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Government final review

Terms in this set (51)

Economics
The study of how people seek to satisfy their needs and wants by making choices
factors of production
land, labor, capital
opportunity cost
the most desirable alternative given up as the result of a decision
self-interest
one's own personal gain
competition
the struggle among producers for the dollars of consumers. Keeps the economy growing and stable
voluntary exchange
the act of buyers and sellers freely and willingly engaging in market transactions
Free rider
a person who receives the benefit of a good but avoids paying for it
Sole Proprietorship
A business owned by one person. Easy to start, taxed once, unlimited liabilities
Partnerships
businesses with two or more owners. Taxed once, shared specialization, unlimited liabilities
Corporations
businesses that are owned by many investors who buy shares of stock. Limited liability, complex decision making
unemployment
Not working but looking for a job
How has the job market changed in the last 100 years
Less manual labor and more white collar jobs
How are wages for a particular job determined?
Demand and skill
Unions
an organized association of workers formed to protect and further their rights and interests; a labor union.
Fiat money
Government issued money
FDIC
Federal Deposit Insurance Corporation. Protects savings accounts from bank failures
How do banks make money
interest on loans
How do banks get people to save money
Paying interest on savings
investment
Saving money now for benefit later
Bond
A loan to the government
Maturity
Bonds mature at 30 years
Stock
Share of a company
Dow Jones
The average cost of 30 selected stocks, used to give an indication of the direction (up or down) of the stock market over time.
mutual fund
Investment in a variety of stocks and bonds
pension plan
Program established by an employer or a union that is designed to provide income to employees after they retire.
GDP
Gross Domestic Product- the total market value of all final goods and services produced annually in an economy
expenditure vs income approach
Expenditure is more accurate than income approach
Real GDP
GDP adjusted for inflation
Nominal GDP
GDP measured in current prices
Underground economy
Goods and services that are bought without the knowledge of government
Phases of buisness cycle
1. Expansion
2. Peak
3. Contraction (recession)(depression)
4. Trough
seasonal unemployment
unemployment that occurs as a result of harvest schedules or vacations, or when industries slow or shut down for a season. Life guards, holiday workers
structural unemployment
unemployment that occurs when workers' skills do not match the jobs that are available
Underemployment
workers are overqualified for their jobs or work fewer hours than they would prefer
Normal (healthy) unemployment rate
4-6%
quantity theory
theory that too much money in the economy causes inflation
tax
Government collects for benefit of the nation
corporate tax
a tax on the value of a company's profits
Income tax
A tax on people's earnings
progressive tax
A tax for which the percentage of income paid in taxes increases as income increases
mandatory spending
Federal spending required by law that continues without the need for annual approvals by Congress. Social security and Medicare
descretionary spending
spending about which Congress is free to make choices. Military
fiscal policy
Government spending used to stabilize the economy
expansionary fiscal policy
Cutting taxes or increase spending
contractionary fiscal policy
Raising taxes or decreasing spending
classical economics
the idea that free markets can regulate themselves (No Government)
Debt
Total deficit of the country
deficit
An excess of federal expenditures over federal revenues.
Main job of the federal Reserve
Lessen the effect of the economic cycle
lender of last resort
The Fed can lend money to banks
fractional reserve banking
banks hold only a fraction of deposits in reserve, lending the rest
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