the term that means that resources are limited?
Scarcity
the study of the aggregate (or total) effects of the national economy or global economy
Macroeconomics
the study of how individual and business decisions interact.
Microeconomics
tangible items that can be bought and sold
Goods
intangible items that can be bought and sold
Services
the philosophy that the government should take a hand's off approach to the economy
Laissez Faire
The three economic questions
What to produce, how to produce and for whom to produce
A motivation to act or not act in one particular manner
incentive
the degree of wealth and material comfort available to a person or community
standard of living
a model of income and expenditures in the economy
circular flow model
the cost of the best thing given up in exchange for something else
Opportunity Cost
The main source of federal income
income taxes
The main source of state expenditure
education
when expenses exceed income
deficit
The four factors of production
Land, labor, capital and entrepreneurship
any arrangement that brings together buyers and sellers
market
anything that comes from the earth
land
the effort produced by people
labor
any human-made resource that is used to produce other goods
capital
the putting together of the physical factors of production
entrepreneurship
the boundary between what can and cannot be produced given the set amount of resources
Production possibilities frontier
when all possible resources are being used
full employment
when resources are not being used
unemployment
movement from unemployment to full employment without opportunity cost
free lunch
Constraint or limit to what is possible that forces an exchange or a substitute of one thing for something else
tradeoff
when a person or firm is better at producing in all areas.
absolute advantage
When a person or firm can produce at a lower opportunity cost than others
Comparative advantage
a good that can be used in place of another good
substitute
a good that can be used along with another good
compliment
as price increases, quantity demanded decreases
law of demand
As price increases, quantity supplied increases
law of supply
movement along the demand curve; caused by a change in price
change in quantity demanded
a shift of the entire demand curve
change in demand
when quantity demanded equals quantity supplied
market equilibrium
when the price of a good changes, quantity demanded changes drastically
elastic good
when the price of a good changes, quantity demanded does not change drastically
inelastic good
when the government sets a minimum price that a good or service can be sold for
price floor
when the government sets a maximum price that a good or service can be sold for
price ceiling
a tax whose percentage increases as income increases
progressive tax
a tax whose percentage does not change, regardless of income
proportional tax
a tax whose percentage increases as income decreases
regressive tax
after a certain point, as units of labor are added, the percentage of return decreases
law of decreasing marginal returns
resources that can be increased or decreased over the short term
variable costs
resources that cannot be increased or decreased over the short term
fixed costs
a business run by a single person
sole proprietorship
a business run by two people
Partnership
a business run by a group of people who are authorized to act as an autonomous entity
corporation
money stockholders receive
dividends
people who own portions of a corporation
stockholders
the measure of the dollar value of all final goods and services produced within a country's boarders in a given year
Gross Domestic Product
unemployment due to a change in the seasons
seasonal unemployment
unemployment due to changes in the business cycle
cyclical unemployment
unemployment due to people entering and exiting the job market
frictional unemployment
unemployment resulting from changes in the job market
structural unemployment
the price of a fixed basket of goods, is tracked year to year and measures inflation
consumer price index
an increase in prices and a devaluation of the dollar
inflation
a period of macroeconomic expansion followed by a period of macroeconomic contraction
Business Cycle
The collection of all of the deficits the United States has accumulated over time
National Debt
Consists of increasing and decreasing taxes and increasing and decreasing government spending to manage the economy
Fiscal Policy
Actions taken by the Federal Reserve, which consists of increasing or decreasing the price of securities, the discount rate and the overnight reserve requirement to manage the economy.
Monetary policy
The regulatory organization that oversees the nation's banks
The Federal Reserve
Characterized by a fall in GDP for two consecutive quarters
Recession
Wrote "The Wealth of Nations
Adam Smith