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production possibility curve

helps producers see opportunity cost

M2

includes M1 includes savings accounts and investment accounts

demand-pull inflation

inflation caused by increasing demand

cost-push inflation

inflation caused by increasing production costs

pure market economy

is driven by the choices of producers and consumers no government intervention is involved (promoting free economic choices)

corporate bond

issued by private corporations

municipal bond

issued by states, counties, and municipalities

types of resources

land, labor, capital

producers are...

limited by their resources can create more than one product have to give up one item for another in production

specialization

limiting kinds of goods and services produced producers choose to specialize based on absolute or comparative advantage

macroeconomics

the study of economic decisions between countries and governments

microeconomics

the study of economic decisions between individuals and businesses

economics

the study of producing and consuming goods and services studying producers and consumers and how they work together how we make use of scarce resources

aggregate

total amount of supply total amount of demand

gross domestic product (GDP)

total value of all final goods and services produced in a country in a given year

barter

trade - exchanging goods or services of equal value

business cycle: trough

transformation point between contractions and expansions

business cycle: peak

transformation point between expansions and contractions

unemployment rate

unemployed workers --------------------------------------- number of works in the labor force

economic models

used by economists to understand how they economy works

injectors

ways that different sectors bring money into en economic system (spending, exports)

3 economic questions

what to produce how to produce it for whom to produce

unemployment

when an individual is actively looking for a job but is unable to find work

shortage

when quantity demanded exceeds quantity supplied

diequilibrium

when quantity supplied does not meet quantity demanded

surplus

when quantity supplied exceeds quantity demanded

structural unemployment

workers are unemployed because the makeup of the economy is changing occurs with the introduction of new technology individual's skills become outdated

frictional unemployment

workers are unemployed by choice

supply

amount of a good or service available in a market at any given price

efficiency

amount produced --------------------- resources used

production cost

amount spent producing goods and services

recovery

an increase in GDP increased production improved feelings about the economy growth

oligopoly

few producers that dominate a market place

inflation rate

final value - initial value -------------------------- x 100 initial value

deflation

general decrease in the overall price level of an economy

inflation

general increase in the overall price level of an economy

substitute goods

goods that replace other goods to meet the same consumer needs

demand

quantity of a good or service consumers are willing and able to buy

Customer sovereignty

Power of consumers to decide what is produced

complementary goods

a good that is commonly used with another good when a good's demand rises and falls, so does it's complementary good

demand curve

a graph that shows how price affects quantity demanded

supply curve

a graph that shows how prices affect the quantity supplied

monopoly

a market with a single supplier of a good or service

factors that affect demand

ability and willingness to purchase complementary goods substitute goods elasticity

incentives

actions that encourage or discourage people from doing something

law of demand

as price increases, demand decreases as price decreases, demand increases

law of supply

as prices rise, the quantity supplied increases as price falls, the quanitity supplied decreases

bond - U.S. government securities

backed by the full faith and credit of the U.S. government

traditional economy

based on traditions or customs of a family or community centers on bartering or trade rather than curency involves hunting, gathering, and farming (preserving traditional customs)

cyclical unemployment

caused by a decrease in demand in an economy

command economy

centrally operated by the government prohibits personal property decides what is made controls prices and supplies (creating social equality)

mixed market economy

combination of command and pure market economies government has some control over economy producers and consumers play a role in economic decisions (promoting free economic choices)

recession

contraction in which there are back-to-back quarters of declining GDP

government monopoly

created and run by the government of a nation

macroeconomic equilibrium

created where aggregate supply and aggregate demand meet

Equilibrium

created where quantity supplied and quantity demanded meet

circulation

currency that is being spent between individuals, businesses, and governments

wealth gap

economic difference between rich and poor

factors that affect supply

elasticity competition inelasticity ability to produce

defaulting

failing to repay a bank loan

price ceiling

maximum price that a good or service can be sold for governments impose price ceilings below the equilibrium price quantity demanded will exceed quantity supplied and shortages will occur

elasticity

measure of behaviors of producers and consumers in response to change in price elastic or inelastic

GDP per capita

measures a nation's GDP per person is determined by dividing the total GDP by the total number of citizens helps compare the performance of nations

gross national product (GNP)

measures the output of a nation's citizens

price floor

minimum price that can be placed on a good or service governments set the price floor above the equilibrium price quantity supplied will exceed quantity demanded and a surplus will occur

business cycle

model that shows how the economy expands and contracts expansion, peak, contraction, trough

capital is limited by...

money available to invest in production, physical resources

representative money

money that has value because it can be exchanged for a valuable object such as gold or silver

commodity money

money that has value because it is made with a valuable object often includes gold or silver most common form of currency in the past

fiat money

money whose value is guaranteed by a government

government involvement

more involvement - more restrictive economy less involvement - less restrictive economy

consumer price index (CPI)

most common measre of inflation

M1

most liquid form of money includes currency in circulation includes money deposited in demand accounts such as checking accounts

monopolistic competition

occurs in a competitive market with identical products

stagflation

occurs when an economy is experiencing... damaging rates of cost-push inflation declining production of goods and services a high level of unemployment

hyperinflation

occurs when prices rise extremely quickly

pure competition

occurs when producers supply identical goods

exchange rate

one currency's value compared to another

technological monopoly

one producer controls a method of production

natural monopoly

one producer naturally meets the entire demand of the market

labor is limited by...

population, standard of living, education, geography

revenue

producer's total income after selling a product

free enterprise

producers and consumers make all of their own decisions minimum interference from the government no restriction on private ownership of property

absolute advantage

producers have an absolute advantage if they can create a product more efficiently

ability to produce

producers must determine if they have the ability to make a specific good how much will the good sell for? what are the production costs? which required resources are available?

leakers

pulls money out of an economic system (savings, taxes, imports)

central bank

responsible for managing banking activity within an economy create policies managing a nation's currency and money supply serving as the bank for banks regulating and supervising the banking industry Federal Reserve -U.S.

closed economy

restricts trade with international partners no countries today have economies that are completely closed (maintaining self-sufficiency)

profit

revenue - production cost

depression

serious economic crisis decline in GDP over a long period of time (at least 4 consecutive quarters) high unemployment increase in the # of failed businesses sustained drop in sales and the standard of living

supply schedules

shows how prices affect quantity supplied by the producer

production possibility schedule

shows the cost of conditions identifies factors relating to opportunity cost

demand schedule

shows the link between quantity demanded and price for a consumer

economists

somone who studies economics

business cycle: contractions

sustained decreases in GDP low levels of production decreasing prices and wages bad feelings about the economy

business cycle: expansions

sustained increases in GDP high levels of production rising prices and wages good feelings about the economy

currency

system of money that can be created by a nation or region has value is divisable has denominations

comparative advantage

the ability to produce goods with a lower opportunity cost than another producer

scarcity

the idea that all resources are limited explains why items have a value and people want it unlimited wants, limited resources