Glencoe Economics Principles and Practices PDF

Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm 1. scarcity the condition of not having enough resources to produce all the things people would like to have 2. factors to pre- WHAT to produce...

Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm 1. scarcity the condition of not having enough resources to produce all the things people would like to have 2. factors to pre- WHAT to produce, HOW to produce, FOR WHOM to vent scarcity produce 3. wants and needs need is a basic requirement, a want is something not necessary for survival. 4. TINSTAAFL There Is No Such Thing As A Free Lunch 5. factors of pro- land, capital, labor, and entrepreneurs all four are re- duction quired to produce goods and services 6. capital goods the tools, equipment, machinery, and factories used in the production of goods and services. 7. Labor the people needed to commit their efforts and abilities 8. entrepreneur an individual that offers a big change in the economy due to them producing new businesses 9. Gross Domestic The dollar value of all final goods, services, and structures Product (GDP) produced within a country's boarders in a 12-month peri- od. 10. goods a useful, tangible item. 11. consumer goods goods intended for final use by individuals 12. durable good goods that last 2-3 years 13. nondurable good a good that lasts less than 2 years 14. services work that is performed for someone, haircuts, home re- pairs, and a couple of other things 15. consumers customers; people that buy things 16. value vaulue refers to the worth of the product 1 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm 17. paradox of value some necessities such as water, had a very low monetary value. On the other hand, some nonnecessities such as diamonds, had a very high value. 18. utility the capacity to be useful and provide satisfaction 19. wealth the accumulation of products that are tangible, scarce, useful and transferable from one person to another is wealth. 20. market a location or other mechanism that allows buyers and sellers to exchange a specific product. 21. factor markets the factors of productions are bought and sold 22. product markets where producers sell their goods and services 23. economic increases when the total output of goods and services growth increases overtime 24. productivity a measure of the amount of goods and services are produced 25. human capital the sum of peoples skills, abilities, health, knowledge, and motivation 26. division of labor a way of organizing work so that each individual worker completes a separate part of work. 27. specialization when factors of production perform only tasks that can do better or more efficiently than others. 28. economic inter- the reliance upon others, and others rely on us, to provide dependence the most of the goods and services we consume. 29. trade-offs alternative choices 30. opportunity cost the cost of the next-best alternative 31. 2 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm production pos- a diagram representing various combinations of goods sibilities frontier and services an economy can produce when all its re- sources are in use. 32. economic model a simplified equation, graph, or figure showing how some- thing works. 33. cost benefit a way of comparing the costs of an action to the benefits analysis received. 34. free enterprise one in which consumers and privately owed businesses, company rather than the government, make the majority of WHAT, HOW, and FOR WHOM decisions 35. standard of liv- the quality of life based on the ownership of the necessi- ing ties and luxuries that make life easier 36. economic sys- an organized way of providing for the wants and needs of tem their people. 37. traditional econ- the use of scarce resources omy 38. command econ- a central authority making the major decisions about omy WHAT, HOW, and for WHOM 39. market economy people making decisions in their own best interest 40. market an arrangement that allows buyers and sellers to come together to exchange goods and services. 41. capitalism an economic system where private citizens own the fac- tors of production. 42. mixed systems that combine elements of all three types economies 43. socialism mixed economic and political system in which the gov. owns and controls some 3 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm 44. communism a political and economic system where all property is collectively, not privately, owned 45. social security a federal program of disability and retirement benefits that covers most working people 46. inflation a rise in the general level of prices, workers need more money to pay for food, clothing, and shelter. 47. fixed income and income that does not increase even though prices go up, making bills harder to pay and planning for the future more difficult. 48. free enterprise resources are privately owned, and competition is allowed to flourish with a minimum of government interference like the lesise faire thingy 49. voluntary ex- the act of buyers and sellers freely and willingly engaging change in market transactions 50. private property allow people to own and control their possessions as they rights wish 51. profit is the extent to which persojns or organizations are better off financially at the end of a specific period than they were at the beginning 52. profit motive the incentive that encourages people and organizations to improve their material well-being is largely responsible for the growth of a free enterprise system 53. competition the struggle among sellers to attract consumers 54. consumer sover- recognizes the role of the consumer as sovereign, or ruler, eignty of the market. 55. modified free en- people and businesses carry on their economic affairs terprise econo- freely, but they are subject to some government interven- my tion and regulation 4 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm 56. proprietorship a business owned and run by a single individual. 57. unlimited liability this means that the owner is responsible for all debts and losses 58. partnership is a business that is jointly owned by two or more persons 59. general partner- all partners are responsible for the management and ship financial obligations of the business 60. limited partner- at least one partner is not active in the daily running of the ship bussiness 61. corporation a form of business organization recognized by law as a separate legal entity with all the rights of an individual 62. charter a government document that gives permission to create a corporation 63. stock ownership certificates in the firm 64. dividend a check that transfers a portion of the corporate earnings to each stockholder 65. common stock basic ownership of a corporation. 66. preferred stock represents nonvoting ownership shares of the corporation 67. bond written promise to repay the amount borrowed at a later date 68. principal the amount borrowed 69. interest the price paid for the use of another money 70. double taxation the stockholder dividends are taxed twice 71. merger a combination of two or more businesses to form a single firm 72. net income 5 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm the funds left over after all of the firms expenses are subtracted from its sales 73. deprecation a noncash charge the firm takes for the general wear and tear on its capital goods 74. cash flow the sum of the net income and noncash exchanges 75. horizontal merg- when firms that produce the same kind of product joins er forces 76. vertical merger companies involved in different stages of manufacturing or marketing join together 77. conglomerate a firm that has at least four businesses each making unrelated products and responsible for a majority of its sales 78. multlinational a corporation that has manufacturing or service opera- tions in a number of different countries 79. nonprofit organi- to promote the collective interests of its members rather zation than to seek financial gain for its owners, like the american red cross 80. cooperative voluntary association formed to carry on some kind of economic activity that will benefit its members 81. credit union a financial organization that accepts deposits from, and makes loans to, employees of a particular company or government agency 82. labor union an organization of workers formed to represent its mem- bers interests in various emplyment matters 83. collective bar- when labor unions negotiate with management over is- gaining sues such as pay, working houre, health care coverage, vacations, and other job related matters. 84. 6 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm professional as- people in a specialized occupation interested in improving sociation the working conditions, skill levels, and public perceptions of the profession. 85. chamber of com- an organizaton that promotes the welfare of its member merce businesses 86. better business nonprofit organization sponsered by local business pro- bureau viding general information on companies and maintains records of consumer inquiries and complaints, and offers consumer education programes 87. public utilities municipal or investor-owned companies that offer prod- ucts such as water, sewerage, and electric service to the public. 88. demand the desire 89. microeconomics the part of economic theory that deals with behavior and decision making by individual units, such as people and firms. 90. market economy people and firms act in their own best interests to answer the WHAT HOW and FOR WHOM 91. demand sched- the demand schedule shows the various quantities de- ule manded of a particular product at all prices that might prevail in the market at a given time 92. demand curve a graph showing the quantity demanded at each and every price that might prevail in the market 93. law of demand states that the quantity demanded varies inversely with its price 94. market demand the demand curve that shows the quantities demanded curve by everyone who is interested in purchasing the product. 95. marginal utility the extra usefulness or additional satisfaction a person gets from acquiring or using one more unit of a product 7 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm 96. diminishing mar- the principle which states that the extra satisfaction we ginal utility get from using additional quantities of the product begins to decline 97. change in quanti- a change that is graphically represented as a movement ty demanded along the demand curve 98. income effect the change in quantity demanded because of a change in price that alters consumers' real income 99. substitution ef- the change in quantity demanded because of the change fect in the relative price of the product 100. change in de- sometimes other factors change with the price remains mand the same. when this happens people may decide to buy different amounts of the product at the same prices this is known as a change in demand 101. substitutes things that can be used in place of other products 102. complements the use of one product increasing the use of another 103. elasticity the general measure of responsiveness, an important cause and effect relationship in economics. 104. demand elastici- the extent to which a change in price causes a change in ty the quantity demanded 105. elastic when a given change in price causes a relatively larger change in quantity demanded 106. inelastic a given change in price causes a relatively smaller change in the quantity demanded 107. unit elastic so that a given change in price causes a proportional change in quantity demanded. 108. law of supply the principle that suppliers will normally offer more for sale at high prices and less at lower prices 8 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm 109. supply schedule listing the various quantities of a particular product sup- plied at all possible prices in the market 110. supply curve a graph showing the various quantities supplied at all possible prices that might prevail in the market at any given time 111. market supply the supply curve that shows the quantities offered at curve various prices by all firms that offer the product for a sale in a given market 112. quantity sup- is the amount that producers bring to market at any given plied price 113. change in quanti- is the change in amount offered for sale in response to a ty supplied change in price 114. change in supply a situation where suppliers offer different amounts of products for sale at all possible prices in the market. 115. subsidy a government payment to an individual, business or other group to encourage or protect a certain type of economic activity 116. supply elasticity a measure of the way in which the quantity supplied responds to a change in price 117. production func- a figure that shows how total output changes when the tion amounts of a single variable input while all other inputs are held constant 118. long run a period long enough for the firm to adjust the quantities of all productive resources 119. short run a period so brief that only the amount of the variable input can be changed 120. total product or the total output produced by the firm 121. marginal product 9 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm the extra output or change in total product caused by adding one more unit of variable input 122. stages of pro- increasing returns, diminishing returns, and negative re- duction turns 123. diminishing re- the stage where output increases at a diminishing rate as turns more variable inputs are added 124. fixed costs the costs that an organization incurs even if there is little or no activity 125. overhead total fixed cost 126. variable costs or costs that change when the business's rate of opera- tion or output changes 127. total cost the sum of the fixed and variable costs 128. e-commerce an electronic business conducted over the internet 129. break-even point the level of production that generates just enough revenue to cover its total operating costs 130. marginal rev- the extra revenue a business receive from the production enue and sale of one additional unit of output 131. profit-maximiz- is reached when marginal cost and marginal revenue are ing quantity of equal, as shown in the last column output 132. rationing a system under which a government agency decides everyone's "fair" share 133. ration coupon a ticket or a receipt that entitles the holder to obtain a certain amount of a product 134. rebate a partial refund of the original price of a product 135. economic model analyze behavior and predict outcomes 10 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm 136. equilibrium price the price at which the number of units produced equals the number of units sold. 137. surplus a situation in which the quantity supplied is greater than the quantity demanded at a given price. 138. shortage a situation in which the quantity demanded is greater than the quantity supplied at a given price 139. price ceiling a maximum legal price that can be charge for a product 140. minimum wage the lowest legal wage that can be paid to most workers 141. price floor the lowest legal price that can be paid for a good or service 142. target price a price floor to help stabilize farm prices 143. non recourse a loan that carries neither a penalty nor further obligation loan to repay if not paid back. 144. deficiency pay- a check the government sends too producers to make up ment the difference between the market price and the target price 145. laissez faire allow the trade companies do as they please without any government intermission 146. market structure the nature and degree of competition among firms doing business in the same industry 147. perfect competi- a market structure characterized by a large number of well tion informed independent buyers and sellers who exchange identical products 148. what are the con- 1. lots of buyers and sellers ditions for a per- 2. no need for advertisements fect competition 3. buyers are already informed of the product 4. sellers are free to enter into, conduct, or get out of business 11 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm 149. imperfect com- the name given to any of three market structures petition 150. what are the fac- 1. monopolistic competition tors creating a 2. oligopoly imperfect com- 3.monopoly petition 151. monopolistic the market structure that has all the condition of perfect competitoin competition except for identical products 152. product differen- real or percieived differences between competing prod- tiation ucts in the same industry 153. non price com- the use of advertising, giveaways, or other promotions petition designed to convince buyers that the product is somehow unique or fundamentally better than a competitors. 154. oligopoly a market structure in which a few very large sellers dom- inate the industry 155. collusion a formal agreement to set specific pric es or to otherwise behave in a cooperative manner 156. price fixing or agreeing to change the same or similar prices for a product 157. monopoly is a market structure with only one seller of a particular product 158. natural monop- a market situation where the costs of production are oly minimized by having a single firm produce the product-is one such case 159. economies of a situation in which the average costg of production falls scale as the firm gets larger 160. what happens lowers production costs when economy of scale happens 12 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm 161. geographic mo- based on the absence of other sellers in a certain geo- nopoly graphic area similarly the owner of the only gas station on a lonely interstate highway exit also has a type of geographic monopoly 162. technological a monopoly that is based on ownership or control of monopoly manufacturing method process or other scientific method, process, or offer scientific advance. 163. government mo- a monopoly owned and operated by the government nopoly 164. market failure whenever one of the conditions necessary for competitive markets does not exist. 165. what are the inadequate competition, inadequate information resource five factors that immobility, public goods being overused, externalities cause market failure? 166. public goods products collectively consumed by everyone 167. externality unintended side effect that either benefits or harms a third party not involved in the activity that caused it. 168. negative extenal- the harm, cost , or inconvenience suffered by a third party ity because actions by others 169. positive external- benefit someone receives who was not involved in the ity activity that generated the benefit 170. trusts combinations of firms designed to restrict competition or control prices in a particular industry 171. price discrimina- the practice of selling the same product to different con- tion sumers at different prices if it substantially lessens com- petition 172. 13 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm cease and desist a FTC ruling requiring a company to stop an unfair busi- order ness practice, such as price fixing, that reduces or limits competition among firms. 173. FTC Federal Trade Commission, regulating trade and stopping unfair trash going on 174. public disclosure the requirement that businesses reveal certain informa- tion to the public, is an important way to do this. for example, all corporations that sell stock to the public must disclose financial and operating information on a regular basis to both their shareholders and the Securities and Exchange Commission 175. SEC Securities and Exchange Commission, 176. craft union/trade an association of skilled workers who perform the same union kind of work 177. industrial union an association of all workers in the same industry, rea- gardeeless of the job each individual worker performs. 178. strike the refusal of work until demands are met 179. picket parade in front of the employers business carrying signs about the dispute 180. boycott a mass refusal to buy products from targeted employers or compaines 181. lockout a refusal to let employees work until they agreed to man- agement demands 182. company unions unions organized supported or run by employers - to head off efforts by others to organize workers 183. great depression the worst period of economic decline and stagnation in the history of the US 184. right-to-work law 14 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm state law making it illegal to force workers to join a union as a condition of employment, even though a union may already exist 185. independent unions that do not belong to the AFGL-CIO or the change unions to win coalition 186. AFL-CIO American Federation of Labor and Congress of Industrial Organizations 187. closed shop an employer agrees to hire only union members. This allows the union to determine who is hired by giving or denying a person union membership 188. union shop workers do not have to belong to the union to be hired, but must join soon after and remain a member for as long as they keep their jobs. 189. modified union workers do not have to belong to a union to be hired and shop cannot be made to join one to keep their jobs 190. agency shop an agreement that does not require a worker to join a union as a condition to get or keep a job. It does require the worker to pay union dues to help pay for collective bargaining costs. 191. what are the 4 closed shop, union shop, modified union shop, agency types of union shop. agreements? 192. civilian labor men and women 16 years old or older who are either force working or actively looking for a job 193. unskilled labor consists of workers in jobs that do not require people with special training and skills. 194. semiskilled labor workers in jobs that require enough mechanical skills to operated machines for which they need a minimum amount of training. 15 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm 195. skilled labor workers who operate complex equipment and perform most of their tasks with little supervision 196. professional la- individuals that have the highest level of knowl- bor edge-based education and managerial skills. 197. market theory of the theory states that the supply and demand for a work- wage determina- er's skills and services determine the wage or salary tion 198. equilibrium wage the wage rate that leaves neither a surplus nor a shortage rate in the labor market 199. theory of negoti- states that the bargaining strength of organized labor is a ated wages factor that helps to determine wages 200. seniority the length of time a person has been on the job 201. collective bar- negotiations that take place between labor and manage- gaining ment over issues such as pay, working hours, health care coverage, and other job related matters. 202. grievance proce- a provision for resolving issues that may come up lat- dure er-may also be included in the final contract 203. meditation the process of bringing in a neutral third person or per- sons to help settle a dispute 204. arbitration a process in which both sides agree to place their differ- ences before a third party whose decision will be accept- ed as final 205. binding arbitra- both sides agreeing to any final decision the arbitrator tion makes. 206. fact-finding an agreement between union and management to have a neutral third party collect facts about a dispute and present nonbinding recommendations 207. injunction a court order not to act 16 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm 208. seizure a temporary take over of operations 209. giveback a wage, fringe benefit, or work rule given up when a labor contract is renegotiated 210. two-tier wage a system that keeps high wages for current workers, but system has a lower wage for newly hired workers 211. glass ceiling an invisible barrier that obstructs their advancement up the corporate ladder 212. set aside con- a guaranteed contract reserved fro a targeted group. ` tract 213. current dollars dollars no adjusted for inflation from 1939 to 2006 214. constant dollars dollars that are adjusted in a way that removes the distor- tion of inflation 215. base year a year that serves as a comparison for all other years 216. sin tax a relatively high tax designed to raise revenue while reducing consumption of a socially undesirable product such as liquor or tobacco 217. incidence of a people who actually pay the tax, or the final burden of the tax tax 218. individual in- the federal tax on people's earnings come tax 219. tax loopholes exceptions or oversights in the tax law that allow some people and businesses to avoid paying taxes. 220. sales tax a general tax levied on most consumer changes 221. tax return an annual report to the IRS summarizing total income, deductions, and taxes withheld. 222. 17 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm benefit principle states that those who benefit from government goods of taxation and services should pay in proportion to the amount of benefits they receive 223. ability to pay the belief that people should be taxed according to their principle of taxa- ability to pay, regardless of the benefits they receive. tion 224. proportional tax imposing the same percentage rate of taxation on every- one, regardless of income 225. average tax rate total tax paid divided by the total taxable income 226. progressive tax a tax that imposes a higher percentage rate of taxation on higher incomes than on lower ones. 227. marginal tax rate the tax rate that applies to the next dollar of taxable income 228. regressive tax a tax that imposes a higher percentage rate of taxation on low incomes than on high incomes 229. IRS INTERNAL REVENUE SERVICE. the branch of the US treasury department in charge of collecting taxes today 230. payroll withhold- a system that requires an employer to automatically ing system deduct income taxes from a worker's paycheck and send them directly to the IRS 231. indexing the upward revision of the tax brackets to keep workers from paying more in taxes just because of inflation 232. FICA Federal Insurance Contributions Act tax which is levied on employers and employees equally to pay for Social Security and Medicare 233. payroll taxes taxes deducted from paychecks for medicare or social security 234. the tax a corporation pays on its profits 18 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm corporate in- come tax 235. excise tax a tax on the manufacture or sale of selected items such a gasoline and liquor 236. estate tax the transfer of property when a person dies 237. gift tax tax on the transfer of money or wealth and is paid by the person who makes the gift 238. customs duty charge levied on goods brought into the US from other countries. 239. user fee a charge levied for the use of a good or service 240. intergovernmen- funds collected by one level of government that are dis- tal revenue tributed to another level of government for expenditures. 241. property tax a tax on tangible and intangible possessions 242. tax assessor the person who assigns value to property for tax purposes 243. natural monopo- arise where the largest supplier in an industry lies 244. payroll withhold- the stub attached to a paycheck that summarizes income, ing statement tax withholdings, and other deductions 245. accelerated de- earlier and larger depreciation chargers -which allowed preciation firms to reduce federal income tax payments 246. alternative mini- the personal income tax rate that applies whenever the mum tax amount of taxes paid falls below a designated level. 247. capital gains profits from the sale of asset held for 12 months or longer - from 28 to 20 percent 248. flat tax a poportional tax on individual income after a specified threshold has been reached 19 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm 249. VAT value-added tax, a tax placed on the value that manufac- turers add at each stage of production. 250. pork a term used to describe a line-item budget expenditure that circumvents normal budget-building procedures 251. public sector the part of the economy consisting of federal, state, and local governments - was relatively low prior to the Great Depression. 252. Private sector the part of the economy made up of private individuals and privately owned businesses - should provide 253. transfer payment a payment for which the government receives neither goods nor services in return 254. grant-in aid a transfer payment that one level of government makes to another 255. distribution of in- the way in which income is allocated among families come individuals or other groups 256. federal budget the annual plan outlining proposed revenues and expen- ditures for the upcoming year - there is often a fair amount of ambiguity 257. fiscal year a 12-month financial planning period that may or may not coincide with the calendar year 258. appropriations an act of congress that allows federal agencies to spend bill money for a specific purpose 259. budget surplus expenditures being less than revenues 260. budget deficit an excess of expenditures over revenues 261. mandatory spending for social security, usually authorized by law spending that continues without the need for annual approvals by congress 20 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm 262. discretionary spending that must be approved by congress in the annu- spending al budgetary process 263. medicaid a join federal state medical insurance program for low-in- come persons 264. medicare a health care program available for all senior citizens regardless of income 265. balanced budget a constitutional provision requiring that annual spending amendment not exceed revenues 266. intergovernmen- funds being that one level of government transfers to tal expenditures another level for spending 267. deficit spending spending in excess of revenues collected - has character- ized the federal budget 268. national debt the total amount borrowed from investors to finance the government deficit spending 269. balanced budget an annual budget in which expenditures equal revenues - the national debt will not change 270. trust funds special accounts used to fund specific types of expendi- tures such as social security and medicare 271. per capita per person 272. crowding-out ef- the higher than normal interest rates caused by heavy fect government borrowing 273. pay-as-you-go a requirement that new spending proposals or tax cuts provision, must be offset by reductions elsewhere in the budget. 274. line-item veto the power to concel specific budget items without reject- ing the entire budget 275. spending caps legal limits on annual discretionary spending-to assure that congress balanced the budget by 2002 21 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm 276. entitlements broad social programs with established eligibility require- ments to provide health, nutritional, or income supple- ments to individuals 277. savings means the absence of spending 278. certificate of de- a document showing that an investor has made an inter- posit est-bearing loan to a bank 279. financial assets claims on the property and the income of the borrower 280. financial system a network of savers, investors, and financial institutions that work together to transfer savings to investors 281. financial inter- the institutions that lend the funds that savers provide. mediaries 282. nonbank finan- or non-depository institutions that also channel savings to cial institutions borrowers 283. finance company is a firm that specializes in making loans directly to con- sumers 284. pension a regular payment intended to provide income security to someone who has worked a certain number of years, reached a specified age, or suffered a particular kind of injury 285. pension fund a fund set up to collect income and disburse payments to those persons eligible for retirement, old-age, or disability benefits 286. bond a formal long-term contract that requires repayment of borrowed money and interest on the borrowed funds at regular intervals over time 287. coupon rate stated interest on the debt 288. maturity the life of the bond 22 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm 289. par value the principal or the total amount initially borrowed that must be repaid to the lender at maturity 290. current yield the annual interest divided by the purchase price 291. what are the coupon rate, maturity, and par value three main com- ponents of a bond? 292. junk bonds exceptionally risky bonds with a standard and poors rating of BB or lower 293. municipal bonds also known as munis, they are bonds issued by state and local governments 294. savings bonds low=denomination nontransferable bonds issued by the US government that are also called EE saving bonds 295. beneficiary someone who inherits the ownership of the financial asset if the owner dies 296. treasury notes US obligations with maturities of 2 to 10 years 297. treasury bonds maturity dates ranging from more than 10 to as many as 30 years. 298. treasury bills a T-bill, a short term obligation with a maturity of 4, 13, or 26 weeks and a minimum denomination of $1,000 299. IRA Individual Retirement Accounts long-term tax sheltered time deposits that can be set up as part of an individual retirement plan 300. capital market when they mean a market in which money is loaned for more than one year 301. money market when investors mean a market in which money is loaned for periods of less than one year 23 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm 302. primary market a market where only the original issuer can sell or repur- chase a financial asset 303. secondary mar- where existing financial assets can be resold to new ket owners 304. equities shares of common stocks that represent ownership of corporations 305. stockbroker a person who buys or sells equities for clients 306. EMH Efficient Market Hypothesis - the argument that stocks are usually priced correctly and that bargains are hard to find because stocks are followed closely by so many investors 307. portfolio diversi- the practice of holding a large number of different stocks fication so that increases in some stocks can offset declines in others - is a popular strategy 308. mutual fund a company that sells stock in itself to individual investors 309. NAV net asset value- the market value of a mutual fund share 310. 401(k) plan a tax deferred investment and savings plan that acts as a personal pension fund for employees 311. securities ex- place where buyers and sellers meet to trade stocks change, aka stocks 312. OTC over-the-counter market, an electronic marketplace for securities that are not traded on an organized exchange such as the NYSE 313. DJIA Dow Jones Industrial average, the mostly popular and widely publicized measure of stock market performance 314. S&P 500 Standard & poor's 500, using the price changes of 500 representative stocks as an indicator of an overall market performance 24 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm 315. bull market a strong market with the prices moving up for several months or years in a row 316. bear market the "nasty" market, with the prices of equities falling sharply for several months or years in a row. 317. spot market transactions are made immediately at the prevailing price 318. futures contract an agreement to buy or sell at a specific future date at a predetermined price 319. call opion the right to buy something at a specific future price 320. put option the right to sell something at a specific future price 321. microeconomics the branch of economics that deals with the economy as a whole 322. NIPA National Income and Product Accounts, keeps track of the nations production, consumption, saving, and investment 323. GDP Gross domestic product, our most comprehensive mea- sure of national output multiplying all the final goods and services produced in a 12-month period by their prices, and then add them up to get the total dollar value of production 324. intermediate goods used to make other products already counted in products GDP 325. secondhand the sales of used goods sales 326. nonmarket trans- economic activities that do not generate expenditures in actions the market 327. underground economic activities that are not reported for legal or tax economy collection purposes 328. base year 25 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm a year that serves as the basis of comparison for all other years 329. real GDP GDP measured with a set of constant base year prices 330. current GDP all mean that the output in any given year was measured using the prices that existed in those yeares 331. GDP per capita or GDP divided by the population to get the amount of output on a per person basis 332. GNP gross national product - the dollar value of all final goods, services, and structures produced in one year with labor and property owned by a country's residence 333. national income the income that is left after all taxes except the corporate profits tax are subtracted from NNP 334. personal income the total amount of income going to consumbers before individual income taxes are sxubtracted 335. disposable per- the total income the consumer sector has at its disposal sonal income after personal income taxes 336. unrelated indi- a person who lives alone even though he or she may have vidual family living elsewhere 337. output-expendi- the macroeconomic model showing how GDP is equal to ture model the sum of aggregate demand by the consumer, invest- ment, government and foreign sectors 338. net exports of foreign sector's purchases goods and ser- vices 339. census an official count of all people living in the US, including their place of residence urban population 340. urban population people living in incorporated cities 26 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm 341. rural population people who live in the fringes of cities 342. center of popula- the point where the country would balance if it could be tion laid flat and everyone weighed the same 343. infrastructure the highways, levees, mass transit, communications sys- tems, electricity, water, sewer, and other public goods needed to support a population 344. poverty thresh- the benchmark used to evaluate the income thatpeople old receive 345. poverty guide- administrative guides used to determine eligibility for cer- lines tain federal programs such as the foods stamps programs and head start 346. lorenz curve which shows how the actual distribution of income varies from an equal distribution 347. welfare economic and social assistance from the government or private agencies because of need 348. EITC Earned Income Tax Credit, which provides federal tax credits and even cash to low income workers 349. enterprise zones areas where companies can locate free of some local, state, and federal tax laws and other operating restric- tions. 350. negative income a proposed type of tax that would make cash payments tax to certain groups below the poverty line 351. business cycle regular ups and downs of real GDP 352. business fluctua- the rise and fall of real GDP over time in a irregular tions manner 353. recession a period during which real GDP is measured in constant prices declines for at least two quarters in a row, or six consecutive months 27 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm 354. peak the point where real GDP stops going up 355. trough the turnaround point where real GDP stops going down 356. expansion a period of recovery from a recession 357. trend line the thing predicting the troughs and peaks of businesses 358. depression a state of the economy with large numbers of people out of work, acute shortages etc 359. depression scrip unofficial currency that towns, counties, chmbers of com- merce and other civic bodies issued 360. composite index a monthly statistical series that uses a combination of 10 of leading eco- individual indicators to forecast changes in real GDP nomic indicatier 361. econometric a mathematical model that uses algebraic equations to model describe how the economy behaves 362. price index a statistical series used to measure changes in teh level of prices over time 363. consumer price a statistical series that tracks monthly changes in the index prices paid by urban consumers for a representative "bas- ket"of goods and services 364. market basket a representative selection of commonly purchased goods and services 365. base year a year that servers as the basis of comparison for all other years 366. stagflation a period of stagnant economic growth coupled with infla- tion 367. producer price a monthly series that reports prices received by domestic index producers 28 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm 368. implicit GDP used to measure changes in GDP price deflator 369. demand-pull in- all sectors in the economy try to buy more goods and flation services than the economy can produce 370. creditors people who lend money 371. civilian labor the sum of all persons age 16 and above who are either force employed or actively seeking employment 372. frictional unem- the situation where workers are between jobs for one ployment reason or another 373. structural unem- when economic progress, a change in consumer tastes ployment and preferences, or a fundamental change in the opera- tions of the economy reduces the demand of the economy reduces the demand for workers and their skills 374. outsourcing the hiring of outside firms to perform non-core operations to lower operating costs has become popular 375. technological unemployment that occurs when workers are replaced unemployment by machines or automated systems that make their skills obsolete 376. cyclical unem- unemployment directly related to swings in the business ployment cycle 377. seasonal unem- unemployment resulting from seasonal changes in teh ployment weather or in the demand for certain products or jobs 378. GDP gap the difference between the actual GDP and the potential GDP that coul,d be produced if al resources were fully employed 379. misery index the sum of the monthly inflation and unemployment rates 380. FED Federal reserve system, the privately owned, publicly controlled central bank of the US 29 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm 381. federal reserve US currency notes 382. barter economy a moneyless economy that relies on trade 383. commodity mon- money that has an alternative use as an economic good, ey or commodity 384. fiat money money b government decree-such as tiny metallic coins used in Asia minor in the seventh century BC 385. specie money in the form of silver or gold coins 386. monetary unit the standard unit of currency in the US money system 387. medium of ex- something accepted by all parties as payment for goods change and services 388. measure of value a common measuring stick that can be used to express worth in terms that most individuals understand 389. store of value the quality that allows purchasing power to be saved until needed 390. DDAs demand deposit accounts, funds deposited in a bank that can be accessed by writing a check and without having to secure prior approval fo the institution 391. M1 includes coins and currency, traveler's checks, DDAs, and checking accounts held at other depository institution. 392. M2 includes M1 along with savings deposits, time deposits, and money market funds -all of which relate to money's function as a store of value. 393. state bank a bank that receives its operating charter from a state government 394. national bank a privately owned bank that receives its operating charter from the federal government 30 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm 395. gold certificates paper currency backed by gold placed on deposit with the US treasury 396. silver certificates paper currency backed by silver dollars and bullion placed on reserve with the currency 397. central bank a bank that can lend to other banks in times of need 398. bank holiday a brief period during which every bank in the country was required to close 399. fractional re- banks are required to keep only a portion of their total serve system deposits in the form of legal reserves 400. legal reserves consist of coins and currency that banks hold in their vaults, plus deposits at the Fed 401. reserve require- the percentage of every deposit that must be set aside as ment legal reserves 402. MBR member bank reserve, a deposit a member bank keeps at the Fed to satisfy reserve requirements 403. excess reserves legal reserves beyond the reserve requirement-repre- sents the bank's lending power and can be loaned out 404. member bank a commercial bank that is a member of, and holds shares of stock in, the Fed 405. monetary policy changes in the money supply in order to affect the avail- ability and cost of credit 406. interest rate the price of credit to a borrower 407. easy money poli- the fed expands the money supply causing interest rates cy to fall 408. tight money poli- the fed restricts the size of the money supply cy 31 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm 409. open market op- the buying and selling of government securities in finan- erations cial markets 410. discount rate the interest the fed charges on loans to financial institu- tions - is the third major tool of monetary policy 411. prime rate the lowest rate of interest commercial banks charge their best customers 412. quantity theory the hypothesis that changes in prices correspond to of money changes in the monetary supply. 413. bank holding firms that own and control one or more banks companies 414. regulation Z the fed has the authority to extend truth-in-lending dis- closures to millions of individuals who borrow from retail stores, automobile dealers, banks, and lending institu- tions 415. macroeconom- the part of economics concerned with the economy as a ics whole and decision making by large units, we also seek a balance. 416. equilibrium price is the market price where the quantity of goods supplied is equal to the quantity of goods demanded. 417. aggregate sup- the total value of goods and services that all firms would ply produce in a specific period of time at various price levels 418. aggregate sup- The higher the price level, the more these sellers will be ply curve willing to supply. 419. aggregate de- the total value of all goods and services demanded at mand different price levels 420. aggregate de- the amount of total output, measured in terms of real GDP, mand curve that would be purchased at every possible price level 421. 32 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm macroeconomic the point at which the level of real GDP is consistent with equilibrium a given price level 422. fiscal policy the federal government's attempt to influence or stabilize the economy through taxing and government spending 423. Keynesian eco- an economic policy approach designed to lower unem- nomics ployment by stimulating aggregate demand 424. multiplier a change in investment spending will have a magnified effect on total spending 425. accelerator the change in investment spending caused by a change in total spending 426. automatic stabi- programs that automatically trigger benefits if changes in lizers the economy threaten income 427. entitlements broad social programs that use established eligibility re- quirements to provide health, nutritional, or income sup- plements - function as automatic stabilizers 428. unemployment insurance that workers who lose their jobs through no insurance fault of their own can collect from individual states for a limited amount of time 429. supply-side poli- policies designed to stimulate output and lower unem- cies ployment by increasing production rather than by stimu- lating demand 430. deregulation removing government regulations that restrict the activi- ties of firms in certain industries 431. monetarism the theory or practice of controlling the supply of money as the chief method of stabilizing the economy. 432. wage price con- regulations that make it illegal for businesses to give work- trols ers raises or to raise prices without the explicit permission of the government 33 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm 433. council of eco- a three member group that reports on economic develop- nomic advisers ments and proposes strategies 434. comparative ad- the ability to produce a product relatively more efficiently, vantage or at a lower opportunity cost 435. quota limit placed on the quantities of a product that can be imported 436. protective tariff a tariff that is high enough to protect less-efficient domes- tic industries 437. revenue tariff a tariff that is high enough to generate revenue for the government without actually prohibiting imports 438. protectionists people who favor trade barriers to protect domestic indus- tries 439. free traders people who prefer fewer or even no trade restrictions 440. infant industries new or emerging industries should be protected from argument foreign competition 441. balance of pay- the difference between the money a country pays out ments to, and receives from, other nations when it engages in international trade 442. most favored na- a provision allowing a country to receive the same tariff tion clause reduction that the US gives to any third country 443. WTO world trade organization, a international agency that ad- ministers trade agreements signed under GATT 444. GATT General Agreement on Tariffs and Trade 445. NAFTA North American Free Trade Agreement, a agreement to liberalize free trade by reducing tariffs among three major trading partners: Canada, Mexico, and the US 446. 34 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm foreign ex- different currencies used to facilitate international trade - change bought and sold in the foreign exchange market 447. foreign ex- the price of one country's currency in terms of another change rate country's currency 448. fixed change a system under which the price of one currency is fixed rates in terms of another currency so that the rate does not change 449. flexible ex- the forces of supply and demand establish the value change rates of one country's currency in terms of another country's currency 450. trade deficit whenever the value of the products it imports exceeds the value of the products it exports 451. trade surplus whenever the value of its exports exceeds the value of its imports 452. trade-weighted an index displaying the strength of the dollar against a value of the group of major foreign currencies when the index falls, the dollar dollar is weak in relation to other currencies 453. capital flight the legal or illegal export of a nation's currency and foreign exchange 454. IMF International Monetary Fund, a organization that offers advice to all countries on monetary and fiscal policies 455. soft loans loans that wouldnt be paid back 456. expropriation the taking over of a foreign property without some sort of payment in return - make it harder for all developing nations to attract foreign capital 457. customs union an agreement in which two or more countries abolish tariffs and trade restrictions among themselves and adopt uniform tariffs for nonmember countries 35 / 36  Glencoe Economics Principles and practices Study online at https://quizlet.com/_6wyptm 458. ASEAN a 10 nation group working to promote regional peace and stability accelerate economic growth and liberalize trade policies in order to become a free-trade agenda 459. cartel a group of producers or sellers who agree to limit the production or sale of a product in order to control prices 460. vouchers certificates that could be used to purchase government owned property 461. collectivizaton the forced common ownership of al agricultural, industrial, and trading enterprises 462. perestroika the restructuring of the soviet economy 463. solidarity the independent and sometimes illegal labor union estab- lished in 1980 36 / 36