporation
A firm involving in foreign direct investment.
Contractionary fiscal policy
A fiscal policy that is usually pursued during an inflationary period. It involves decreasing government spending or increasing taxes. Possibly both methods.
What is a corporation?
A form of business organization that is authorized by law to act as a legal entity regardless of the number of owners.
What is a partnership?
A form of business with two or more owners who share the risk and the profits.
Private good
A good that is both rivalrous and excludable.
Public good
A good that is non-rivalrous and non-excludable.
Inferior good
A good the demand for which varies negatively with income. As income increases, the demand for the good decreases.
elastic good
A good where consumers are very responsive to price changes (e.g. soda)
Patent
A government license that gives the inventor of a new product the exclusive right to produce and sell it.
Copyright
A government license that grants an author exclusive rights to publish and sell creative works.
price ceiling
A government price control that sets the maximum allowable price for a good; results in a shortage
price floor
A government price control that sets the minimum allowable price for a good; results in a surplus
production possibilities frontier
A graph that describes the maximum amount of one good that can be produced for every possible level of production of the other good
Production Possibilities Curve
A graph that shows alternative ways to use an economy's productive resources.
production possibilities curve
A graphical representation that shows the possible combinations of two products that an economy can produce, given that its productive resources are fully employed and efficiently used.
Trading bloc
A group of countries that have agreed to reduce tariff and other barriers to trade for the purpose of encouraging the development of free or freer trade and cooperation between them.
Monetary union
A high form of economic integration, involving the adoption by a group of countries of a single currency. Example: European Union.
abundance
A large amount. Ex: If I have 130 students, I have an abundance of students
Minimum price (price floor)
A legal price set by the government which is above the market equilibrium price to fall to its equilibrium level determined by a free market.
Maximum price (Price ceiling)
A legal price set by the government, which is below the market equilibrium price.
Competitive market
A market composed of many buyers and sellers acting independently, none of whom has any market power.
oligopoly
A market structure in which a few large firms dominate a market
perfect competition
A market structure in which a large number of firms all produce the same product
perfectly competitive market
A market that meets the conditions of (1) many buyers and sellers, (2) all firms selling identical products, and (3) no barriers to new firms entering the market.
Mixed Economy
A market-based economic system in which the government is involved to some extent.
Income elasticity of demand
A measure of how much the demand for a product changes when there is a change in the consumer's income. (%∆ in Qd / %∆ in income).
Cross elasticity of demand
A measure of how much the demand for a product changes when there is a change in the price of another product (%∆ in Qd of X / %∆ in price of Y).
Price elasticity of demand (PED)
A measure of how much the quantity demanded of a product changes when there is a change in the price of the product (%∆ in Qd / %∆ in price). A negative result is ignored.
Price elasticity of supply
A measure of how much the quantity supplied of a product changes when there is a change in the price of the product (%∆ in Qs / %∆ in price). The value is almost always positive and can go from zero to infinity.
Elasticity
A measure of responsiveness - how much something changes when there is a change in one of the factors that determines it.
Elasticity
A measure of responsiveness or sensitivity of a variable to changes in any of the variable's determinants.
Consumer Price Index
A measure of the cost of living for the typical household. It compares the value of a basket of goods and services in one year with the value of the same basket in a base year.
Income elasticity of demand (YED)
A measure of the responsiveness of demand to changes in income.
Cross-price elasticity of demand (XED)
A measure of the responsiveness of the demand for one good to a change in the price of another good.
Gross domestic product (GDP)
A measure of the value of aggregate output of the economy. It is the market value of all final good sand services produced within a country during a given time period.
Output approach
A method used to measure the value of aggregate output of an economy, which calculates the value of all final goods and services produced in the country within a given time period. According to the circular flow model, it is equivalent to measurement by the expenditure approach and the income approach.
Minimum wage (price floor)
A minimum price of wage set by governments in the labor market, in order to ensure that low-skilled workers can earn a wage high enough to secure them with access to basic goods and services.
mixed economy
A mixture of a pure command and pure market economy.
Circular flow of income model
A model showing the flow of resources from consumers to firms, and the flow of products from firms to consumers, as well as money flows consisting of consumers' income arising from the sale of their resources and firms' revenues arising from the sale of their products. Basically, it illustrates the equivalence of expenditure flows, value of output flows, and income flows.
Contractionary monetary policy
A monetary policy usually pursued in an inflationary period. It involves increasing the interest rate (to lower investment and consumption spending).
gold standard
A monetary system in which paper money and coins are equal to the value of a certain amount of gold
Negative externality of consumption
A negative externality caused by consumption activities, leading to a situation where MSB<MPB.
Negative externality of production
A negative externality caused by production activities, leading to a situation where MSC >MPC.
Infant industry
A new domestic industry that has not had time to establish itself and achieve efficiencies in production, and therefore may be unable to compete with more mature competitor firms from abroad. This is used as a strong argument for trade protection policies in developing countries.
Primary sector
A part of an economy that is dominated by agriculture, including fishing and forestry.
Non-produced, non-financial assets
A part of the capital account of the balance of payments, which includes a variety of items such as mineral rights, forestry rights, fishing rights and airspace.
Profit
A payment per unit of time to owner of entrepreneurship.
Interest
A payment, per unit of time, for the use of borrowed money (borrowers pay interest, lenders receive interest.)
Rent
A payment, per unit of time, to owners of land resources who supply their land to the production process.
Wage
A payment, per unit of time, to those who provide labor.
Economic Transition
A period of change in which a nation moves from one economic system to another.
Recession
A period of declining real GDP, accompanied by lower real income and higher unemployment.
Business cycle
A period of macroeconomic expansion, or growth, followed by one of contraction, or decline.
Producer
A person or company that sells goods, or offers services.
Household
A person or group of people living in a single residence.
entrepreneur
A person who organizes, manages, and takes on the risks of a business.
Producer
A person, company, or country that makes, grows, or supplies goods or commodities for sale
producers
A person, group, or business that makes goods or provides services to satisfy consumers' needs and wants.
Guns or Butter
A phrase expressing the idea that a country that decides to produce more military goods (guns) has fewer resources to produce consumer goods (butter) and vice versa.
"Guns vs. Butter"
A phrase that refers to the trade-off that nations face when choosing to devote more of fewer resources to military or civilian goods and services, such as educating children, or building a larger army.
Market-oriented policy
A policy in which government intervention is limited, economic decisions are made mainly by the private decision-makers and the market has significant freedom to determine resource allocation.
Communism
A political system in which the government owns and controls all resources and means of production and makes all economic decisions.
mutual fund
A pool of money from many investors that is used to buy different stocks and bonds.
Positive externality of consumption
A positive externality caused by consumption activities, leading to a situation where MSB>MPC.
Positive externality of production
A positive externality caused by production activities, leading to a situation where MSC > MPC.
Interest group
A private organization that tries to persuade public officials to act in ways that benefit its members.
Import
A product a country brings into a country from another country to sell.
Export
A product a country sells to another country.
Micro-credit
A program to provide credit (loans) in small amounts to people who do not have access to credit.
Referendum
A proposed law submitted directly to the public.
Socialism
A range of economic and political systems based on the belief that wealth should be distributed evenly throughout a society.
Core rate of inflation
A rate of inflation based on consumer price index that excludes goods with highly volatile (unstable) prices. This is most notable in food and energy prices.
Balance of payments
A record of all transactions between the residents of a country and the residents of all other countries. It shows all payments received from other countries (credits), and all payments made to other countries (debits). It has CURRENT ACCOUNT, CAPITAL ACCOUNT, FINANCIAL ACCOUNT, and ERRORS&OMISSIONS.
reserve requirement
A regulation in which requires a bank to keep a certain percentage of each dollar deposited in the bank in its reserve.
Positive causal relationship
A relationship between two variables in which an increase in the value of one causes an increase in the value of the other, i.e. the two variables change in the same direction; also know as a direct relationship.
Cap and Trade Scheme
A scheme in which a government authority sets a limit or 'cap' on the amount of pollutants that can be legally emitted by a firm, set by an amount of pollution permits (tradable permits) distributed to firms.
Safety Net
A set of government programs that protect people who face unfavorable economic conditions.
Deficit
A short term budget shortfall.
Shortage
A situation in which consumers want more of a good or service than producers are willing to make available at a particular price.
deflation
A situation in which prices are declining
Shortage
A situation in which quantity demanded is greater than quantity supplied
shortage
A situation in which quantity demanded is greater than quantity supplied
Surplus
A situation in which quantity supplied is greater than quantity demanded
surplus
A situation in which quantity supplied is greater than quantity demanded
Market failure
A situation in which the free market, operating on its own, does not distribute resources efficiently.
equilibrium
A situation in which the market price has reached the level at which quantity supplied equals quantity demanded
Inflation targeting
A type of monetary policy carried out by some central banks that focuses on achieving a particular inflation target, rather than focusing on the goals of low and stable rate of inflation and low unemployment. Common inflation targets are between 1.5% and 2.5%.
Government budget
A type of plan of a country's tax revenues and government expenditures over a period of time.
Quota
A type of trade protection that involves setting a legal limit to the quantity of a good that can be imported over a particular time period.
Common market
A type of trading bloc in which countries that have formed a customs union proceed further to eliminate any remaining tariffs in trade between them. Example: European Economic Community.
Free trade area
A type of trading bloc, consisting of a group of countries that agree to eliminate trade barriers between themselves. Example: North American Free Trade Agreement.
Customs union
A type of trading bloc, consisting of a group of countries that fulfill the requirements of a free trade area and adopts a common policy towards all non-member. (It's higher than a FREE TRADE AREA, but lower than a COMMON MARKET)
Structural unemployment
A type of unemployment that occurs as a result of technological changes and changing patterns of demand, as well as geographical changes, and labor market rigidities.
Cyclical unemployment (demand-deficient unemployment)
A type of unemployment that occurs during the downturns of the business cycle, when the economy is in a recessionary gap.
Seasonal unemployment
A type of unemployment that occurs when the demand for labor in certain industries changes on a seasonal basis because of variations in needs.
Frictional unemployment
A type of unemployment that occurs when workers are between jobs, workers make leave their job because they have been fired, or because their employers went out of business, or because they are in search of a better job, or they may be waiting to begin a new job.
stock symbol
A unique series of letters assigned to a security for trading purposes.
Supply-side policies
A variety of policies that focus on aggregate supply. There are market-based policies and interventionist policies.
Demand
A willingness of consumers to buy goods and services.
Describe education measures.
ADULT LITERACY RATE: •measure of the proportion of adult population aged 15 or over which is literate. NET ENROLEMENT IN PRIMARY EDUCATION: •measure of the ratio of the number of children of primary school age who are enrolled in primary school, to the total number of children who are of primary school age in the country.
Land
All natural resources used to produce goods and services.
Land (FACTOR OF PRODUCTION)
All natural resources: land and agricultural land, including minerals, oil reserves, underground water, forests, rivers, and lakes.
Production possibilities curve
All possible combination of the maximum amounts of two goods that can be produced by an economy, given fixed and unchanging resources and technology.
Factors of production
All resources or inputs used to produce goods and services. LAND, LABOR, CAPITAL, AND ENTREPRENEURSHIP.
Who owns resources in Market System?
All resources privately owned
Resources
All things used in producing goods and services.
Economics
Allocation of scare resources among competing uses.
business cycle
Alternating periods of economic expansion and economic recession; 1. expansion 2. peak 3. recession 4. trough
Recession
An economic contraction, where there is falling real GDP and increasing unemployment of resources, lasting six months or more.
Services
An active you pay someone to do for you
credit bureau
An agency which checks credit information and keeps complete files on people who apply for and use credit.
Keynesian aggregate supply curve
An aggregate supply curve that has a flat horizontal section, and upward sloping section and a vertical section.
Preferential trade agreement
An agreement between two or more countries to lower trade barriers between them on particular products, resulting in an easier access to the markets of other members for selected products, compared with the access of countries that are not members.
Allocative efficiency
An allocation of resources that results in producing the combination and quantity of goods and services mostly preferred by consumers. Marginal Cost = Marginal Benefit
Subsidy
An amount of money paid by the government to firms for reasons: to protect infant industries, to support producers' income, or as a form of protection against imports.
Supply
An amount of something available for use.
Price
An amount usually expressed in terms of money paid for property.
traditional economy
An economy in which production is based on customs and traditions and economic roles are typically passed down from one generation to the next--usually subsistence agriculture
Traditional Economy
An economy in which production is based on customs and traditions and economic roles are typically passed down from one generation to the next.
Poverty threshold
An income level below that which is needed to support families or households.
expansionary fiscal policy
An increase in government purchases of goods and services, a decrease in net taxes, or some combination of the two for the purpose of increasing aggregate demand and expanding real output
consumer price index
An index that measures the prices of a fixed "market basket" of some 300 goods and services bought by a "typical" consumer
Self-interest
An individual's own personal gain.
Errors and omissions (BALANCE OF PAYMENTS)
An item that is included to account for possible omissions and errors in items that have been included or excluded in order to ensure that the balance of payments balances.
labor union
An organization of workers that tries to improve working conditions, wages, and benefits for its members
Firm
An organization that uses resources to produce a product or service, which it then sells.
Primary commodities
Another word for raw materials, such as cotton or coffee. These products tend to have inelastic demand since they are necessities to consumers; they have few or no substitutes. Consumers tend to be manufacturing industries which process the raw materials into finished products.
Market
Any arrangement that allows buyers and sellers to exchange things.
Capital
Any human-made resource that is used to produce other goods and services.
Market
Any kind of arrangement where buyers and sellers of a particular good, service, or resource are linked together to carry out an exchange.
Interventionist supply-side policy
Any policy based on government intervention in the market intended to affect the supply-side of the economy, usually to shift the LRAS curve to the right, increase potential output and achieve long term economic growth.
Interventionist Policy
Any policy based on government intervention in the market.
Market-based supply-side policy
Any policy based on promoting well-functioning, competitive markets in order to influence the supply-side of the economy, usually to shift the LRAS curve to the right, increase potential output and achieve long term economic growth. It includes labor market reforms, competition policies and incentive-related policies.
Primary commodity
Any product that is produced in the primary sector, which includes agriculture, forestry, fishing, and the extractive industries.
Poverty cycle
Arises when low incomes result in low savings, permitting low investments (in physical, human, and natural capital), and therefore, low productivity leading to low incomes.
Dual economy
Arises when there are two different and opposing sets of circumstances that exist simultaneously, often found in economically less developed countries. For example: Higher class living with lower class.
Progressive taxation
As income increases, the fraction of income paid as taxes increases.
law of supply
As the price of a particular good or service rises, suppliers will produce more of that good or service.
Time period
As the price of a product changes, it will take time for consumers to change their buying and consumption habits. The more time the consumer has to search for alternative products, the more elastic the demand is for the original product.
Which two immigrant groups worked on the railroads and were discriminated in the 19th century?
Asian and Irish people
Resource allocation
Assigning available resources, or factors of production, to specific uses chosen among many possible and competing alternatives. It involves answering "What to produce" and "How to produce".
Choice
Because wants are unlimited and resources are limited, all economies must choose which goods and services should be produced and in what quantities
Why did the farmers rely on windmills?
Because wind mills were their source of clean water and also their source of water to help grow their crops
Utopia
Book by Thomas Moore that describes a society without scarcity where wants are limited and easily fulfilled. Means "no place" in Greek.
capital goods
Buildings, machines, technology, and tools needed to produce goods and services.
Market Economy
Businesses supply products with little government interference based upon consumer demand. Supply and demand to help them determine how much to produce and the price point. Hire based upon supply and demand of jobs
Speculation
Buying and selling of something in hope of making profit.
trade
Buying and selling; an exchange
Consumer
Buys goods or services
outsourcing
Contracting outside the organization to have work done that formerly was done by internal employees.
opportunity cost
Cost of the next best alternative use of money, time, or resources when one choice is made rather than another
Sunk Costs
Costs that have already been incurred and cannot be recovered.
Currency
Country's system of money
Empowerment
Creation of conditions for equality of opportunities. It involves increasing the political, social, and economic power of individuals or groups of individuals.
Evaluate trade liberalisation.
DESCRIPTION: •Removal or reduction of trade barriers that block free trade. •Involves elimination of tariff barriers, quotas, export subsidies and administrative legislation ADVANTAGES: •Believed increase world trade enabling developing countries to focus on production of goods and services in which they have comparative advantages •Benefits of free trade (learned previously) DISADVANTAGES: •Allows MNC's to have access to cheap labour markets where they can produce products and sell them for large profits •Developing countries have little gain •can lead to economic crises, increasing debt, income inequality and exploitation of working conditions
Evaluate fair trade organisations.
DESCRIPTION: •Small scale farmers often suffer due to low primary product prices, tariff escalation and poor working conditions •Ensure that small scale producers in developing countries receive a fair share of revenue from their produce ADVANTAGES: •Raises awareness to consumers of harsh and unfair conditions facing farmers •Product will be purchased so price covers production costs and provides a living income •Long term contract so producer has security •Promotes sustainability •Ensure proper working condition, fund local community development
Evaluate diversification.
DESCRIPTION: •dependent on exporting primary commodities •Move from production and export of primary goods to production and export of processed and manufactured goods ADVANTAGES: •Countries encouraged to improve state of technology and their force of highly skilled workers •Protect themselves from volatile prices in primary products DISADVANTAGES: •Tariff escalation •Need for a more highly qualified workforce
Evaluate export promotion.
DESCRIPTION: •increased international trade •lead to increase GDP and higher incomes and growth. •Concentrate on producing and exporting products they have comparative advantage of. ADVANTAGES: •source foreign exchange DISADVANTAGES: •Lead to increase in protectionism in developed countries against manufactured products from developing countries. •Tariff escalation •Attract MNC's, which could become too powerful •Export led growth may increase income inequality (focus on manufactured goods)
Evaluate the role of WTO and bilateral and regional preferential trade agreements.
DESCRIPTION: •main objective to promote free trade among its members •Preferential access to products from other member countries. Reduces but doesn't necessarily abolish tariffs ADVANTAGES: •The more agreements made, greater ability developing country has to trade and to gain development •More trade mean increase in AD, can increase employment, increasing growth etc.
Evaluate import substitution.
DESCRIPTION: →Produce goods domestically rather than import them. →allows domestic industries to grow and become competitive ADVANTAGES: •Protects jobs in domestic market •reduce foreign exchange demand •stimulate innovation •make the country self-reliant in critical areas such as food, defense, and advanced technology DISADVANTAGES: •loss of consumer welfare (more expensive, less choice, higher taxes) •inefficiency •Lead to high rates of inflation •cause other countries to increase protectionism
theory of comparative advantage
David Ricardo's theory that specialization and free trade will benefit all trading parties
choice
Deciding on something you want when you have different options.
contractionary fiscal policy
Decreases in government expenditures and/or increases in taxes to control inflation
law of diminishing marginal utility
Decreasing satisfaction or usefulness as additional units of a product are acquired
Interdependence
Depending on others to produce things you need
Authoritarian
Describes a form of government that limits individual freedoms and requires strict obedience from its citizens.
wants
Desires that can be satisfied by consuming a good or service
Where is the automobile industry located?
Detroit
Division of Labor
Different people doing different jobs.
Cash transfers
Direct payments of money by the government to poor, disabled, or retired people.
Deciles
Divisions of a population into ten equal groups with respect to the distribution of a variable, such as income. So, basically 10% of the population with the lowest income.
Self-Interest
Doing something for ones own personal gain.
price elasticity
Economic concept that deals with how much demand varies according to changes in price
Explain positive outcomes of market-orientated policies.
E.g. liberalized trade and capital flows, privitization and dereculation. •More efficient allocation of resources •Economic growth.
1st Amendment
Gave the freedom of speech, religion, and press
Communism
Economic system in which all wealth and property are owned by the state.
Millennium Development Goals
Eight development goals adopted by the Millennium Declaration of 2000, consisting of 18 targets to be achieved by the year 2015. It includes 1) eradicating extreme poverty and hunger, 2) achieving universal primary education, 3) reducing child mortality, 4) and promoting gender equality.
Managed exchange rates
Exchange rates that are mostly free to float to their market price levels over long periods of time; however, central banks periodically intervene in order to stabilize them over the short term.
Trade
Exchanging one thing for another thing.
14th Amendment
Ensured the right that all people born in the U.S. become citizens upon birth.
Democratic Socialism
Established through the democratic political process rather than violent overthrow of the government
Supply shock
Events that have a sudden and strong impact on short-run aggregate supply. Example: A war that destroys physical capital or unfavorable weather on a factor of production.
3 basic economic questions
Every economic system must answer the three basic economic questions: What to produce; How to produce it? For whom to produce?
What is traditional economy?
Everything is based on customs, beliefs, and traditions.
Barter
Exchange goods without involving money (goods for goods or goods for services).
Trade
Exchange of goods and services
Resources
Factors of production, used by firms as inputs in the production process.
Labor market rigidities
Factors preventing the forces of supply and demand from operating in the labor market, and therefore preventing labor market flexibility. Example: Minimum wages, legislation, and job security.
Automatic stabilisers
Factors that automatically, without any actions by the government, work toward stabilizing the economy by reducing the short term fluctuation of the business cycle. Two important automatic stabilizers are PROGRESSIVE INCOME TAXES and UNEMPLOYMENT BENEFITS.
19th Amendment
Gave women the right to vote
central banking system
Federal Reserve System
expansionary monetary policy
Federal Reserve system actions to increase the money supply, lower interest rates, and expand real GDP; an easy money policy.
Portfolio investment
Financial investment, including investment in stocks and bonds. Appears as an item in the financial account of the balance of payments.
Development aid
Foreign aid intended to help economically less developed countries; may involve project aid, program aid, technical assistance, or debt relief.
Program aid
Foreign aid involving financial support to sectors, such as education, health care, agriculture, urban development, financial sector (credit, banking, insurance), and the environment.
Project aid
Foreign aid involving support for specific projects, such as building schools, clinics, hospitals, irrigation systems, or other agricultural infrastructure.
gross domestic product
GDP; the total of all economic in a country, regardless of who owns the assets
GDP Formula
GDP=C+I+G+(X-M)
gross national income
GNI; total income earned by a country's factors of production, regardless of where assets are located (previously went by the name of GNP)
CONSUMER GOODS
GOODS THAT ARE INTENDED FOR FINAL USE BY INDIVIDUALS.
ECONOMIC PRODUCT
GOODS THAT ARE USEFUL, RELATIVELY SCARCE, AND TRANSFERABLE TO OTHERS.
DURABLE GOODS
GOODS THAT INCLUDE BOTH CONSUMER AND CAPITAL GOODS THAT WILL LAST FOR THREE OR MORE YEARS DURING REGULAR USE.
15th Amendment
Gave African American men the right to vote
trade off
Giving up one thing for another
Exports
Goods and Services sold to other countries
Specialization
Goods and services are produced in better quality, quantity and speed when people focus on producing a few things instead of making everything they want by themselves.
specialization
Goods and services are produced in better quality, quantity and speed when people focus on producing a few things instead of making everything they want by themselves.
Imports
Goods and services bought from another country
In-kind benefits
Goods and services provided for free or at greatly reduced prices.
exports
Goods and services sold to other countries.
public goods and services
Goods and services that are non-rivalrous and non-excludable and cannot be withheld from those who don't pay for them. Benefits that may be "consumed" by one person without reducing the amount of the product available for others. Examples include national defense, streetlights, and roads and highways. Public services include welfare programs, law enforcement, and monitoring and regulating trade and the economy.
Capital Resources
Goods made and used to produce and distribute goods and services, such as tools, machinery and buildings.
Common good
Goods that are rivalrous and non-excludable
Capital good
Goods that are used to make something else
Capital resources
Goods used to make other goods
Welfare
Government aid to the poor.
Trade protection
Government intervention in international trade through imposition of trade restrictions to prevent the free entry of imports into a country and protect the domestic economy from foreign competition.
What role does the government play in communism?
Government makes all economic decisions
What role does the government play in socialism?
Government makes decision in the basic industries
Who owns resources in Socialism?
Government owns basic resources; rest are privately owned
How are resources allocated in Socialism?
Government planners allocate basic resources; market forces allocate privately-owned resources
How are resources allocated in Communism?
Government planners decide how resources are used
Industrial policies
Government policies designed to support the growth of the industrial sector of an economy. It may include support for infant industries through tax cuts, grants, low interest loans, and etc, as well as investment in human capital, research and development, or infrastructure development.
fiscal policy
Government policy that attempts to manage the economy by controlling taxing and spending.
deficit spending
Government practice of spending more than it takes in from taxes
Safety Net
Government programs that protect people experiencing unfavorable economic conditions.
Demand
How much buyers are willing to buy.
supply
How much of a good or service a producer is willing and able to produce at different prices.
demand
How much people want to buy a good
What type of recourse is a human teacher?
Human
Labor
Human effort directed toward producing goods and services
human capitol
Human labor, workers with the knowledge, skills, and experience to make the goods or provide the services
The 4 types of resources in production are:
Human, natural, capital, and entrepreneurship.
Capital Resources
Human-made resources.
Wideness of product definition
If a product is defined more narrowly, the demand is less inelastic (more elastic).
Investment
Includes spending by firms or the government on capital goods (buildings, machinery, equipment), and all new spending on new construction (housing and other buildings).
Savings
Income that a person puts aside for a later time.
Supply
Indicates the various quantities of a good that firms (or a firm) are willing and able to produce and sell at different possible prices during a particular time period.
Demand
Indicates the various quantities of good that consumers are willing and able to buy at different possible prices during a particular time period.
Traditional Market
Individuals create products based upon resources & tribal/cultural customs -- usually produce enough to survive. The individual determines what is produced, how it is produced, and when/where it is sold.
Heavy Industry
Industry that requires a large capital investment and that produces items used in other industries.
Expenditure flow
It is the flow of spending from households to firms to buy the goods and services produced by the firms. The expenditure flow is equal to the income flow and the value of output flow.
imports
Items that are brought into a country to sell
exports
Items that are taken out of the country to sell
Resources
Items used to create the product or service. Can be renewable or nonrenewable
Concessional loans
Loans that are offered as part of FOREIGN AID, made on concessional terms. They are offered at interest rates that are lower than commercial rates, with longer repayment periods.
Income Tax
Most of Georgia's revenue comes from the type of tax.
Excess demand (Shortage)
Occurs when the quantity of good demanded is greater than the quantity supplied.
Productive efficiency
Occurs when firms produce at the lowest possible cost.
Free rider problem
Occurs when people can enjoy the use of a good without paying for it and arises from non-excludability: people cannot be excluded from using the good, because it is not possible to charge a price. It is often associated with public goods, which are a type of market failure: due to the free rider problem, private firms fail to produce these goods.
Externality
Occurs when the actions of consumers or producers give rise to positive or negative side-effects on other people who are not part of these actions, and whose interests are not taken into consideration.
Market failure
Occurs when the market fails to allocate resources efficiently, or to provide the quantity and combination of goods and services mostly wanted by society. There is either an underallocation or an overallocation.
Excess supply (Surplus)
Occurs when the quantity of a good demanded is smaller than the quantity supplied.
Resource
On my way! thin used to produce goods and services
Physical capital
One of the factors of production, which is itself produced (it doesn't occur naturally), used to produce goods and services; includes machinery, tools, factories, buildings, road systems, airports, telephone supply lines, etc. Also referred to as 'capital', or 'capital good' or 'investment good'.
Tradable permits
Permits that can be issued to firms by a government or international body, and that can be traded (bought and sold) in a market, the objective being to limit the total amount of pollutants emitted by the firms.
invisible hand
Phrase coined by Adam Smith to refer to the self-regulating nature of a free marketplace.
Where is the steel industry located?
Pittsburg
Expenditures
Plans for spending income.
Incentive-related policies (a type of supply-side policy)
Policies involving reduction of varies types of taxes, in the expectation that the tax cuts will change the incentives faced by tax payers. For example, tax cuts may encourage the desire to work and cuts in business taxes may encourage investment.
Deregulation
Policies involving the elimination or reduction of government regulation of private sector activities, based on the argument that government regulation stifles the competition and increases inefficiency.
Demand-side policies
Policies that attempt to change aggregate demand in order to achieve goals of price stability, full employment, and economic growth, and minimize the severity of the business cycle.
Laissez-Faire
Policy based on the idea that government should play as small a role as possible in the economy.
Monetary policy (Type of demand-side policy)
Policy carried out by central bank, aiming to change interest rates in order to influence aggregate demand.
Best forms of money
Portable, divisible, durable, recognizable
The interaction between supply and demand creates:
Price
If demand goes down
Price goes down
If supply goes up
Price goes down
If demand goes up
Price goes up
If supply does down
Price goes up
marginal benefit-marginal cost analysis
Rational decision making involves marginal benefits that equal or exceed the marginal costs
natural resources
Raw materials supplied by nature
Disinflation
Refers to a fall in the rate of inflation; it involves a positive rate of inflation.
Export promotion
Refers to a growth and trade strategy where a country attempts to achieve economic growth by expanding its exports. As a trade and strategy, it looks outward towards foreign markets and is based on stronger links between domestic and global economies.
Import substitution
Refers to a growth and trade strategy where a country begins to manufacture simple consumer goods oriented towards the domestic market in order to promote its domestic industry.
Welfare loss
Refers to a loss of a portion of social surplus that arises when MSB doesn't equal MSC.
Underground market
Refers to a market that arises whenever a buying/selling of a transaction is unrecorded.
Perfectly elastic demand
Refers to a price elasticity of demand value of infinity, and arises in the case of a horizontal demand curve.
Unit elastic demand
Refers to a price elasticity of demand value of one.
Natural capital
Refers to an expanded meaning of the factor of production land, including everything that is included in land plus additional natural resources occurring naturally in the environment such as air, biodiversity, soil quality, the ozone layer, and the global climate.
Appreciation
Refers to an increase in the value of a currency in the context of a floating (flexible) exchange rate system or managed exchange rate system.
Revaluation (of a currency)
Refers to an increase in the value of the currency in the context of a fixed exchange rate system.
Diversification
Refers to change involving greater variety, and is used to refer to increasing the variety of goods and services produced and/or exported by a country.
Redistribution of income
Refers to changing the distribution of income, giving rise to a new distribution.
Conditional assistance
Refers to development assistance provided by bilateral or multilateral development organizations, which is extended to countries on condition that they satisfy certain requirements, usually requiring that the country adopts particular policies.
Economic intergration
Refers to economic interdependence between countries.
Foreign debt
Refers to external debt, meaning the total amount of debt (private and public) incurred by borrowing from foreign creditors. The global problem of debt involves large volumes of public debt.
Expansionary fiscal policy
Refers to fiscal policies usually pursued in a recession, involving an increase in government spending or a decrease in taxes.
Reserve assets
Refers to foreign currency reserves that the central bank maintains and can buy or sell to influence the value of the country's currency exchange rate.
Income (Part of CURRENT ACCOUNT)
Refers to inflows of wages, rents, interest and profit earned abroad minus the same income factors that are sent abroad.
Foreign direct investment
Refers to investments by firms based in one country (the home country) in productive activities in another country (the host country).
Full employment
Refers to maximum use of all resources in the economy to produce the maximum quantity of goods and services that the economy is capable of producing, implying zero unemployment.
Expansionary monetary policy
Refers to monetary policy usually pursued in a recession, involving a decrease in interest rates, intended to increase investment and consumption spending.
Spare capacity
Refers to physical capital that firms have available but do not use; arises in recessions.
Reallocation of resources
Refers to reassigning resources to particular uses, so that the allocation of resources changes and becomes a new allocation.
Consumer surplus
Refers to the difference between the highest prices consumers are willing to pay for a good and the price actually paid.
Producer surplus
Refers to the difference between the price received by firms for selling their goods and the lowest price firms are willing to receive to produce the good.
Injections (part of the CIRCULAR FLOW OF INCOME MODEL)
Refers to the entry into income flow of funds corresponding to investment, government spending or exports.
Income flow
Refers to the flow of income of households that are received by selling their factors of production to firms.
Public debt
Refers to the government's accumulation of budget deficits minus budget surpluses.
Financial account (BALANCE OF PAYMENTS)
Refers to the inflows minus outflows of funds due to foreign direct investment, portfolio investment, and changes in reserve assets.
Capital account (BALANCE OF PAYMENTS)
Refers to the inflows minus the outflows of funds for capital transfers (including debt forgiveness and non-life insurance claims) and the purchase or use of non-produced natural resources (such as mineral rights, forestry rights, fishing rights, and airspace).
Indebtedness
Refers to the level of debt, or the amount of money owed to creditors.
Joint supply
Refers to the production of two or more goods that are derived from a single product, so that it is not possible to produce more of one without producing more of the other. Example: Butter and Skimmed milk are both produced from whole milk, producing more of one means to produce more of the other.
Productivity
Refers to the quantity of output produced for each hour of work of the working population.
Market demand
Refers to the sum of all individual consumer demands for a good or service.
Market supply
Refers to the sum of all individual firm supplies of a good or service.
Net exports
Refers to the value of exports minus the value of imports.
Value of output flow
Refers to the value of output that is sold by firms and purchased by consumers.
Obsolescence
Situation in which older products and processes become out-of-date.
elastic demand
Situation in which the rise or fall in a producers price greatly affects the amount that people are willing to buy
benefit
Something that has a good effect
Video games are an example of a need or want?
Something that is not necessary for life, but some might think makes life more enjoyable
Need
Something that must be met in order for them to survive
Want
Something that people desire but that is not necessary for survival.
Manufactured goods
Supply for these goods tends to be more elastic as it is easier to increase or decrease the quantity supplied in response to a price change.
UTILITY
THIS IS THE ABILITY OF A GOOD OR SERVICE TO PROVIDE USEFULNESS AND CONSUMER SATISFACTION.
ECONOMIC GROWTH
THIS OCCURS WHEN A NATION'S TOTAL OUTPUT OF GOODS AND SERVICES INCREASES OVER TIME.
VALUE
THIS REFERS TO A WORTH THAT CAN BE EXPRESSED IN DOLLARS AND CENTS.
SPECIALIZATION
THIS TAKES PLACE WHEN FACTORS OF PRODUCTION PERFORM TASKS THAT THEY CAN DO RELATIVELY MORE EFFICIENTLY THAN OTHERS.
DIVISION OF LABOR
THIS TAKES PLACE WHEN WORK IS ARRANGED SO THAT INDIVIDUAL WORKERS DO FEWER TASKS THAN BEFORE.
demand schedule
Table showing quantities demanded at different possible prices
Withdrawal
Take money out of bank
Surplus
Tax collection that exceeds spending needs.
Income
Tax on the amount of money a person earns.
property tax
Tax paid on the value of someone's property, such as their land or house
Regressive taxation
Taxation where as income increases, the fraction of income paid as taxes decreases.
Proportional taxation
Taxation where as income increases, the fraction of income paid as taxes remain constant.
Ad Valorem Taxes
Taxes calculated as a fixed percentage of the price of the good or service; the amount of tax increases as the price of the good or service increases.
Excise taxes
Taxes imposed on spending on particular goods or services.
Indirect taxes
Taxes levied on spending to buy goods and services, called indirect because payments of some or all of the taxes by the consumer is paid to the government authorities by the firms.
Tariffs
Taxes on imported goods.
tariff
Taxes on imported products
Personal income taxes
Taxes paid by households or individuals in households on all forms of income, including wages, rental income, interest income, and dividends (income from ownership of shares in a company); is the most important source of government tax revenues in many countries (especially economically more developed countries).
Direct taxes
Taxes paid directly to the government tax authorities by the taxpayer, including personal income taxes, corporate income taxes, and wealth taxes.
Appropriate technology
Technologies that are well-suited to a country's particular economic, geographical, ecological, and climate conditions.
Clean technology
Technology that is not polluting, associated with environmental sustainability. Examples: Solar power, wind power, hydropower, and recycling.
Price as incentives
The ability of prices, and changes in prices, to convey information to consumers and producers that motivates them to respond by offering them incentives to behave in their best-self-interest.
Urban informal sector
That part of an urban economy that lies outside the formal economy, consisting of economic activities that are unregistered and legally unregulated.
Prices as signals
The ability of prices, and changes in prices, to communicate information to consumers and producers, on the basis of which they make economic decisions.
Factor Market
The arena of exchange in which firms purchase the factors of production from households.
Product Market
The arena of exchange in which households purchase goods and services from firms.
Normative economics
The body of economics based on normative statements, which involve beliefs, or value judgements about what ought to be. Normative statements cannot be true or false; they can only be assessed relative to beliefs and value judgements. Normative economics forms the basis of economic policies.
Microeconomics
The branch of economics that examines the behavior of individual consumer and firm.
Closeness of substitutes
The closer the substitutes available the more elastic will be the demand.
Human Resources
The health, education, experience, training, skills, and values of people, such as doctors, teachers, or farmers.
Physical Capital
The human-made objects used to create other goods and services.
Scarcity
The idea that nobody has enough to get everything they want.
Benefit principle
The idea that people should pay taxes based on the benefits they receive from government services.
Ability to pay principle
The idea that taxes should be levied on a person according to how well that person can shoulder the burden.
Absolute poverty
The inability of an individual or a family to afford a basic standard of goods and services, where the standard is absolute and unchanging over time. Absolute poverty is defined in relation to a nationally or internationally determined 'poverty line', which determines the minimum income that can sustain a family in terms of its basic needs.
Relative poverty
The inability of an individual or family to afford an adequate standard of goods and services, where the adequate standard is relative and changes over time.
Poverty
The inability of an individual or family to afford an adequate standard of goods and services. It may be relative or absolute.
What is scarcity?
The inability to satisfy all needs at once because supplies are limited.
Profit motive
The incentive that drives individuals and business owners to improve their material will-being.
Disposable income
The income of consumers that is left over after the payment of income taxes.
Factor Payment
The income people receive in return for supplying factors of production.
Potential output
The level of output that can be produced when there is "full employment".
Economic System
The method used by a society to produce and distribute goods and services.
Profit
The money a business makes.
withdrawal
The money a person withdraws, or takes out of the bank.
income
The money people earn from their work.
account
The money people keep in the back and the record of that money
deposit
The money people put into the bank.
currency
The money people use in different countries.
Opportunity cost
The most desirable alternative given up as the result of a decision.
Official Development Assistance (ODA)
The most important part of foreign aid, referring to foreign aid that is offered by countries or by international organizations composed of a number of countries (it does not include aid offered by non-governmental organizations).
Economics Forces
The necessary reactions to scarcity.
Underemployment
The number of underemployed people, defined as all people above a particular job who have part-time jobs.
Labor (FACTOR OF PRODUCTION)
The physical and mental effort that people contribute to the production of goods and services.
Goods
The physical objects that someone produces.
Dumping
The practice of selling a good in international markets at a price that is below the cost of producing the good.
Tied aid
The practice whereby donors make the recipients of foreign aid spend a portion of the borrowed funds on the purchase of goods and services from the donor country.
equilibrium (price)
The price at which the amount of goods producers supply meets the amount of goods consumers demand.
What is demand?
The price at which the consumer is willing to buy the product at?
What is supply?
The price at which the producer is willing to sell the product.
The Invisible Hand
The price mechanism, the rise and fall of prices that guides our actions in a market.
Open opportunity
The principle that anyone can compete in the marketplace.
Legal equality
The principle that everyone has the same legal rights.
Scarcity
The principle that limited amounts of goods and services are available to meet unlimited wants.
Private property rights
The principle that people have the right to control their possessions and use them as they wish.
Free contract
The principle that people may decide what agreements they want to enter into.
Voluntary exchange
The principle that people may decide what, when, and how they want to buy and sell.
Innovation
The process of bringing new methods, products, or ideas into use.
Competition
The struggle among producers for the dollars of consumers.
Competition
The struggle among producers for the dollars of consumers; the rivalry among sellers to attract customers while lowering costs.
Economics
The study of choices leading to the best possible use of scarce resources in order to best satisfy the unlimited human needs and wants.
Macroeconomics
The study of economic behavior and decision-making in a nation's whole economy.
Economics
The study of how buyers and sellers make decisions.
Economics
The study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political realities of the society.
economics
The study of how people seek to satisfy their needs and wants by making choices
Economy
The system of growing, making, selling, buying and using goods and services.
sales tax
The tax added to the cost of what you buy.
Aggregate demand
The total quantity of goods and services that all buyers in an economy (Consumers, Firms, the Government, and Foreigners) want to buy over a particular time period, at different possible price levels.
Gross Domestic Product
The total value of all final goods and services produced in a country in a given year.
Bartering
The trading of goods ad services without the use of money.
redistribution of income
The transfer of income through government taxation, spending and assistance programs targeted at particular income groups. The goal is to transfer money from higher-income groups to lower-income groups.
Non-price determinants of demand
The variables that can influence demand: Income, Preferences, Prices of related goods (Substitution and Complementary), and Demographic changes.
unlimited
There is not a(n) _______ supply of *any* good.
Current account (BALANCE OF PAYMENTS)
This includes the balance of trade (exports minus imports of goods), the balance of services (exports of services minus imports of services), inflows minus outflows of income and current transfers.
Entrepreneurs
Those in a market economy who see a need to create goods and services to satisfy the wants of consumers.
Absolute Advantage
To be able to make something using fewer resources than anyone else. Or to be better at something over someone else.
privatization
To change from government or public ownership or control to private ownership or control.
barter
To exchange goods or services without the use of money
role of government
To maintain legal and social framework, overcome market failure by providing public goods and services, maintain competition, redistribute income, correct for externalities, to protect individuals and their property rights, stabilize the economy
Deposit
To put money in bank
Privatize
To sell to individuals state-run firms, which are then allowed to compete in the marketplace.
Average tax rate
Total taxes paid divided by total income.
Administrative barriers
Trade protection measures taking the form of administrative procedures that countries may use to prevent the free flow of imports into a country.
Barter
Trade without money
Substitutes
When the sign of XED is positive, the products are said to be substitutes. The higher the value, the closer they are as substitutes.
Embargo
a govern. order to stopping trade with another country to put pressure on the government of that other country
Substitute goods
Two or more goods that satisfy a similar need, so that one good can be used instead of the other. If two goods are substitutes, an increase in the price of one leads to an increase in the demand for the other.
Complement goods
Two or more goods that tend to be used together. If two goods are complements, an increase in the price of one will lead to a decrease in the demand of the other.
interdependence
Two or more people depending on each other for goods and services
treasury bond
U.S. government bond with maturity of 10 to 30 years
Hidden unemployment
Unemployment that is not accounted in official unemployment statistics because of such factors as the exclusion of discouraged workers, the practice of considering part time workers as full-time workers, and others.
incentives
Used to change behavior in order to persuade people to take certain economic actions. Ex. profit and the ownership of private property are incentives to start a business
rent
When a person chooses to pay someone else to use something on a short term basis.
Interdependent
When an individual, region, or country relies on other people for many of the goods and services it needs.
What is incentive?
What motivates you to work? (money, etc.)
expenses
What you choose to spend your money on.
Opportunity Cost
What you don't do when you do something.
Inelastic demand
When 0<PED<1; a change in the price of the product leads to a proportionally smaller change in its quantity demanded. Total revenue increases if price is raised.
Inelastic supply
When 0<PES<1; a change in the price of the product leads to a less than proportionate change in its quantity supplied.
Income inelastic
When 0<YED<1; %∆ in Qd < %∆ in income.
Elastic demand
When 1<PED<infinity; a change in the price of the product leads to a greater than proportionate change in its quantity demanded. Total revenue decreases if the price is raised.
Elastic supply
When 1<PES<infinity; a change in the price of the product leads to a greater than proportionate change in its quantity supplied.
Unit elastic demand
When PED=1; a change in the price of a product leads to a proportionate, opposite change in its quantity demanded. If price is raised by 10%, quantity will fall by 10%; total revenue will not change.
Unit elastic supply
When PES=1; a change in the price of the product least to a proportionate change in its quantity supplied.
Perfectly inelastic demand
When a change in the price of a product will have no effect on the quantity demanded at all (PED=0; completely unresponsive to price changes).
Perfectly inelastic supply
When a change in the price of a product will have no effect on the quantity supplied at all (PES=0; completely unresponsive to price changes).
Merchantilism
When a colony exists for the good of the mother country.
Shortage
When demand is higher than supply.
Surplus
When supply is higher than demand.
Complements
When the sign of XED is negative, the products are said to be complements. The lower the value, the closer they are as complements.
Inferior good
When the sign of YED is negative; the product is said to be an inferior good: the demand decreases as income increases because people purchase more expensive alternatives instead.
Normal good
When the sign of YED is positive, the product is said to be a normal good: the demand increases as income increases. Normal goods include necessity goods and superior goods.
surplus
When there is more of it than people want and its price goes down
scarcity
When there is not enough supply of a good that people want
What is limited government
When there isn't much government intervention
Import
When we bring in goods from other countries
Export
When we sell goods made in this country to other countries
Scarcity
When what a group of people want or need something, but there is not enough available.
Pay interest
When you borrow from a bank
Opportunity cost
When you buy something you give the chance to buy something else. This is the thing you give up
Market
Where buyers and sellers meet.
economic interdependence
Where two or more countries depend on one another to trade in order to meet each country's demand.
Services
Work that someone does for someone else.
Human Resources
Workers doing work.
money market mutual fund
a fund that pools money from small savers to purchase short term securities
Veblen good
a good for which taste outweighs substitution effect
Normal good
a good the demand for which varies positively (or directly) with income; this means that as income increases, demand for the good increases.
utility
a goods or services capacity to provide satisfaction
central bank
a bank that can lend money to other banks in time of need - it also helps to regulate the money supply
factory
a building where people produce goods
partnership
a business co-owned by two or more people, or "partners," who agree on how responsibilities, profits, and losses will be divided.
sole proprietorship
a business owned and managed by a single person
corporation
a business owned by stockholders, who own the rights to the company's profits but face limited liability for the company's debts and losses
partnership
a business owned by two or more people
economic and monetary union
a common market with a common currency and a common central bank (for example, the Eurozone)
rule of law
a concept that those who govern are bound by the laws; no one is above the law
job
a daily activity that you do for pay. These can change within a career.
Economic choice
a decision ot buy one thing instead of another
production possibilities curve (PPC)
a graph used by economists to show the impact of scarcity on an economy
trading bloc
a group of countries in an agreement to increase trade between themselves and/or to gain economic benefits from co-operation
landlord
a landowner who leases or rents to others
scarcity
a limited supply or resources in comparison to unlimited wants and needs
price stability
a low and stable rate of inflation
producer
a maker of goods or a provider of services
competitive market
a market in which there are many buyers and many sellers so that each has a negligible impact on the market price
monopolistic competition
a market structure in which many companies sell products that are similar but not identical
perfect competition
a market structure with very many firms with no market power, homogeneous products and no barrier to entry (only theoretical, closest real-word example would be agricultural products)
natural monopoly
a market that runs most efficiently when one large firm supplies all of the output
product market
a market where producers offer goods and services for sale
income elasticity of demand
a measure of how much the quantity demanded of a good responds to a change in consumers' income, computed as percentage change quantity demanded divided by percentage change in income
price elasticity of supply
a measure of how much the quantity supplied of a good responds to change in price, computed as percent change quantity supplied divided by the percent change in price
standard of living
a measure of quality of life based on the amounts and kinds of goods and services a person can buy
elasticity
a measure of the responsiveness of quantity demanded or quantity supplied to a change in one of its determinants
utility
a measure of usefulness and/or pleasure
credit rating
a measure of your creditworthiness, often computed as a numerical score, using the FICO scoring system to analyze your credit history
rationing
a method used to apportion or divide something up between its interested users
circular flow of income
a model of exchange between households and firms
government monopoly
a monopoly created by the government
normative economics
a way if describing and explaining what economics behavior ought to be, not what it actually is
financial system
a network of savers, investors, and financial institutions working together to transfer savings for investment uses
general partnership
a partnership in which partners share management of the business and each one is liable for all business debts and losses
taxes
a payment, penalty or fee that is paid for spending, buying, earning or having
recovery
a period in the business cycle of economic expansion, where GDP increases at a steady rate
stagflation
a period of slow economic growth and high unemployment (stagnation) while prices rise (inflation)
consumer
a person who buys a good or service
Consumer
a person who buys goods and services
entrepreneur
a person who starts up and takes on the risk of a business
entrepeneur
a person who takes a risk to start a business
consumer
a person who uses goods or services
stock market
a place where shares of pubic listed companies are traded
budget
a plan for keeping track of savings and spending
budget
a plan on how you will spend your money
Budget
a plan that shows how you spend and save your money
budget
a plan that shows income and expenses over a period of time. A budget's income should be greater than its expenses
financial planning
a process used to achieve financial success based upon the development and implementation of financial goals and planning
government regulation
a rule that a government establishes and enforces to protect the public or provide equal access to specific goods, and services.
career
a series of jobs that advance in complexity, usually pay increases as well to.
positive economics
a way of describing and explaining economics as it is
Assembly Line
a series of workers and machines in a factory by that produces one good repeatedly.
stock
a share of ownership in a corporation
economic model
a simplified representation of economic forces
circular flow model
a simplified representation of how the economy's transactions work together
limited life
a situation in which a business ceases to exist if the owner dies, retires, or leaves the business for some other reason
unlimited liability
a situation in which a business owner is responsible for all the losses, debts, and other claims against the business
market failure
a situation in which a market left on its own fails to allocate resources efficiently
equilibrium
a situation which the market price has reached the level at which quantity supplied equals quantity demanded
economy
a societal system based upon the exchange of goods and services for money.
Giffen good
a special inferior good for which income effect outweighs substitution effect
equilibrium
a state of rest, self-perpetuating in the absence of any outside disturbance
social science
a study of people in society and how they interact with each other
dividend
a sum of money paid regularly (typically quarterly) by a company to its shareholders out of its profits (or reserves)
market economy
a system based on private ownership, free trade between buyers and sellers, and competition
gold standard
a system in which paper money and coins are equal to the value of a certain amount of gold
command economy
a system in which the central government makes all economic decisions
fractional reserve banking
a system that keeps only a portion of funds on hand, and lends out the rest
proportional tax
a tax for which the percentage of income paid in taxes remains the same for all income levels
excise tax
a tax on certain items such as alcohol, tobacco, and gasoline
Tariff
a tax on imports
income tax
a tax on people's earnings
invisible hand
a term coined by Adam Smith to describe the self-regulating nature of the marketplace
Ceteris Paribus
all other things being equal
limited liability partnership (LLP)
all partners are limited partners and not responsible for the debts and other liabilities of other partners
ceteris paribus
all things held constant
تخصيص
allocation
internalizing the externality
altering incentives so that people take account of the external effects of their actions
consumer surplus
amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it
producer surplus
amount a seller is paid for a good minus the seller's cost of providing it
surplus
amount by which supply is higher than the quantity demanded (above where supply and demand curve intersect)- signals price is to high
demand
amount of G/S that consumers are able and willing to buy at various possible prices during a specified time period
quantity demanded
amount of a good that buyers are willing and able to purchase
quantity supplied
amount of a good that sellers are willing and able to sell
Profit
amount of money remaining after expenses
total revenue
amount paid by buyers and received by sellers of a good computed as price of good times quantity sold
services
an action that a person does for someone else
price fixing
an agreement among firms to charge one price for the same good
debt
an amount someone owes
cost-benefit analysis
an approach that weighs the benefits of an action against its cost
Supply and Demand
an economic concept that states that the price of a good rises and falls depending on how many people want it (demand) and depending on how much of the good is available (supply)
market economy
an economic system based on free enterprise, in which businesses are privately owned, and production and prices are determined by supply and demand
pure market economy
an economic system with no government so that private firms account for all production
choice
an economic, rationing decision in how to allocate scarce resources
Market Economy
an economy in which centralized planning groups decide what and how goods and services will be produced, distributed, and consumed
Command Economy
an economy in which changes in price guide what and how goods and services will be produced, distributed, and consumed.
Traditional economy
an economy in which customs and habits of the past decide what and how goods and services are produced, distributed, and consumed.
market economy
an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services
Mixed Economy
an economy that blends characteristics of both command and market economies , but falls closer to one form and the other.
Trade
an exchange of goods, services, or money in return for goods or services
resource allocation
assigning available resources or factors of production to specific uses chosen among many possible and competing alternatives, and involves answering the what to produce and how to produce questions
diminishing marginal utility
assuming all things stay the same with each additional unit consumed, we recieve less satisfaction then the previous unit consumed.
rational self interest
assumption in economics that people do what they want for a reason that makes sense to them at the time of the incident
expectations
businesses fear costs will not be high in the future so they produce less-opposite also true...
open market opperations
buying and selling of government securities
rational decisions
choice in which you weigh the costs and benefits of each option
law of demand
claim that other things equal "certius paribus" demand of a good falls when the price of a good rises
if revenue is < operating costs should you stay open or close down
close down
economic integration
co-ordination and linking of economic policies
currency
coins and bills used to purchase goods and services
mixed economic system
combines elements of traditional, market and command systems
law of demand
consumers buy more of a good when its price decreases and less when its price increases
monopoly
control of a product or service by one company
private company
controls who can buy or sell its stock
Money has been made out of
copper, silver, paper
transaction costs
cost that parties incur in the process of agreeing to and following through on a bargain
externalities
costs that are not calculated into the price; spillovers--Ex. Pollution
rural
country
three main components of a bond
coupon rate, maturity, and par value
بطاقة الائتمان
credit card
common market
customs union with common policies on product regulation and with free movement of goods, services, capital, and labour (for example, the EU or CARICOM)
allocation of resources
decision on how to divide scarce resources among different uses
Mixed Economy
economic system in which both the state and private sector direct the economy
centrally planned economy
economic system in which the central government makes all decisions on the production and consumption of goods and services; command economy
Andrew Jackson
effectively killed the Second Bank of the United States by vetoing the bill that would have renewed its charter. The demise of the bank led to the Panic of 1837
homeostasis
equilibrium
porportional
every one pays the same percent of their income
income
ex) normal gods and inferior
barter
exchange of goods without using money
معفى
exempt
examples of RRR
expansionary and contractionary monetary policy
agriculture
farming and producing crops
social security
federal program of disability and retirement benefits that covers most working people
bills
fees you owe for having used something
التمويل
financing
capital investments
firms purchase of new machines and buildings. firms invest in capital goods to increase their capacity to produce more goods and services in order to maximize profits
total cost
fixed costs + variable costs
inferior good
good for which other things equal increase in income leads to a decrease in demand
Things that are made then grown then sold
goods
بضائع
goods
Products
goods and services
exports
goods and services produced within a country and sold outside the country's borders
imports
goods and services purchased from other countries
imports
goods and services sold in a country that are produced in other countries
outputs
goods and services that firms produce
wants
goods and services that we would LIKE to have
What do people purchase
goods and services, give an example
imports
goods bought from other countries
exports
goods made in another country and shipped to your country to be sold
imports
goods made in another country and shipped to your country to be sold
capital resources
goods produced and used to make other goods and services. EX: toolds, machines, buildings, equipment, computers, pens
export
goods shipped FROM the United States TO another country
import
goods shipped TO the United States FROM another country
exports
goods sold to other countries
substitute goods
goods that can be used to replace the purchase of similar goods when prices rise (e.g. strawberries/blueberries)
free goods
goods that don't have an opportunity cost
economic goods
goods that have an opportunity cost
nondurable goods
goods that last a short period of time, such as food, light bulbs, and sneakers
durable goods
goods that last for a relatively long time, such as refrigerators, cars, and DVD players
inferior goods
goods that people buy less of as income increases
normal goods
goods that people buy more of as income increases
Capital Resources
goods used to make other goods and services
scarcity
having a limited quantity for unlimited wants
taxes
higher taxes= higher costs (curve shifts left)
negative XED
increase in quantity demanded of product A with a decrease in price for product B/decrease in quantity demanded of product A with an increase in price for product B
positive XED
increase in quantity demanded of product A with an increase in price for product B/decrease in quantity demanded of product A with a decrease in price for product B
market economic system
individual consumers and producers make economic decisions; also called capitalism or free market; encourage entrepreneurs to establish new businesses
producers
individuals and organizations that determine what products and services will be available for sale.
Producers
individuals and organizations who make and or supply goods and services
Consumers
individuals and organizations who purchase goods and services
in the short run supply becomes more...
inelastic
infinite PED
infinite change in quantity demanded with a change in price
infinite PES
infinite change in quantity supplied with a change in price
cooperative
is a business operated for the shared benefit of the owners, who also are its customers
franchise
is a business that licenses the right to sell its products in a particular area
bond
is a contract issued by a corporation that promises to repay borrowed money, plus interest, on a fixed schedule
profit
is a financial gain that a seller makes from a business transaction
multinational corporation
is a large corporation with branches in several countries
specialization
is a situation in which people concentrate their efforts in the activities that they do best
centrally planned economy
is a system in which central government officials make all economic decisions
market economy
is an economic system in which individual choice and voluntary exchange direct economic decisions
traditional economy
is an economic system in which people produce and distribute goods according to customs handed down from generation to generation
command economy
is an economic system in which the government makes all economic decisions
communism
is an economic system in which the government owns all the factors of production and there is little to no political freedom
socialism
is an economic system in which the government owns some or all of the factors of production
capitalism
is an economic system that is based on private ownership of the factors of production
mixed economy
is an economy that has elements of traditional, command, and market systems
durable
lasting for a long time, one of the six characteristics of money
price floor
legal minimum on the price at which a good can be sold
Diminishing Marginal Utility
lessening of satisfaction with each additional purchase
Scarcity
limited supply of something
inelastic PED
little change in quantity demanded with a change in price
inelastic PES
little change in quantity supplied with a change in price
mortgages
loans used to buy real estate, such as land or a home.
uniform
looking the same, one of the six characteristics of money
Good service
makes money grocery store, car manufacturer
tax incidence
manner in which the burden of a tax is shared among participants in a market
Production
manufacturing, mining, or growing something (usually in large quanities) for sale
competitive market
market in which there are many buyers and sellers so that each has a negligible impact on the market price
taxes
money collected to pay for public goods and services
profit
money gained after costs are paid
Natural Resources
materials such as minerals, forests, water, and fertile land that occur in nature and can be used to make money.
price ceiling
maximum price set by government that can be charged by goods and services
unlimited life
means that a corporation continues to exist even after an owner dies, leaves the business, or transfers his or her ownership
privatize
means to change from government or public ownership to private ownership
nationalize
means to change from private ownership to government or public ownership
economize
means to make decisions according to the best combination of costs and benefits
cross-price elasticity of demand
measure of how much quantity demanded of one good responds to a change in the price of another good, computed as the percentage change in quantity demanded of the first good divided by the percentage change in the price of the second good.
Dow Jones Industrial Average (DJIA)
measure of stock market performance based on 30 representative stocks
elasticity
measure of the responsiveness of quantity demanded or quantity supplied to a change in one of its determinants
output method
measuring national income by corporate tax (finding the total value of all goods and services produced by firms)
income method
measuring national income by income tax (finding the value of all wages)
expenditure method
measuring national income by sales tax (consumption + investment + govt. spending + net exports)
entitlement programs
medicare, medicaid, social security
functions of money
medium of exchange, unit of account, store of value
price floor
minimum price set by government that can be charged for goods and services
goods
objects, such as food, clothing, and furniture, that can be bought
price controls
occasionally the government sets the price of a product because they believe that the forces of supply and demand are "unfair"
Natural Resources
occurr naturally within environments that exist relatively undisturbed by market in a natural form
specialization
occurs when individual workers focus on single tasks (division of labor), enabling each one to be more efficient and productive
management
organizing and risk-taking; entrepreneurship
greenback
paper currency issued by the Union government during the American Civil War/ this was considered fiat money.
traditional economic system
people make economic decisions based on their customs and habits; needs and wants satisfied through hunting or farming; not very common
consumers
people or businesses that buy, or consume, products
producers
people or businesses that make and sell products
consumers
people that buy products (teenagers,adults,elderly)
consumers
people who buy goods and services
producers
people who create goods and provide services
Producer
people who made goods and services
consumers
people who purchase goods and services
rational people
people who systematically and purposefully do the best they can to achieve their objectives
human resources
people who work to produce goods and services EX: factory workers, teachers, bakers, managers, doctors, secretaries, doctors, farmers, nurses, fire fighters
real income
people's income limit the amount they are able to spend
RRR
percent of deposits banks must keep on hand
bear market
period during which stock market prices move down for several months or years in a row
bull market
period during which stock market prices move up for several months or years in a row
labour
physical and mental contribution to the economy
Goods
physical items that can be made or grown, and bought and sold.
efficiency
property of society getting the most it can from its scarce resources
Private Property
property owned by individuals or companies, not by the government or the people as a whole
private ownership
property/resources that individuals own and control; a core principle of capitalism
unit elastic PED
proportional change in quantity demanded with a change in price
unit elastic PES
proportional change in quantity supplied with a change in price
coase theorem
proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own.
producers
provide a product or service
substitution effect
quantity demanded increases as a product becomes relatively more attractive
income effect
quantity demanded increases with an increase in real income
shortages
quantity demanded is greater than quantity supplied
demand
quantity of a good or service that consumers are willing and able to purchase at a given price in a given time period
ركود
recession
acceptable
recognized as having value; one of the six characteristics of money
business cycle
recurring fluctuations in economic activity consisting of contraction and expansion
land
refers to all natural resources used to produce goods and services
global economy
refers to all the economic interactions that cross international boundaries
pension
regular payment to someone who has worked a certain number of years, reached a certain age, or has suffered an injury
natural resource
resources that come from nature
elasticity
responsiveness of consumers and producers to a change in one of the variables of the marketplace
comparative advantage
the ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than other producers.
stock
shares of ownership in a company
surplus
situation in which quantity supplied is greater than quantity demanded
absolute advantage
the ability to produce more of a given product using a given amount of resources
income-inelastic
small change in quantity demanded with a change in consumer income
entrepreneur
someone who opens their own business
entrpreneur
someone who owns and runs a business
Free rider
someone who would not be willing to pay for a certain good or service, but who would get the benefits of it anyway if it were provided as a public good.
service
something that a person does for someone else in exchange for money or value
incentive
something that induces a person to act
store of value
something that keeps its value if it is stored, rather than used
physical capital and technological factors
sources of economic growth that improve the quality/quantity of physical capital
human capital factors
sources of economic growth that increase human capital by population growth/immigration (quantity) or by health care/education/training (quality)
natural factors
sources of economic growth that increase the quality and/or quantity of a factor of production
voluntary exchange
the act of buyers and sellers freely and willingly engaging in non-fraudulent market transactions. Both parties should benefit from the exchange.
authoritarian
systems require absolute obedience to those in power
supply schedule
table that shows the relationship between the price of a good and quantity supplied
goods
tangible products that we use to satisfy our wants and needs
corrective tax
tax designed to induce private decision makers to take account of the social costs that arise from a negative externality
Tariff
tax imposed on goods imported from outside the country that is not imposed on similar goods within the country
determinants of supply/supply shifters
technology, price of goods used in production, number of firms, seller's expectations, and government
marginal cost
the additional cost of using one more unit of a product
want
term for a desire, a longing, or an appetite for something
market
term for a mechanism that allows people to exchange goods
need
term for a necessity
mass market
term for a very large number of people to whom very large quantities of products are sold
economy
term for any system for the production, distribution, and consumption of goods and services
capital good (investment good)
term for anything used in the production and distribution of goods and services
economic theories (principles)
term for ideas that attempt to explain how the economy works and why people respond the way they do
services
term for intangible goods produced by labor for which people expect to pay
consumers
term for people who use goods
producers
term for persons who work to provide goods
economists
term for scholars of the production, distribution, and consumption of goods within an economy
demand
term for the amount of a good that is bought at a certain price under certain conditions
Diamond-Water Paradox
term for the economic riddle which asks why rare items such as diamonds normally command high prices while necessities such as water usually command low prices
want
term for the human desire to have and use a certain good
technology
term for the industrial skills and scientific methods that make possible efficient production
scarcity
term for the limited availability of a good
supply
term for the quantity of a good for sale at a certain price under certain conditions; the amount of a good that is produced
macroeconomics
term for the study of national and international economies and how these major economies are affected by large-scale choices and public policies
microeconomics
term for the study of specific components within a major economy and how the choices made by individuals, households, and businesses affect that economy
economics
term for the study of the choices that individuals and societies make in the production, distribution, and consumption of goods
utility
term for the usefulness of a good
value
term for the worth that consumers attach to a good
consumer goods
term for those things produced for direct use by consumers
Federal Reserve
the "national bank" of the United States, it also controls the money supply
Federal Open Market Committee (FOMC)
the 12 member group that determines the purchase and sale policies of the Federal Reserve Banks in the market for U.S. government securities
comparative advantage
the ability of a party to produce a particular good or service at a lower marginal and opportunity cost over another
absolute advantage
the ability of a party to produce more of a good or service than competitors, using the same amount of resources
marginal benefit
the additional satisfaction from using one more unit of a product
expansion
the half of the business cycle during which economic growth is increasing (import expenditure rises, export revenues fall)
laissez-faire
the idea that government should not interfere with the economy
scarcity
the idea that human wants exceed the ability to produce goods and services from our limited resources to satisfy these wants
Profit
the income a business has after all the costs are paid
World Trade Organization
the international organization that sets the rules for global trading and resolves disputes between member countries (established in January 1995)
land
the land and everything that grows on it or is found under it
production possibilities curve
the limit of potential production if all factors of production are used to their fullest given its resources and technology
substitutes
two goods for which an increase in the price of one leads to increase demand of the other
equality
the property of distributing economic prosperity uniformly among the members of society
productivity
the quantity of goods and services produced from each unit of labor input
demand
the quantity of people wanting to buy a good or service
factors of production
the resources that allow an economy to produce its output (land, labour, capital, management/entrepreneurship); what households exchange for rent, wages, interest, and profit
consumer sovereignty
the role of consumer as the ruler of the market, determining what products will be produced
foreclosure
the seizure of property from people who are unable to pay back their loans. This usually refers to mortgages.
scarcity
the situation that exists when there are not enough resources to satisfy human wants
human capital
the skills and knowledge gained by a worker through education and experience
human resources
the skills and talents used to create goods or provide services
economics
the social science that deals the with the production, consumption, and distribution of goods and services; the study of the allocation of scarce resources to satisfy the infinite wants of consumers for goods and services
economics
the study of how individuals and nations make choices about ways to use scarce resources to fulfill their needs and wants
economics
the study of how individuals and societies satisfy their unlimited wants with limited resources
economics
the study of how people meet their wants and needs
microeconomics
the study of individuals, families, and businesses in an economy
microeconomics
the study of smaller, discrete economic agents and their reaction to changing events
macroeconomics
the study of the economy as a whole and is concerned with large-scale economic activity
economics
the study of the production, distribution, and the consumption of goods and services
interdependent
two or more people or things dependent on each other.
trade
to buy, sell, or exchange goods using money
increase
to change to more
استهلك
to consume
خدع
to deceive
barter
to exchange goods or services without the use of money; trade
Earn
to gain money after providing a service
accelerate
to go faster or to grow
deficit
to have a shortage of something
deregulate
to remove laws or controls on an institution or industry
انكمش
to shrink
سحب
to withdraw
capital resources
tools needed to create goods or provide services
GDP (Gross Domestic Product)
tot value of the goods and services that a country produces each year
revenue
total amount of money made or exchanged
barter
trading of goods and services for other goods and services
complements
two goods for which an increase in the price of one leads to a decrease in the demand for the other
externality
uncompensated impact of one person's actions on the well-being of a bystander
structural unemployment
unemployment that occurs when workers' skills do not match the jobs that are available
frictional unemployment
unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills
capital
wealth in the form of money or property owned by a person or business and human resources of economic value
spending
using your money to pay for your needs and wants
privatize
v. to change from government or public ownership to private ownership (p. 61)
nationalize
v. to change from private ownership to government or public ownership (p. 61)
economize
v. to make decisions according what is believed to be the best combination of costs and benefits (p. 12)
injections
value added to the circular flow (investment, exports, government spending)
cost
value of everything a seller must give up to produce a good
leakages
value taken out of the circular flow (savings, imports, taxes)
أجور
wages
Trade Barriers
ways of limiting trade by tariffs,quotas, or embargoes.
trade creation
when the entry of a country into a customs union leads to the production of a good or service transferring from a high-cost producer to a low-cost producer (for instance, by the elimination of tariffs on goods imported from another member country)
trade diversion
when the entry of a country into a customs union leads to the production of a good or service transferring from a low-cost producer to a high-cost producer (for instance, by the introduction of tariffs on goods imported from a non-member country that weren't present when a country was outside of the customs union)
economic growth
when the quantity of output produced by an economy over a period time increases; the increase in actual output of value/expenditure/total incomes; measured in GDP/GNI
scarcity
when there is not enough of a good for everyone to wants to buy it
productivity
when workers are productive, costs go down! more products are produced @ the same price
services
when you pay someone to complete a job or task for you
Market
where buyers and sellers exchange goods
factor markets
where resources, especially capital and labor, are bought and sold
supply
willingness and ability of producers to produce a quantity of a good or service at a given price in a given time period
non-fraudulent exchange
without fraud/without deceiving; honest, voluntary exchange
services
work performed by a person for someone else
services
work that one person does for another
Human Capital
workers of a business or country including their education, training, skills, and health.
value
worth expressed in dollars and cents
GDP
worth of all the goods and services in the economy
Describe the poverty cycle.
•A linked combination of barriers to growth and development forms a circle, thus it is endless unless the circle can be broken. •Poor communities are unable to invest in physical, human and natural capital due to low or no savings; poverty is therefore transmitted from generation to generation •there is a need for intervention to break out of the cycle.
Priority of NGOs.
•Aim to promote economic development, humanitarian ideals and sustainable development •Activities: →Plan and implement specifically targeted projects in developing countries →Act as lobbyists to try to influence public policy →Actively raise funds →Raise awareness which could lead to public pressure on governments affecting amount of aid given →Influence buying patterns of consumers •Work directly with field, work directly with poor people to enhance their human capital •Literacy programmes, health education, AIDS prevention projects, agricultural extension, micro credit schemes, immunization and vocational training
Define Aid.
•Assistance that is given to a country that would not have been provided through normal market forces. •Extended to economically less developed countries by governments of donor countries (official development assistance ODA) or by non-government organizations (NGOs).
Describe composite indicators of economic development.
•Composite indicators include more than one measure and so are considered to be better indicators of economic development
Explain the importance of good governance in the development process.
•Creates confidence in developed countries increasing trade •Money will be spent in infrastructure and other areas to promote growth and development
Explain weaknesses of interventionist policies.
•Excessive bureaucracy •Poor planning •Corruption
Distinguish, compare and contrast GDP per capita figures and GDP per capita figures a purchasing power parity exchange rates for different countries.
•GDP normally measured US dollars but exchange rates can be very volatile and are more relevant to trading products. •GDP based on market exchange rates tend to over-estimate the cost of living in poorer developing countries •The difference between GDP converted to US dollars at official rates is higher than the GDP converted at PPP rates for lower income countries.
Distinguish, compare and contrast GDP per capita figures and GNI per capita figures for different countries.
•GDP per capita=(Total economic activity in country regardless of who owns productive assets)/(Number in poppulation) •GNI per capita=(Total income earned by a country' s factors of production regardless of asset location)/(Number in population) •GNI figures tend to be used to measure the status of developing countries. •increase in the annual flow of foreign direct investment (FDI) to developing countries increasing GDP above GNI figures. •Developed countries GNI figures are greater than GDP.
Describe development aid.
•Given in order to alleviate poverty in the long run and improve welfare of individuals •Official Development Aid •Provided by governments on concessional terms or as donations •Consists of: grants, concessional long-term loans, project aid (includes support for schools and hospitals), and programme aid (includes support for education sector and financial sector)
Describe humanitarian aid.
•Given to relieve short term suffering •Generally considered grant aid (short term aid provided as a gift) •Consists of food aid, medical aid and emergency relief aid.
Discuss the view that economic development may be best achieved through a complementary approach involving a balance of market orientated policies and government intervention.
•Government intervention protects against worst elements of capitalism while others are unnecessary invasion of their freedoms. •Government should take a limited role in the economy while allowing private enterprises because such involvement would eliminate the negative aspects of capitalism while adopting the positiveness of Socialism. •Government regulations allow businesses to remain in the private hands while removing some of the worst abuses of pure capitalism. •Government intervention protects the consumers, producers, and the community as a whole. •Limited government involvement prevents crises such as inflation, unemployment and depression.
Explain why a countries GDP/GNI per capita global ranking may be lower, or higher than its HDI global ranking.
•HDI still only shows an average figure that can mask inequalities within the country, •Inequalities that are likely to occur between: →rural and urban citizens →the genders →ethnic groups.
What are the strategies for achieving economic growth and economic development.
•Import substitution •Export promotion •Trade liberalisation •Bilateral and regional preferential trade agreements •Diversification •Fair trade organisations.
Define economic development.
•Improvement in welfare measured from a number of viewpoints •Multidimensional nature of economic development: →reducing widespread poverty →raising living standards →reducing income inequalities →increasing employment opportunities.
Describe indebtedness.
•Level of debt repayments that countries need to make on money that was borrowed.
Explain negative outcomes of market-orientated policies.
•Market failure •Development of dual economy •Income inequalities
Define absolute poverty.
•Measured in terms of the basic necessities for survival •the amount that a person needs to have in order to live. •Enables to make comparisons across the world.
Effectiveness of Foreign aid in contributing to economic development.
•No significant correlation between level of aid given and growth of GDP •Often governments do not distribute aid evenly or to areas in need, corruption •Aid sometimes given for political reasons, where they have political or economic interest. This means that the poorest receive the least amount of aid •Tied aid is less effective than untied aid. Developing country will not be able to buy least expensive goods as they have to buy from donor country. Creates no employment or extra output for developing country, and imports may replace domestic products •Long term provision of large quantities of food may force down domestic prices •Continued dependency on aid gives little incentive to be innovative •Aid often focused on modern sector, widening gap in incomes and living standards •Loan repayments on financial aid could lead to indebtedness
Role of International Monetary Fund (IMF).
•Organization of 184 countries working to foster: →global monetary cooperation →secure financial stability →facilitate international trade →promote high employment and sustainable economic growth →reduce poverty •Practices of IMF: →Surveillance →Technical assistance → Financial assistance
Describe Price volatility of primary products.
•Price elasticity of demand for commodities and the price elasticity of supply of commodities on the world market tend to be relatively inelastic. •Any change in the demand or supply conditions for resources will lead to large price fluctuations. •Makes very difficult for producers and governments in developing countries to plan ahead for education healthcare and infrastructure •impact on investment in companies
Describe inability to access international markets.
•Protectionism measures by developed countries preventing developing countries from utilizing their comparative advantages and exporting to developed countries, limiting their ability to earn foreign exchange •More developed countries give greater subsidies to farmers lowering world prices making it harder for developing countries to compete (lead to dumping) •Tariff escalation (rate of tariffs on goods rises the more the goods are processed) →discourages developing countries to move away from producing raw materials as if they do process them, they will be uncompetitive. →Traps them as suppliers of raw materials •Many developing countries have non convertible currencies (can only be used domestically, not accepted for exchange on foreign exchange markets). →making trade less likely to occur as traders taking more of a risk
Explain strengths of interventionist policies.
•Provision of infrastructure •Investment in human capital •Provision of a stable macroeconomic economy •Provision of a social safety net
Describe the actions of SAP.
•SAP helped control inflation, improve workings of international markets, lowering government budget deficits, reducing public ownership and reforming exchange rate policies •SAP heavily affected poor: →Reduction in government provided services such as education and health care →Increasing unemployment →Fall in real wage levels →Increased prices of essential products •Although SAPs lead to long term growth, argued that short term costs to very poor are too great •Need to service debt means that governments are unable to spend on other areas which: →Slows down economic growth →Slows down development
Describe debt relief.
•To address the development needs of low income countries and make sure that debt sustainability is maintained over time •For debt reduction to have impact on poverty, additional money needs to be spend on programs that benefit poor •Issue of odious debt where debt is incurred by a regime and is not used for purposes that serve the interests of the people •Debt relief allows developing countries to experience better rates of economic growth. Rising incomes create more demand and this would benefit exporters in more developed countries
Success of FDI in supporting sustainable economic development depends on.
•Type of investment •Ability of host government to regulate behavior of MNCs and use benefits of investment to achieve development objectives
Describe over specialisation on a narrow range of products.
•dependent on primary commodities •Rises in these prices of these commodities will be beneficial, increasing rate of economic growth •revenues could be used to finance education, health and infrastructure offsetting positive cycle in terms of development and future growth •Fall in prices of these commodities cause economy to experience deteriorating terms of trade. FACED WITH GREATER VULNERABILITY AND UNCERTAINTY
Define PPP(purchasing power parity).
•exchange rate attempts to equate purchasing power of currencies in different countries •done by comparing prices of identical goods and services in different countries
Disadvantages of FDI on developing countries.
•only provide employment for inexpensive low skilled workers for basic production, using their own management teams. •No education or training provided, limiting ability to acquire new technologies •too much power, gaining large tax advantages or subsidies. Can influence policy decisions • transfer pricing, where sell goods and services from one division of company to another division of company in a separate country, in order to take advantage of different tax rates on corporate profits. •Developing countries with low tax rates encourage MNCs to invest reap little tax reward, developed countries loose out on tax revenue. •able to reduce private costs while creating external costs. Damage environment •exploitation of workers, low wage rates and poor working conditions •extract resources, stripping resources and leaving. Host country does not get profits •often buy domestic firms in shares which means actual money not used to benefit economy
Role of World Bank.
•organisation whose main aims are to provide aid and advice to developing countries, (as well as reducing poverty levels and encouraging and safeguarding international investment). •MORE DETAILED NOTES ABOUT ITS AIMS: →promote the economic development of the world's poorer countries →assists developing countries through long-term financing of development projects and programs →provides to the poorest developing countries with special financial assistance (through the International Development Association (IDA)) →encourages private enterprises in developing countries through its connections, (the International Finance Corporation (IFC))
