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Absolute Advantage the ability of a nation to produce more a good
than another in a given time period
2. Allocation n amount or portion of a resource assigned to a particular
3. Command Economy - A central authority makes most of the economic
4. Commodities a raw material or primary agricultural product that can be
bought and sold, such as copper or coffee.
5. Comparative Advantage the ability of a nation to produce a good more
efficiently than another. It is measured by opportunity cost (what you
give up). It can lead to some surprising trades between nations.
6. debt something, typically money, that is owed or due.
1. Demand a consumer's desire and willingness to pay a price for a specific good
or service.
2. Efficiency getting the most out of a resource
3. Equilibrium Refers to the price and quantity determined in a market
when the supply equals the demand. At equilibrium there are no
surpluses or shortages of the product; at the equilibrium price the
quantity supplied equals the quantity demanded.
4. Export goods manufactured in a nation and sent to another country to
be sold
5. Federal Reserve Bank The central bank of the United States and the most
powerful financial institution in the world
6. Fiscal policy Fiscal policy: Changes in government spending and tax
collections implemented by government with the aim of either
increasing or decreasing aggregate demand to achieve the
macroeconomic objectives of full employment and price level stability.
7. Gross Domestic Product The total market value of all final goods and
services produced during a given time period within a country’s
borders. Equal to the total income of the nation’s households or the
total expenditures on the nation’s output..

15. knowledge. 13. and significant market share can be lost if prices are raised.what you give up to get something (more than just money) 17. Such markets tend to be highly inefficient due to the lack of competition. their employers. 11. 16. Monopoly A market in which only one firm produces all the output. or other intangible assets of individuals that can be used to create economic value for the individuals. A monopolist is a single seller. Human capital he collective skills. Inflation A rise in the average level of prices in the economy over time. . measured by the percentage change in the Consumer Price Index (CPI). 14. or their community 9. producing a unique product with the ability to set the price and level of output based on its own profit-maximizing decisions.people and firms think of themselves when deciding what will be done in the economy 12. Monetary policy The central bank’s manipulation of the supply of money aimed at raising or lowering interest rates to stimulate or contract the level of aggregate demand to promote the macroeconomic objectives of price level stability and full employment. Mixed market Parts of the economy are privately owned and parts may be owned by the government . Characterized by a strong interdependence between the small number of firms.8. Outsourcing practice used by different companies to reduce costs by transferring portions of work to outside suppliers rather than completing it internally. Oligopoly A market in which a relatively small number of firms compete with one another in a strategic manner. Barriers to entry are high and firms are hesitant to change their prices due to the fact that price wars may result when prices are lowered. Market Economy . Import goods brought into a nation after being manufactured in a different country 10. protected by high entry barriers. The United States has a Mixed Market Economy. Opportunity Cost .

Shortage When the quantity demanded for a particular good is greater than the quantity supplied. Scarcity . such as machinery. Public goods & services Goods or services which are nonexcludable by the producers and non-rivalrous in consumption. Therefore. Recession A decrease in the total output of goods and services in a nation between two periods of time.the fundamental economic problem of having seemingly unlimited human needs and wants. resources a service or other asset used to produce goods and services that meet human needs and wants. 22. 27. Occurs when the price is below the equilibrium level. 25. Subsidies reduce the cost of production or increase the benefit of . or computers 19. Examples include street lamps. sidewalks and national defense. Also called “excess demand”. for example. or a nation lives as measured by a the extent to which it meets it needs. Specialization when a nation or an individual worker focuses their work into one area where they have higher ability and a comparative advantage Stability 28. designed to limit foreign firms ability to satisfy demand and help domestic firms sell goods 23. Physical capital factor of production (or input into the process of production). buildings. 26. since they would be impossible to sell. government must provide public goods. in a world of limited resources. 29. 24. Standard of Living The level at which a person. Price the amount of money that has to be paid to acquire a given product 20. and its consumption by one individual prevents another individual from consuming it 21.18. a group. Private goods a product that must be purchased to be consumed. subsidy Payments made from the government to individuals or firms for the production or consumption of particular goods or services. private sector firms have little or no incentive to produce them. Because of these characteristics. Could be caused by a decrease in aggregate demand or in aggregate supply. Quota a limit on the amount of a good that a nation allows to enter their nation. when a government imposes a price ceiling in a market.

Tariff a tax placed on the sale of imported goods. Wants esires that can be satisfied by consuming a good. Substitution . 37. 30. 39. Tax revenues government income due to taxation 34. Traditional economy . Also called “excess supply”. trade – the process of one nation buying goods produced in another nation 35. for example. It is designed to make consumers prefer the goods made domestically and protect jobs 33. Surplus When the quantity supplied of a good is greater than the quantity demanded.consumption. or custom 36.The allocation of scarce resources (and just about everything else) from ritual. habit. 38. 31. A surplus will occur if the price in a market is greater than the equilibrium price. Voluntary exchange . and therefore lead to a greater equilibrium quantity in the market for the subsidized good. Complements 40. 32. service or leisure activity. Needs as goods or services that are required. Supply A schedule or curve showing the direct relationship between the quantity of output firms produce in a particular period of time and the various prices of the good.The process of willingly trading one item for another. due to a government price floor.