-
Aggregate demand curve
A graphical depiction of the relationship between the level of desired expenditures in an economy and the price level
-
Aggregate supply curve
A graphical depiction of the relationship between the quantity of goods and service firms wish to supply and the price level
-
Agricultural Adjustment Act (AAA)
A New Deal program that provided relief to farmers by reducing the acreage planted major crops and supported the prices of there crops
-
Average labor Productivity
Total output divided by the quantity of labor employed in its production
-
Bank run
A sudden rush of depositors seeking to withdraw funds from the banking system
-
Barriers to entry
Conditions that prevent firms from freely entering or exiting a market
-
Business cycle
Fluctuations in aggregate economic activity
-
Capital goods
Long-lived goods that are themselves produced and are used to produce other goods and services, but are not used up in the production process
-
Cartel
An agreement between suppliers to restrict production and raise prices
-
Civilian Conservation Corps (CCC)
A federal employment program during the New Deal that employed younger workers to work on wilderness conservation projects
-
Coase Theorem
The proposition that if private parties can bargain without cost over the allocation of resources, then they can solve the problem of externalities on their own
-
Comparative advantage
The ability to produce a good or service at the lower opportunity cost than other producers
-
Competitive market
A market with many buyers and sellers trading a homogenous good or service in which each buyer and seller is a price taker
-
Complements
Two goods for which a rise in the price of one leads to a decline in the demand for the other
-
Consumer Price Index (CPI)
An index constructed by comparing the cost of purchasing a fixed basket of goods at different times
-
Consumer surplus
The difference between the amount that a buyer would be willing to pay for a good or service and the price actually paid
-
Consumption
Spending by households on goods and services, with the exception of the purchase of new housing
-
Contraction
The phase of a business cycle in which the economy is growing more slowly that its long-run average
-
Crowding out
The decrease in private investment that occurs as a result of a reduction in government saving or an increase in government borrowing
-
Currency
Coins and bills in the hands of the public
-
Cyclical unemployment
Unemployment caused by deviations of output from its potential level
-
Dawes Plan
An international agreement that went into effect in 1924 that was designed to end German hyperinflation and enable Germany to make reparations payments as specified by the Versailles Treaty
-
Deadweight loss
The reduction in total surplus that results from a market distortion such as a tax
-
Demand curve
A graphical representation of the quantity of a good or service demanded as a function of the price
-
Demand schedule
A table showing the relationship between the price of a good or service and the quantity demanded
-
Depression
A severe recession
-
Diminishing returns to scale
The property whereby each additional increase in inputs results in a smaller increase in the quantity produced
-
Discount rate
The interest rate that the Federal Reserve charges banks when they must borrow reserves from it
-
Economic profit
The difference between the revenue realized by a producer and the opportunity cost of production
-
Elasticity
The percentage change in a quantity demanded or supplied as a result of a one percent change in price
-
Entrepreneur
An individual who takes on the risk of attempting to create new products or services, establish new markets, or develop new methods of production
-
Equilibrium
A situation in which the forces in a system are in balance so that the situation is stable and unchanging
-
Excludability
The ability to prevent buyers from enjoying the benefits of consuming a good or service without paying for it
-
Expansion
The phase of the business cycle in which the economy is growing more quickly that its long-run average
-
Externality
When the action of one person affects the well-being of someone else, but where neither party pays nor is paid for these effects
-
Fair Labor Standards Act
Legislation pass in 1938 that established a federal minimum wage, prohibited the employment of children younger than sixteen, and established overtime pay for a workweek over forty-four hours
-
Federal Emergency Relief Agency (FERA)
A New Deal agency created to channel funds to state and local relief efforts
-
Federal funds rate
The rate that banks charge other banks when they lend reserves
-
Final goods
Goods or services that are purchased by their ultimate user
-
Financial markets
The institutions through which individuals with saving can supply these funds to persons or firms that wish to borrow money to purchase consumption goods or invest in physical capital
-
Fiscal policy
The use of taxes and spending to influence aggregate demand and through it the level of overall economic activity
-
Fixed cost
A cost of production that is independent of the quantity produced
-
Foreign direct investment
When a company or individual acquires assets in a foreign country that they will manage directly
-
Frictional unemployment
Unemployment that results because it takes time for workers to search for the jobs that are best suited to their tastes and skills
-
Gains from trade
The benefits that both individuals or nations realize from mutually beneficial exchange
-
Gold standard
An international exchange rate system in which national governments or central banks commit to the convertibility of their currency into gold at a fixed exchange rate
-
Government purchases
Spending on goods and services by federal, state, and local governments
-
Gross Domestic Product (GDP)
The market value of final goods and services produced in an economy during a specified period of time
-
Human capital
Skills and experience that are acquired through education, training, and on the job experience that increase a worker’s productivity
-
Imperfect competition
The case of a market with a small number of sellers, so that sellers have market power
-
Inferior good
A good for which the quantity demanded falls as buyers’ income increases
-
Inflation
A general increase in prices
-
Institutions
Formal and informal rules that structure human interactions
-
Intermediary
A third party who acts as a link between two others who wish to transact business
-
Intermediate good
A good or service that is used in the process of producing other goods and services
-
Investment
Spending on capital equipment, inventories, and structures, including household purchases of new housing
-
Keynesian model
A model of short-run aggregate economic fluctuations inspired by the analysis of British economist John Maynard Keynes, which attributes short-run deviations in output from potential to variations in the level of aggregate demand or aggregate supply
-
Labor force
The sum of those individuals who are employed and those who are seeking paid work but have not found it
-
Labor force participation rate
The fraction of the working-age population who are in the labor force
-
Law of demand
Holding other things equal, the quantity demanded is negatively related to the price
-
Law of supply
Holding other thing equal, the quantity supplied is positively related to the price
-
Liquidity
The ease with which a nonmonetary asset may be converted into money
-
Logrolling
The practice of elected officials trading votes
-
Marginal cost
The additional cost of production associated with a small increase in the quantity produced
-
Marginal revenue
The additional revenue resulting from a small increase in the quantity produced
-
Market failures
Conditions in which a competitive market fails to produce a socially effective outcome
-
Market power
The situation in which a producer knows that changes in the quantity produced will alter the price at which the good or service can be sold
-
Monetary base
The quantity of currency plus bank reserves
-
Monetary policy
The use of the supply of money in the economy by the Federal Reserve to influence the level of aggregate demand
-
Money
An asset that is a medium of exchange, unit of account, and store of value
-
Money multiplier
The ratio of the money supply to the monetary base
-
Money supply
The quantity of money available to the economy
-
Monopolistic competition
A market in which there is free entry or exit, but every producer supplies a differentiated product and faces a downward sloping demand curve
-
Monopoly
A market in which there is a single producer
-
National Industrial Recovery Act (NIRA)
A New Deal program that established industry codes of conduct intended to reduce output and raise prices and wages
-
National Labor Relations Act
Legislation passed in 1935 that protected the right of workers to bargain collectively; also referred to as the Wagner Act
-
Natural rate of unemployment
The level of unemployment that would exist if the economy were producing at its potential output
-
Net capital outflow
The difference between the purchases of foreign assets by domestic residents and the purchases of domestic assets by foreign residents
-
Net exports
The difference between the value of goods and services sold to foreigners and the value of goods and services purchased from foreigners
-
Neutrality of money
The proposition that in the long run, changes in the quantity of money affect the price level but do not affect any real quantities
-
New Deal
The name given to the policies introduced by President Franklin D. Roosevelt to combat the Great Depression
-
Nominal GDP
The production of goods and services valued at current prices
-
Normal good
A good or service for which demand is positively related to the buyer’s income
-
Normative economics
Economic analysis used to guide decisions about what should be as opposed to what is the case
-
Okun’s law
A relationship identified by Arthur Okun between the output gap and the level of cyclical unemployment
-
Oligopoly
A market in which there are just a few producers
-
Open market operations
A tool used by the Federal Reserve to adjust the money supply by buying or selling U.S. government bonds in the financial market
-
Opportunity cost
The cost of any choice is what must be given up by making that choice
-
Output gap
The difference between actual output and potential output
-
Pareto efficiency
Describes an allocation in which the only way to make any individual or group of individuals better off would require making at least one other person worse off
-
Per capita
Literally per head, used to denote an average value for a population
-
Portfolio investment
The purchase of shares of stock or bonds
-
Positive economics
The use of the tools of economic analysis to describe and explain economic phenomena and to make predictions about what will happen under particular circumstances
-
Potential output
The quantity of output that would be produced by an economy if all of its resources were being employed at normal rates
-
Price discrimination
When a business sells the same product to different buyers at different prices
-
Producer surplus
The difference between the price that producers receive for supplying a good and their marginal cost of producing it
-
Production possibility frontier (PPF)
A graphical depiction of the combinations of output that can be produced by an economy
-
Public good
A good or service for which is it not possible to establish individual property rights
-
Rationality
When individual choices are made by comparing the benefits and costs of different actions and then selecting the action that produces that greatest benefit
-
Real GDP
The production of goods and services valued at constant prices
-
Rent seeking
Using political influence to increase one’s economic profits at the expense of others
-
Reserve requirement
The amount of reserves that the Federal Reserve requires banks to hold
-
Reserves
The fraction of deposit liabilities that banks hold to meet depositor withdrawals
-
Rival goods
Goods or services characterized by the fact that one person’s enjoyment of the good orservice reduces the quantity available for others’ enjoyment
-
Savings
The difference between a person’s disposable income and his or her expenditures
-
Scarcity
An Inescapable fact of human existence that results from the fact that the available resources are always less than our limitless desires
-
Structural unemployment
Unemployment that results from the mismatch in skills, locations, or other important characteristics between job seekers and the available jobs
-
Substitutes
Two goods for which an increase in the price of one leads to an increase in the demand for the other
-
Supply curve
A graphical representation of the quantity of a good or service supplied as a function of the price
-
Supply Schedule
A table showing the relationship between the price of a good or service and the quantity supplied
-
Technology
Knowledge about the techniques by which inputs are transformed into the goods and services that households desire
-
Total revenue
The total revenue received by a supplier
-
Total surplus
The sum of consumer and producer surplus
-
Tragedy of the commons
The depletion of a common resource due to overuse
-
Treaty of Versailles
The agreement that ended the First World War
-
Unemployment
The state of actively seeking paid work but being unable to find it
-
Unemployment rate
The number of unemployed workers as a fraction of the total labor force
-
Variable cost
A cost of production that depends on the quantity produced
-
Velocity of money
The ratio of nominal GDP to the money supply; in effect, the average number of transactions supported by each dollar of the money supply
-
Wealth
The total value of assets used as a store of value
-
Works Projects Administration (WPA)
A federal program during the New Deal that directly employed artists, writers, photographers, and other workers on a variety of cultural projects; it also employed workers in the construction of a variety of public works projects such as roads and flood control dams
|
|