Economics Semester Test Review

Marginal Utility

satisfaction or usefulness obtained from acquiring one more unit of a product

stock

a certificate documenting the shareholder's ownership in the corporation

corporation

an organization that is authorized by law to carry on an activity but treated as though it were a single person

partnership

a contract between two or more persons who agree to pool talent and money and share profits or losses

Sole Proprietorship

business owned and run by a single person who has the rights to all profits and unlimited liability for all debts of the firm

inflation

a general and progressive increase in prices

economics

The study how individuals, governments, firms and nations make choices on allocating scarce resources to satisfy their unlimited wants.

scarcity

Basic economic problem facing all societies. Limited quantities of resources to meet unlimited wants

GDP

Total dollar value of all final goods and services produced in a country during a single year

welfare

governmental provision of economic assistance to persons in need

recession

two or more consecutive quarters of decline in the GDP

depression

a long-term economic state characterized by unemployment and low prices and low levels of trade and investment. Lowest point in a business cycle.

European union

international organization comprised of Western European countries to promote free trade among members

trade deficit

An imbalance in international trade in which the value of imports exceeds the value of exports.

trade surplus

situation in which a country exports more than it imports

price ceiling

a maximum price that can be legally charged for a good or service

price floor

a minimum price for a good or service

NAFTA

This allows open trade with US, Mexico, and Canada

quota

a limitation on imports

tariff

a government tax on imports or exports

absolute advantage

the ability to produce a good using fewer inputs than another producer

comparitive advantage

The situation where someone can produce a good at lower opportunity cost than someone else can

fiat

money by government decree has no alternative value or use as a commodity

commodity money

A good used as money that also has value independent of its use as money.

FED

privately owned, publicly controlled, central bank of the United States

seasonal unemployment

unemployment that occurs as a result of harvest schedules or vacations, or when industries slow or shut down for a season

cyclical unemployment

unemployment directly related to swings in the business cycle

entrepreneur

a person who starts up and takes on the risk of a business

marginal revenue

the additional income from selling one more unit of a good

marginal cost

the cost of producing one more unit of a good

diminishing returns

the stage where output increases at a diminishing rate as more units of a variable input are added

law of supply

the principle that suppliers will normally offer more for sale at higher prices and less at lower prices

surplus

a situation in which quantity supplied is greater than quantity demanded

shortage

a situation in which quantity demanded is greater than quantity supplied

labor union

an organization of workers that tries to improve working conditions, wages, and benefits for its members

monopoly

control of a product or service by one company

monopolistic competition

a market structure in which many companies sell products that are similar but not identical

oligopoly

(economics) a market in which control over the supply of a commodity is in the hands of a few producers and each one can influence prices and affect competitors

law of demand

consumers buy more of a good when its price decreases and less when its price increases

mixed economy

Most common for of economic system that has some combination of traditional, command, and market economies.

traditional economy

economic system that relies on habit, custom, or ritual to decide questions of production and consumption of goods and services

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. (Capitalism)

command economy

a system in which the central government makes all economic decisions

boycott

to take part in an organized group refusal to use a product or service as a means of protest

consumer price index

index used to measure price changes for a market basket of frequently used consumer items

stagflation

a period of slow economic growth and high unemployment (stagnation) while prices rise (inflation)

frictional unemployment

A type of unemployment caused by workers voluntarily changing jobs and by temporary layoffs; unemployed workers between jobs.

structural unemployment

unemployment that occurs when workers' skills do not match the jobs that are available

factors of production

economic resources: land, capital, labor, and entrepreneurial ability

perfect competition

market structure with many well-informed and independent buyers and sellers who exchange identical products. Example=salt

opportunity cost

Cost of the next best alternative use of money, time, or resources when one choice is made rather than another

free enterprise economy

market economy in which privately owned businesses have the freedom to operate for a profit with limited government intervention

market

the world of commercial activity where goods and services are bought and sold local, regional, national, or global

trade-off

alternatives that must be given up when one is chosen over another

strike

union organized work stoppage designed to gain concessions from an employer

mediation

the process of bringing in a neutral third person or persons to help settle a dispute

business cycle

systematic changes in real GDP marked by alternating periods of expansion, contraction, and possibly recessions and depressions

stock exchange

a place where shares in a company or business enterprise are bought and sold

substitute

a competing product that consumers can use in place of another

subsidy

government payment to encourage or protect a certain economic activity

circular flow model

A model that shows the flow of goods and services and the interaction among households, businesses, and banks

compliment

products that increase the use of other products

product market

market where goods and services are offered for sale

factor market

market where productive resources are bought and sold

socialism

An economic system in which government owns some factors of production and has a role in determining what and how goods are produced to even out society.

Inelastic demand

A situation in which an increase or a decrease in price will not significantly affect demand for the product

elastic demand

A situation in which consumer demand is sensitive to changes in price

equilibrium

the point at which quantity demanded and quantity supplied are equal

bull market

Rising stock market

bear market

a stock market with declining stock prices

FDIC

a federally sponsored corporation that insures accounts in national banks and other qualified institutions

FOMC

the most powerful committee of the Fed, because it makes the decisions that affect the economy as a whole by manipulating the money supply

exports

Goods and Services sold to other countries

imports

goods brought into a country

hyperinflation

inflation that is out of control. Over 500%.

creeping inflation

inflation in the range of one to three percent each year.

galloping inflation

a more intense form of inflation that can go as high as 100 to 300 percent.

stock market

A system for buying and selling shares of companies

share

one portion of ownership in a corporation

sales tax

a tax based on the cost of the item purchased and collected directly from the buyer

property tax

a tax on the value of a property

income tax

a tax on people's earnings

sin tax

relatively high tax to raise revenue and discourage consuption of a socially undesirable product

estate tax

a levy imposed on the assets of one who dies

April 15

deadline for filing your income tax return