Comm 1800 Ch 4
Terms
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- Economy
- the economic of financial state of a society
- economics
- study of the financial welfare of an economy and how an economy operates; stud y of how society acquires and uses its financial capital real capital, and human capital
- economists
- people who study economics
- microeconomics
- study of how individual people and organizations behave financially--how the work, earn money, and spend money
- Macroeconomics
- study of how and overall society behaves financially
- full employment
- the want for everyone who wants and needs a job to have a job
- unemployment
- not having full employment
- cyclical unemployment
- occurs when the market for a person's laabor is temporarily low
- seasonal unemployment
- occurs when the demand for employees varies depending on the time of year
- stuctural unempoyment
- occurs when there are structural barriers that prevent employment and employees from coming together
- transitional unemployment
- occurs when an employee or employer desires to make a change
- underemployment
- have part time job, seeking full time; overqualifed
- productivity
- the use of resources to create income
- factors of production
- the resources that an econoy needs to operate and prosper (labor, natural resources, knowledge, money)
- inflation
- when prices of items go up (BUT THIS ISNT WHAT ACTUALLY HAPPENS IN ECONOMICS!!! BUSINESS IS STUPID)
- deflation
- prices of items go down
- demand-pull inflation
- occurs when the demand for a product exceeds the avaiable supply of the product
- Cost-push inflation
- occurs when the cost of an item goes up without an increase in demand (occurs when supply is artificaly and suddenly limited)
- nominal income
- measure of the income of individuals, businesses, and nations in current year dollars and do not adjust for changing prices
- real income
- nominal income adjusted for inflation or deflation
- economic index
- mesures the relative change of an economic factor over time
- Consumer Price Index (CPI)
- estimates how the average price of consumer goods has changed in a give period. prices often called retail prices
- Producers Price Index (PPI)
- estimates how the prices of products sold between businesses have changed in a given period. such prices are called wholesale prices
- GDP deflator
- estimates how the prices of all items have changed in a given period
- Adm smith
- argued that economies was a win win game (not a zero sum game) (1+1=3)
- multiplier effect
- when you spend money, you create income for someone else
- free market system/ capitalistic ecnomoies
- individuals and businesses are free to compete ad free to receive the benefits from winning the competition
- supply curve
- shows the relationship, high prices=higher supply, lower prices=lower supply
- demand
- refers to the individuals and businesses that buy products; behavior of custoomers
- demand curve
- relationship of demand; higher prices=lower demand, lower prices=higher demand
- equilibrium point (market price)
- price where buyers and sellers agree to bake and exchange
- price-elastic
- when demand and supply react to price changes they are this (typically when customers ahve alernatives or choices)
- price-inelastic
- when demand and supply do not react to price changes they are this (typically where there are not alternative choices)
- perfect competition
- numerous buyers and sellers; buyers have alternatives and choices and sellers must supply the buyer with the best product at the lowerst prices
- monopoly
- happens when one business controls the entire supply of a product
- oligopoly
- few businesses control the supply of a product
- collusion
- the challege is when these competing businesses get together and set prices
- socialism
- an economic system in which the government owns selected businesses; typically businesse more critical to the welfare of society
- nationalized
- said when the government owns the business
- communisms
- fromed by kar marx and others; no private ownership; evertyhing owned by everything
- controlled or regulated economy
- economy in which businesses are privately owned by heavily regulated by government
- mixed economies
- economies modified freee markets with regulation and socialism to abiod abuses
- economic cycle/business cycle
- cycle as economy goesthrough ups and downs (expansions and contractions)
- Gross Domestic Product (GDP)
- how the health of the economy is measured; value of goods and services produced in an economy in a given yera
- Nominal GDP
- price componet of GDP as current price of goods and services produced
- Real GDP
- nominal GDP with an adjustment of price changes
- Consumption
- when individuals buy products that are manuafactured in their home country
- Durable goods
- goods that have long lives (computers, cars, etc)
- nondurable goods
- goods that have realtively short lives
- investment
- when indivduals or businesses spend money on capital items such as buildings and equipment
- Government spending
- when governments spend money for national defense, roads, services, etc. Includes stae and local governmetns
- disposable income
- gross earings, less your taxes, equals net paycheck; money we have to spend on thigns
- marginal propensity to consume
- tendency to spend disposable income
- marginal propensity to save
- propensity to save disposable income
- recession
- two consecutive quarters of negative growth in real GDP
- depression
- very long and severe recession
- fiscal policy
- relates to governmetn spending and taxation
- monetary policy
- governmetns management of supply of money to help and economy grow faster or slower
- Federal reserve
- central bank in the united states that controlles money supply by printing and circulating money, regulating bank lending, influence interest rate s
- deficit
- when governmet spending is greater than tax revenue
- leading economic indications
- event that can predit future sate of economy to base decisions on (consumer sentiment, claims for unemployent benefits, housing starts, inventories, interest rates, prices of products)