Econ Basics
The study of how society manages its scarce resources
Economics
The three factors of production
land, labor, capital
The sum total of the value of all the goods and services produced in a nation
gross domestic product (GDP)
Government policy that attempts to manage the economy by controlling the money supply and thus interest rates.
Monetary Policy
Cost of the next best alternative use of money, time, or resources when one choice is made rather than another
Opportunity Cost
The fact that there is a limited quantities of resources to meet unlimited wants is called ______
Scarcity
The idea that consumers buy more of a good when its price decreases and less when its price increases
Law of Demand
A period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.
recession
Percentage of amount borrowed to be added to the amount loaned and paid back
Interest Rate
An economic system in which the central government makes all decisions on the production and consumption of goods and services
Centrally Planned Economy
Analysis that involves comparing marginal benefits and marginal costs
Marginal Analysis
The price at which the quantity demanded equals the quantity supplied
Equilibrium
A type of unemployment caused by workers voluntarily changing jobs and by temporary layoffs; unemployed workers between jobs.
Frictional Unemployment
The Federal Reserve's policy of increasing interest rates to reduce inflation
Contractionary Monetary Policy
A situation in which the free market, operating on its own, does not distribute resources efficiently
Market Failure
A situation that occurs in markets when both the buyer and the seller of a product are made better off by the transaction
Voluntary exchange
A situation in which quantity demanded is greater than quantity supplied
Shortage
The largest component of Gross Domestic Product (GDP) which includes the total money spent on final goods and services by individuals and households for personal use and enjoyment in an economy.
consumer spending
The central bank of the United States
The Federal Reserve
An economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume
Externality
A phrase coined by Adam Smith to describe the process that turns self-directed gain into social and economic benefits for all
Invisible Hand
Two goods for which an increase in the price of one leads to a decrease in the demand for the other
Complement good
When there is persistent high inflation combined with high unemployment and stagnant demand in a country's economy.
Stagflation
Government policy that attempts to manage the economy by controlling taxing and spending.
Fiscal policy
The ability of a country to produce a good at a lower cost than another country can.
comparative advantage