1. Intro to Economics Vocab
2010

2. Shortage vs Scarcity
Shortages are when the supply of a product is temporarily low
and Scarcity is the lack of an unlimited supply of all resources.
75% of the beef in the US is recalled and prices go up. Once the supply of beef goes back to normal, prices come back down
The earth does not contain an unlimited supply of oil

3. Goods & Services A good is a product you purchase
Ex = Shoes, Car,
A service is something you pay for.
Ex = Oil Change, Paying someone to do your taxes, mow your lawn.

4. Factors of Production 1. Land 2. Labor 3. Capital (investment)
not Capitol (building/location)

5. Technology Helps firms (businesses) produce more. Increase production
Create more economic Growth
EX = Computer, Car, Planes, Cell Phones

6. Economic Systems
Method societies use to distribute goods and services in a countries economy.
How you the consumers are able to buy your goods and pay for services.

7. Safety Net
Programs the state and federal govt’s put in place to help you during a period of financial difficulties.
Social Security
Unemployment
Medicare & Medicaid

8. Standard of Living
Your current financial life style. The amount of money you make, house you live in, car you drive, etc.

9. Market Economy
A market economy is one in which all decisions are made by individuals and are based on trade or exchange.

10. Command Economy
All economic decisions are made by the central government.

11. Free Market
Land Labor and Capital are owned by individuals and businesses they get to make what they want and buy what they want.

12. Socialist v Comminust Economy
Socialist = Democratic means should be used to distribute wealth evenly throughout a society.
Communist = A central government owns all the businesses and determines what is made and who will consume it and how much will be consumed.

13. Role of the Gov’t
Government pays for and provides certain goods and services in the economy because the private sector (businesses) will make no money (there’s no profit)
Roads, Bridges, Canals, Schools,

14. Business Cycle Expansion = Economic Growth
Peak = Maximum point of economic growth
Contraction = Slow down of economic growth, or negative economic growth
Trough = lowest point of economic contractiont.

15. GDP (Gross Domestic Product)
GDP = Total sum of all goods and services produced during each given year in a countries economy.
2008 GDP = $14.4 trillion dollars of goods and services produced.

16. Public Sector vs. Private Sector
Public Sector = When the government is providing goods or services/jobs by means of tax dollars.
EX = Teachers, education, construction of roads and bridges, work for the state of federal government
Private Sector = Working for companies that do not use tax dollars to pay employees. Transactions made by individuals and businesses

17. Demand vs Supply
Demand = The desire to want something and having the ability to pay for it
Supply = How much of a good is produced by a business and is available.

18. Law of Demand and Supply
Law of Demand = Consumers will buy more of a good when the price decreases and less of a good when the price increases.
Law of Supply = Businesses will supply more of a good when prices are high and less of a good when prices are low.

19. Role of Prices
Prices move land, labor and capital into the hands of producers and then the finished goods into the hands of the consumers.

20. Monopoly & Their Ban
When a market is dominated by a SINGLE company. No other company is able to compete with this one dominate company.

21. Role of Banks Store Money
Provide a way to pay bills (checking accounts)
Invest ones money
Make loans
Provide credit cards
Create money in the economy

22. Interest
Amount an individual owes for borrowing money from a financial institution (Loans)
Credit Card Company, Bank

23. Credit Cards
A line of credit (money) given to an individual from a financial institution that allows one to make purchases and make monthly payments on such purchases.
Consumers will be charged interest on purchases
Some purchases can be made interest free from stores on the stores credit card as long as the items are paid within the specified time frame. EX 36 months interest free.

24. Debit Cards
Your OWN MONEY used to make purchases by using a plastic card that withdraws the money from YOUR OWN checking account.

25. Investing of Money
Banks
Bonds
Stocks
Pensions
401K
IRA’s

26. Unemployment Frictional = individual takes time to find a job
Cyclical = unemployment that rises during economic downturns, falls during economic booms.
Seasonal = occurs when seasons change, companies shut down for a period of time
Structural = workers skills no longer match the jobs available.

27. Inflation Increase in prices over a period of time.
Different types of inflation depending on how quickly prices increases.
Opposite of inflation is deflation. When prices drop.
Gas was .79cents per gallon in 1999, then in gas was over $4.00 per gallon.(Inflation) Later in 2008, gas dropped to $1.75 per gallon (deflation)

28. Interest Rate and Consumers
Lower Interest Rates = More consumers and businesses borrow money. It’s cheaper to borrow money.
Higher Interest Rates = Fewer consumers and businesses borrow money. It’s more expensive to borrow money.

29. Income Distribution
How the income in this country is divided up between the citizens.
Which types of careers pay what and why
Who determines which careers pay what and why?

30. Tax Payment made to the government (local, state, federal).
Several types of taxes

31. Tax Base Income, property or good that is subject to a tax.
Individual Income Tax
Sales Tax
Property Tax
Corporate Income Tax

32. Fiscal Policy
The Federal Governments policy on spending and taxation to effect the economy.
Spend more or less tax dollars
Cut taxes or increase taxes.

33. Budget Deficit
When the government (Federal, state or local) spend more money in a given year than what it collected in taxes/revenue.

34. Federal Reserve System
The federal gov’ts central bank. It’s the federal governments checking account. (pays the federal gov’t’s bills)
Monitors the national economy
Determines if interest rates need to be increased or lowered
Tries to control inflation/deflation
Regulates Banks
Monitors the money supply in the economy.

35. Monetary Policy
The policies put into place by the Federal Reserve to increase/decrease the nations money supply.
Increase/decrease interest rates
Easy/Tight money policy
Money supply up/interest rates down
Money supply down/interest rates up

36. Trade When countries exchange goods.
Some countries specialize in the production of certain goods and send them to countries that do not and need those goods
Allows for more competition in an economy.

37. Export Goods produced in the country and sent out to other countries.
Ford vehicles produced in the USA and sent to Germany

38. Import
Goods that are produced in another country and brought into the country.
Toyotas from Japan into the USA

39. Tariff Tax on an imported good into the country
The USA imposes a very small tariff on most goods.
The USA can select certain goods and impose a higher tariff. (Chinese tires)

40. European Union (pg455)
Regional trade organization made up of European nations.
Protect and promote the economies of member nations

41. NAFTA North American Free Trade Agreement
Promote free trade between the USA, Mexico and Canada. Promote and grow all three nations economies

42. Exchange Rate
Taking currency and changing it to another countries currency. Going rate for each currency.
Example =
$1.00 US dollar = 10 Mexican Pesos.
$1.00 US dollar = 0.67cents of a Euro
$1.00 Euro = $1.67 US dollar