| Term | Definition |
|---|
| black market | A market in which illegal trading takes place at market-determined prices. |
| consumer surplus | The difference between the maximum amount a person is willing to pay for a good and its current market price. |
| deadweight loss | The net loss of producer and consumer surplus from underproduction or overproduction. |
| favored customers | Those who receive special treatment from dealers during situations of excess demand. |
| minimum wage | A price floor set under the price of labor. |
| price ceiling | A maximum price that sellers may charge for a good, usually set by the government. |
| price floor | A minimum price below which exchange is not permitted. |
| producer surplus | The difference between the current market price and the full cost of production for the firm. |
| price rationing | The process by which the market system allocates goods and servies to consumers when quantity demanded exceeds quantity supplied. |
| queuing | Waiting in line as a means of distributing goods and services: a nonprice rationing mechanism. |
| ration coupons | Tickets or coupons that entitle individuals to purchase a certain amount of a given product per month. |
| aggregate behavior | The behavior of all households and firms together. |
| aggregate demand | The total demand for goods and services in an economy |
| aggregate output | The total quantity of goods and services produced in an economy in a given period. |
| aggregate supply | The total supply of all goods and services in an economy. |
| business cycle | The cycle of short-term ups and downs in the economy. |
| circular flow | A diagram showing the income received and payments made by each sector of the economy. |
| contraction, recession, or slump | The period in the business cycle from a peak down to a trough, during which output and employment fall. |
| corporate bonds | Promissory notes issued by corporations when they borrow money. |
| deflation | A decresae in the overall price level. |
| depression | A prolonged and deep recession. |
| dividends | The portion of a corporation's profits that the firm pays out each period to its shareholders. |
| expansion or boom | The period in the business cycle from a trough up to a peak, during which output and emplyment rise. |
| fine-tuning | The phrase used by Walter Heller to refer to the government's role in regulating inflation and unemployment. |
| fiscal policy | Government policies concerning taxes and expenditures (spending). |
| Great Depression | The period of severe economic contraction and high unemployment that began in 1929 and continued throughout the 1930s. |
| hyperinflation | A period of very rapid increases in the overall price level. |
| inflation | An increase in the overall price level. |
| macroeconomics | The branch of economics that examines the economic behavior of aggregtates - income, employment, output, and so on - on a national scale. |
| microeconomic foundations of macroeconomics | The microeconomic principles underlyng macroeconomic analysis. |
| microeconomics | The branch of economis that examines the functioning of individual industries and teh behavior of individual decision-making units - that is, business firms and households. |
| monetary policy | The behavior of the Federal Reserve concerning the nation's money supply. |
| recession | A period in which real GDP declines for at least two consecutive quarters. Marked by falling output and rising unemployment. |
| shares of stock | Financial instruments that give to the holder a share in the firm's ownership and therefore the right to share in the firm's profits. |
| stagflation | Occurs when the overall price level rises rapidly (inflation) during periods of recession or high and persistant unemployment (stagnation). |
| sticky prices | Prices that do not always adjust rapidly to maintain equality between quantity supplied and quantity demanded. |
| supply-side policies | Government policies that focus on stimulating aggregate supply instead of aggregate demand. |
| transfer payments | Cash payments made by the government to people who do not supply goods, services, or labor in exchange for these payments. They include social security benefits, veterans' benefits, and welfare payments. |
| Treasury bonds, notes, and bills | Promissory notes issued by the federal government when it borrows money. |
| unemployment rate | The ratio of the number of people unemployed to the total unmer of people in the labor force. |
| actual investment | The actual amount of investment that takes place; it includes items such as unplanned changes in inventories. |
| aggregate income | The total income received by all factors of production in a given period. |
| autonomous variable | A variable that is assumed not to depend on the state of the economy - that is, it does not change when the economy changes. |
| change in inventory | Production minus sales. |
| consumption function | The relationship between consumption and income. |
| desired investment | Those additions to capital stock and inventory that are planned by firms. |
| equilibrium | Occurs when there is no tendency for change. In the macroeconomic goods market, it ocurs when planned aggregate expenditure is equal to aggregate output. |
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