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ABDURRAHMAN YUSUF A
SYAMSUL
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ZAHRATUN JANNAH

SAMSAN TECH
24 HOUR
SOFTWARE
 Learning Activity

Ecomonic terms
STA R TED WI TH F

LOADING
 FACTOR COST
A measure of output reflecting the costs of the factors of production used, rather than market prices, which may
differ because of indirect tax and subsidy.

FACTORS OF PRODUCTION
The ingredients of economic activity: land, labour, capital and
enterprise.

FACTORY PRICES
The prices charged by producers to wholesalers and retailers. Because these prices are eventually passed on to the end
customer, changes in factory prices, also known as producer prices, can be a leading indicator of consumer price
inflation.

FAIR TRADE
Many politicians and ngos argue that free trade is not enough; it should also be fair. On the face of it, fairness is
self-evidently a good thing. However, fairness, in trade as in beauty, lies in the eye of the beholder.
 FEDERAL RESERVE
SYSTEM

America's central bank. Set up in 1913, and popularly known as the Fed, the system divides the United
States into 12 Federal Reserve districts, each with its own regional Federal Reserve Bank. These are
overseen by the Federal Reserve Board, consisting of seven governors based in Washington, DC.
Monetary policy is decided by its Federal Open Market Committee.

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 A place in which an above-average amount of financial business takes place. The big ones
are New York, London, Tokyo, and Frankfurt. Small ones such as Dublin, Bermuda,
FINANCIAL Luxembourg, and the Cayman Islands also play an important part in the global financial
CENTRE system. Globalization and the increase in electronic trading has raised concerns about
whether there will be as much need for financial centers in the 21st century as there was in
the 19th and 20th centuries. So far, the evidence suggests that the biggest, at least, will
remain important.

FINANCIAL
Certificate of ownership of a financial asset, such as a bond or a share.
INSTRUMENT

A middleman. An individual or institution that brings together investors (the source of

FINANCIAL funds) and users of funds (such as borrowers). May be increasingly at risk of
INTERMEDIARY disintermcdiation.
 FINANCIAL
SYSTEM
The firms and institutions that together make it possible for money to make the world go round. This includes financial
markets, securities exchanges, banks, pension funds, mutual funds, insurers, national regulators, such as the Securities and
Exchange Commission (SEC) in the United States, central banks, governments and multinational institutions, such as the IMF
and World Bank.

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 A favourite government policy in the Keynesian-Dominated 1950s and 1960s, involving frequent
adjustments to fiscal policy and/or monetary policy to alter the level of demand to keep the economy
growing at a steady rate. The trouble was and is, partly because of the inadequacies of economic
FINE TUNING forecasting, that these frequent adjustments were and are often mistaken, making the economy's
growth path more, rather than less, erratic. In the 1990s, fine tuning was increasingly shunned by
central banks and governments, which stopped trying to manage short-term demand and instead
aimed to pursue long-term macroeconomic goals, which required fewer adjustments to policy. Or so
they claimed. In practice, there continued to be some attempted fine tuning.

Since the 1960s, sophisticated economic theories of how firms work have been developed. These have
FIRMS examined why firms grow at different rates and tried to model the normal life cycle of a company, from
fast-growing start-up to lumbering mature business. The aim is to explain when it pays to conduct an
activity within a firm and when it pays to externalize it through short- or long-term arrangements with
outsiders, be the individuals, exchanges or other companies.

Game theory shows that being the first to enter a market or to introduce an innovation
FIRST-MOVER can be a huge advantage, not just because the first firm in can erect barriers to entry,
ADVANTAGE but also because potential rivals may be discouraged from committing the resources
necessary to compete successfully.
 FISCAL DRAG
Fiscal drag is the tendency of revenue from taxation to rise as a share of GDP in a growing economy. Fiscal
drag is an automatic stabilizer, as it acts naturally to keep demand stable.

FISCAL NEUTRALITY
When the net effect of taxation and public spending is neutral, neither stimulating nor dampening demand. The term
can be used to describe the overall stance of fiscal policy: a balanced budget is neutral, as total tax revenue equals
total public spending.

FISCAL POLICY
Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and
influence a nation's economy.

FIXED COSTS
Production costs that do not change when the quantity of output produced changes, for instance, the cost of renting
an office or factory space. Contrast with variable costs.
TERM
S
FLOTATION
Going public. When shares in a company are sold to the public for the first time
through an initial public offering. The number of shares sold by the original
private investors is called the "float". Also, when a bond issue is sold in the

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financial markets.

FORECASTING
Best guesses about the future. Despite complex economic theories and cutting-edge
econometrics, the forecasts economists make are often badly wrong. Indeed,
following economic forecasts has been likened to driving a car blindfolded, following
directions given by a person who is looking out of the back window. Some of the
inaccuracies in forecasts reflect badly designed models; often, the problem is that
the future actually is unpredictable. Maybe it would be better to take the advice of
Sam Goldwyn, a movie mogul, "Never prophesy, especially about the future."
 FOREIGN DIRECT INVESTMENT
Investing directly in production in another country, either by buying a company there or establishing
new operations of an existing business. This is done mostly by companies as opposed to financial
institutions, which prefer indirect investment abroad such as buying small parcels of a country's supply
of shares or bonds.

FREE RIDING
Getting the benefit of a good or service without paying for it, not necessarily illegally. This may be
possible because certain types of goods and services are actually hard to charge for-a firework display,
for instance.
 FRICTION
AL
UNEMPLOY
That part of the jobless total

FREE MENT
caused by people simply
changing jobs and taking
their time about it, because
TRADE they are spending time on job
search or are taking a break
before starting with a new
employer. There is likely to
be some frictional
The ability of people unemployment even
to undertake economic employment, because most
transactions with people change jobs from time
people in other to time. when there is
countries free from technically full
any restraints imposed
by governments or
other regulators.
 FRIEDMAN, MILTON

Loved and loathed; perhaps the most influential economist of his generation. He won the Nobel Prize for economics in 1976, one of
many Chicago school economists to receive that honour. He has been recognized for his achievements in the study of consumption,
monetary history and theory, and for demonstrating how complex policies aimed at economic stabilization can be. A fierce
advocate of free markets, Mr Friedman argued for monetarism at a time when Keynesian policies were dominant. Unusually, his
work is readily accessible to the layman. He argues that the problems of inflation and short-run unemployment would be solved if
the Federal Reserve had to increase the money supply at a constant rate.

Like Adam Smith and Friedrich Hayek, who inspired him, Mr Friedman praises the free market not just for its economic efficiency
but also for its moral strength. For him, freedom--economic, political and civil-is an end in itself, not a means to an end. It is what
makes life worthwhile.

He has said he would prefer to live in a free country, even if it did not provide a higher standard of living, than a country run by an
alternative regime. However, the likelihood of a free country being poorer than an unfree one strikes him as implausible; the
economic as well as the moral superiority of free markets is, he has declared, "now proven".

An adviser to Richard Nixon, he was disappointed when the president went against the spirit of monetarism in 1971 by asking him
to urge the chairman of the Fed to increase the money supply more rapidly. The 1980s economic policies of Margaret Thatcher and
General Pinochet were inspired- -and defended-by Mr Friedman. However, in 2003, he admitted that one of those policies, the
targeting of the money supply, had "not been a success" and that he doubted he would "as of today push it as hard as I once did".
TERM
S
FULL EMPLOYMENT
Jobs for all that want them. This does not mean zero unemployment because at
any point in time some people do not want to work. Also, because some people
are always between jobs, there will usually be some frictional unemployment. Full

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employment means that everyone who wants work and is willing to work at the
market wage is in work. Most governments aim to achieve full employment,
although nowadays they rarely try to lower unemployment below the nairu: the
lowest jobless rate consistent with stable, low inflation.

FUNGIBLE
You can't tell them apart. Something is fungible when any one single
specimen is indistinguishable from any other. Somebody who is owed $1
does not care which particular dollar he gets. Anything that people want
to use as money must be fungible, whether it be gold bars, beads or shells.
TH
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