Going in Circles
In the circular flow model, these two groups are the main participants exchanging goods, services, and resources
What are Households and Firms?
This law states that, all other things being equal, as the price of a good increases, the quantity supplied of that good will also increase.
What is the Law of Supply?
A business owned and managed by a single individual who faces unlimited liability for the firm's debts.
What is a sole proprietorship?
The primary measure of a country's economic output, representing the total market value of all final goods and services produced annually.
What is Gross Domestic Product?
The use of government spending and taxation to influence the economy.
What is Fiscal Policy?
The market where households sell resources like labor and firms purchase them.
What is the Resource/Factor Market?
A government-mandated minimum price set above the equilibrium price, like minimum wage, which often leads to a surplus.
What is a Price Floor?
A market structure with many sellers, slightly differentiated products, and low barriers to entry; restaurants and clothing stores are common examples.
What is monopolistic competition?
A recent college graduate looking for their first job is an example of this type of unemployment.
What is frictional unemployment?
This institution serves as the central bank of the United States and is responsible for monetary policy.
What is the Federal Reserve?
The tangible flow of goods and services from firms to households and resources from households to firms.
What is Real Flow?
An increase in the price of fertilizer, a key input for growing corn, would cause the supply curve for corn to shift this direction.
What is to the left/Decrease in Supply?
This form of business is a legal entity separate from its owners, providing limited liability but facing double taxation on profits.
What is a corporation?
The measure used to track inflation by monitoring the average change in prices for a market basket of consumer goods and services.
What is Consumer Price Index?
When the government spends more in a single year than it collects in tax revenue, it runs this.
What is a Budget Deficit?
When a household buys a new video game from a store, the transaction takes place in this market.
What is the Product Market?
A government-set maximum price, such as rent control in a city, often results in this market condition where quantity demanded exceeds quantity supplied.
What is a shortage?
A market structure dominated by a few large firms, such as the airline or mobile phone industries, where barriers to entry are high.
What is an oligopoly?
The lowest point in the business cycle, characterized by high unemployment and low economic output, before a recovery begins.
What is a Trough?
The Federal Reserve's dual mandate from Congress directs it to pursue these two primary economic goals.
What are Price Stability and Full Employment?
In the circular flow diagram, this represents the flow of payments for goods, services, and the factors of production.
What is Money Flow?
If a new study proves that coffee has amazing health benefits, this determinant of demand will cause the demand curve for coffee to shift right, increasing both equilibrium price and quantity.
What is consumer taste and preference?
This theoretical market structure features a large number of firms selling an identical product with no control over price and no barriers to entry.
What is pure/perfect competition?
Unemployment caused by a fundamental change in the economy, such as automation replacing factory workers.
What is Structural Unemployment?
To fight a severe recession, the government might cut taxes, while the Fed might buy government securities to lower interest rates. The Fed's action is an example of this type of policy.
What is Expansionary Monetary Policy?