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Economic Terms (Micro & Macro)

Economic Terms (Micro & Macro)

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Some of the most common economic terminology of both microeconomics and macroeconomics.

Items (71)

  • The next best alternative that must be given up when a choice is made

    Opportunity Cost

  • The total amount of goods and services demanded in the economy

    Aggregate Demand (AD)

  • The total supply of goods and services produced within an economy

    Aggregate Supply (AS)

  • The value of all the goods and services produced in an economy

    Gross Domestic Product (GDP)

  • Gross Domestic Product (GDP), adjusted for inflation

    Real GDP

  • Process whereby workers perform only a single or a very few steps of a major production task

    Division of labor

  • How much consumers are willing and able to buy at all possible prices

    Demand (D)

  • How much producers are willing and able to sell at all possible prices

    Supply (S)

  • The amount of a product consumers will purchase at a specific price

    Quantity demanded (Qd)

  • The amount of a product producers will produce and sell at a specific price

    Quantity supplied (Qs)

  • The health, strength, education, training, and skills which people bring to their jobs

    Human capital

  • All buildings, equipment and human skills used to produce goods and services

    Capital

  • The total spending, by individuals or a nation, on consumer goods during a given period

    Consumption (C)

  • Investment spending by companies on capital goods

    Investment (I)

  • Government expenditures on publicly provided goods and services

    Government spending (G)

  • International trade whereby goods produced in one country are shipped to another country for future sale or trade

    Export (X)

  • A good or service brought into one country from another

    Import (M)

  • What does this formula describe: C+I+G+(X-M)

    AD (Aggregate Demand)

  • The difference between a country's imports and its exports

    Balance of Trade (BoT)

  • Summary of an economy’s transactions with the rest of the world for a specified time period

    Balance of Payments (BoP)

  • A price at which the quantity supplied equals the quantity demanded

    Equilibrium price

  • The quantity of a good demanded and supplied at the equilibrium price

    Equilibrium quantity

  • Ratio between a change in the quantity demanded of a particular good and a change in its price

    Price elasticity of demand

  • Ratio between a change in the quantity supplied of a particular good and a change in its price

    Price elasticity of supply

  • Ratio between a change in the quantity demanded for a particular good and a change in real income

    Income Elasticity of Demand

  • Latin term for "all other things being equal"

    Ceteris paribus

  • The amount of money that households have available for spending and saving after income taxes have been accounted for

    Disposable income

  • A good that experiences an increase in demand as the real income of an individual or economy increases

    Normal good

  • A good that experiences a decrease in demand as the real income of an individual or economy increases

    Inferior good

  • The proportion of a loan that is charged as interest to the borrower

    Interest rate

  • What occurs when the consumer is willing to pay more for a given product than the current market price?

    Consumer surplus

  • Difference between the amount that a producer of a good receives and the minimum amount that they would be willing to accept

    Producer surplus

  • A general increase in prices and fall in the purchasing value of money

    Inflation

  • A general decline in prices, often caused by a reduction in the supply of money or credit

    Deflation

  • A condition of slow/stagnant economic growth and relatively high unemployment, accompanied by inflation

    Stagflation

  • The percentage of the total labor force that is unemployed but actively seeking employment and willing to work

    Unemployment rate

  • The effectiveness of productive effort, as measured in terms of the rate of output per unit of input

    Productivity

  • Adding more of one factor of production, while holding all others constant, will at some point yield lower incremental per-unit returns

    Law of diminishing returns

  • The time period between jobs when a worker is searching for, or transitioning from one job to another

    Frictional unemployment

  • Periodic unemployment created by seasonal variations in particular industries (e.g. agriculture, construction)

    Seasonal unemployment

  • A longer-lasting form of unemployment caused by fundamental shifts in an economy

    Structural unemployment

  • The fluctuations in economic activity that an economy experiences over a period of time

    Business cycle

  • Unemployment that relates to the increases/decreases in growth and production that occur within the business cycle

    Cyclical unemployment

  • A consequence of economic activity which affects other parties without this being reflected in market prices

    Externality

  • A product that one individual can consume without reducing its availability to another individual and from which no one is excluded

    Public good

  • Someone who benefits from resources, goods, or services without paying for the cost of the benefit

    Free rider

  • Goods which are rivalrous but non-excludable (e.g. fish stocks)

    Common good

  • An economic problem in which every individual tries to reap the greatest benefit from a common resource

    Tragedy of the commons

  • A product that must be purchased in order to be consumed, and whose consumption by one individual prevents another individual from consuming it

    Private good

  • The means by which a government adjusts its spending levels and tax rates to monitor and influence the economy

    Fiscal policy

  • The actions of a central bank or other regulatory committee that determine the size and rate of growth of the money supply

    Monetary policy

  • Price at which one country's currency is exchanged for the currency of another country

    Exchange rate

  • A monetary policy in which a central bank purchases government securities or other securities from the market to increase the money supply

    Quantitative easing (QE)

  • A situation in which prevailing interest rates are low and savings rates are high, making monetary policy ineffective

    Liquidity trap

  • Occurs when increased government borrowing (expansionary fiscal policy) reduces investment spending

    Crowding out

  • The ratio in which the change in a nation's income level is affected by government spending

    Fiscal multiplier

  • The total amount of money which a country's government has borrowed

    National debt

  • View that in the short run, economic output is strongly influenced by aggregate demand

    Keynesian economics

  • An economic theory that is strongly opposed to any government intervention in business affairs

    Laissez-faire

  • Coined by Adam Smith. A natural phenomenon that guides free markets and capitalism through competition for scarce resources

    Invisible Hand

  • A product that cannot be distinguished from competing products from different suppliers

    Homogeneous product

  • Products with attributes that are significantly different from each other

    Heterogeneous products

  • A market such that no participants are large enough to have the market power to set the price of a homogeneous product

    Perfect competition

  • A market such that many producers sell products that are differentiated from one another (e.g. by branding or quality)

    Monopolistic competition

  • A situation in which a particular market is controlled by a small group of firms

    Oligopoly

  • A situation in which a single company or group owns all or nearly all of the market for a given type of product or service

    Monopoly

  • Total cost divided by the number of goods produced (TC/Q = ?)

    Average cost (AC)

  • Total revenue divided by the number of goods produced (TR/Q = ?)

    Average revenue (AR)

  • The cost added by producing one extra item of a product

    Marginal cost (MC)

  • The increase in revenue that results from the sale of one additional unit of output

    Marginal revenue (MR)

  • Process by which a firm determines the price and output level that returns the greatest profit

    Profit maximization (where MR = MC)