Economics ch. 13-17 - Assignment Essays

question

Ability-to-pay principle

answer

Principle of taxation in which those with higher incomes pay more taxes than those with lower incomes, regardless of the number of government services they use

question

Aggregate Demand

answer

Total quantity of goods and services in the entire economy that all citizens will demand at any single time.

question

Aggregate Demand Curve

answer

A graphed line showing the relationship between the aggregate quantity demanded and the average of all prices as measured by the implicit GDP price deflator

question

Aggregates

answer

Total; Summation of all the individual parts in the economy.

question

Aggregate Supply

answer

Real domestic output of producers based on the rise and fall of the price level.

question

Aggregate Supply Curve

answer

A graphed line showing the relationship between the aggregate quantity supplied and the average of all prices as measured by the implicit GDP price deflator

question

Automated Teller Machines (ATMs)

answer

Units that allow consumers to do their banking without the help of a teller

question

Barter

answer

Exchange of goods and services for other goods and services.

question

Base Year

answer

Year used as a point of comparison for other years in a series of statistics.

question

Benefits-received Principle

answer

System of taxation in which those who use a particular government service support it with taxes in proportion to the benefit they receive; those who do not use a service do not pay taxes for it

question

Budget Deficit

answer

Situation when the amount of government spending exceeds its receipts during the fiscal year.

question

Budget Surplus

answer

Situation when the amount of government receipts is larger than its expenditures during the fiscal year.

question

Business Cycle

answer

Irregular changes in the level of total output measured by real GDP.

question

Business Fluctuations

answer

Ups and downs in an economy.

question

Checkable Deposits

answer

Money deposited in a bank that can be withdrawn at any time by presenting a check.

question

Check Clearing

answer

Method by which a check that has been deposited in one institution is transferred to the issuer's depositor institution.

question

Checking Account

answer

Account in which deposited money can be withdrawn at any time by writing a check.

question

Circular Flow of Income

answer

Economic model that pictures income as flowing continuously between businesses and consumers.

question

Coincident Indicators

answer

Economics indicators that usually change at the same time as changes in overall business activity.

question

Commodity Money

answer

A medium of exchange such as cattle or gems that has values as a commodity or good aside from its value as money.

question

Consumer Price Index (CPI)

answer

Measure of change in price over time of specific group of goods and services used by the average household.

question

Contraction

answer

Part of the business cycle during which economic activity is slowing down, leading to a trough.

question

Cost-push Inflation

answer

Theory that the wage demands of labor unions and the excessive profit motive of large corporations push up prices, resulting in stagflation.

question

Debit Card

answer

Device used to make cashless purchases; money is electronically withdrawn from the consumer's checkable account and transferred directly to the store's bank account

question

Deficit Financing

answer

Government policy of spending more money than it is able to bring in through revenues.

question

Deflation

answer

Prolonged decline in the general price level of goods and services.

question

Demand-pull Inflation

answer

Theory that prices rise as the result of excessive business and consumer demand; demand increases faster than total supply, resulting in shortages that lead to higher prices.

question

Depreciation

answer

Loss of value because of wear and tear to durable goods and capital goods; fall in the price of currency through the action of supply and demand.

question

Depression

answer

Major slowdown of economic activity during which millions are out of work, many businesses fail, and the economy operates at far below capacity.

question

Discount Rate

answer

Interest rate that the Fed charges on loans to member banks.

question

Disposable Personal Income (DI)

answer

Income remaining for a person to spend or save after all taxes have been paid.

question

Economic Indicators

answer

Statistics that measure variables in the economy.

question

Electronic Funds Transfer (EFT)

answer

System of putting onto computers all the various banking functions that in the past were handled on paper.

question

Expansion (Recovery)

answer

Part of the business cycle in which economic activity slowly increases.

question

Externalities

answer

Economic side effects or by-products that affect an uninvolved third party; can be negative or positive.

question

Fed

answer

The Federal Reserve System created by Congress in 1913 as the nation's central banking organization.

question

Federal Funds Rate

answer

Interest rate that banks charge each other on loans (usually overnight).

question

Federal Open Market Committee (FOMC)

answer

12-member committee in the Federal Reserve System that meets 8 times a year to decide the course of action that the Fed should take to control the money supply.

question

Fiat Money

answer

Money that has value because a government fiat, or order, has established it as acceptable for payment of debts.

question

Fiscal Policy

answer

Federal government's use of taxation and spending policies to affect overall business activity.

question

Fiscal Year

answer

Year by which accounts are kept; for the federal government, October 1 to September 30 of the next year.

question

Fractional Reserve Banking

answer

System in which only a fraction of the deposits in a bank is kept on hand, or in reserve; the remainder is available to lend to borrowers or is otherwise invested.

question

Full Employment

answer

Condition of the economy when the unemployment rate is lower than a certain percentage established by economists' studies.

question

GDP Price Deflator

answer

Price index that removes the effect of inflation from GDP so that the overall economy in one year can be compared to another year

question

Gross Domestic Product (GDP)

answer

Total dollar value of all final goods and services produced in a nation in a single year.

question

Income Redistribution

answer

Government activity that takes income from some people through taxation and uses it to help citizens in need.

question

Inflation

answer

Prolonged rise in the general price level of goods and services.

question

Innovation(s)

answer

Development of new products, systems, or processes that have wide-ranging effects.

question

Lagging Indicators

answer

Indicators that seem to lag behind changes in overall business activity.

question

Leading Indicators

answer

Statistics that point to what will happen in the economy.

question

Legal Tender

answer

Money that by law must be accepted for payment of public and private debts.

question

Loose Money Policy

answer

Monetary policy that makes credit inexpensive and abundant, possibly leading to inflation.

question

answer

Narrowest definition of the money supply; consists of moneys that can be spent immediately and against which checks can be written.

question

answer

Broader definition of the money supply; includes all of M1, plus such near moneys as money market mutual fund balances, certificates of deposit, and Eurodollars.

question

Market Basket

answer

Representative group of goods and services used to compile the consumer price index.

question

Medicaid

answer

State and federal public-assistance program that helps pay health care costs for low-income and disabled persons.

question

Medicare

answer

Government program that provides health care for the aged.

question

Medium of Exchange

answer

Use of money in exchange for goods or services.

question

Monetarism

answer

Theory that deals with the relationship between the amount of money the Fed places in circulation and the level of activity in the economy.

question

Monetarists

answer

Supporters of the theory of monetarism, often linked with Milton Friedman.

question

Monetary Policy

answer

Policy that involves changing the rate of growth of the supply of money in circulation in order to affect the cost and availability of credit.

question

Monetary Rule

answer

Monetarists' belief that the Fed should allow the money supply to grow at a smooth, consistent rate per year and not use monetary policy to stimulate or slow the economy.

question

Money

answer

Anything customarily used as a medium of exchange, a unit of accounting, and a store of value.

question

National Debt

answer

Total amount of outstanding debt for the federal government.

question

National Income (NI)

answer

Total income earned by everyone in the economy.

question

National Income Accounting

answer

Measurement of the national economy's performance, dealing with the overall economy's output and income.

question

Near Moneys

answer

Assets, such as savings accounts, that can be turned into money relatively easily without the risk of loss of value.

question

Net Domestic Product (NDP)

answer

Value of the nation's total output (GDP) minus the total value lost through depreciation on machines and equipment.

question

Net Exports

answer

Difference between what the nation sells other countries and what it buys from other countries.

question

Open-market Operations

answer

Buying and selling of United States securities by the Fed to affect the money supply.

question

Overdraft Checking

answer

Checking account that allows a customer to write a check for more money than exists in his or her account.

question

Peak (Boom)

answer

Period of prosperity in a business cycle in which economic activity is at its highest point.

question

Personal Income (PI)

answer

Total income that individuals receive before personal taxes are paid.

question

Prime Rate

answer

Rate of interest that banks charge on loans to their business customers.

question

Producer Price Index (PPI)

answer

Measure of the change in price over time that United States producers charge for their goods and services.

question

Progressive Tax

answer

Tax that takes a larger percentage of higher incomes than lower incomes; justified on the basis of the ability-to-pay principle.

question

Proportional Tax

answer

Tax that takes the same percentage of all incomes; as income rises, the amount of tax paid also rises.

question

Public-assistance Programs (Welfare)

answer

Government programs that make payments to citizens based on need.

question

Public Goods

answer

Goods or services that government supplies to its citizens; can be used by many individuals at the same time without reducing the benefit each person receives.

question

Public-works Projects

answer

Publicly used facilities, such as schools and highways, built by federal, state, or local governments with public money.

question

Purchasing Power

answer

The real goods and services that money can buy; determines the value of money.

question

Real GDP

answer

GDP that has been adjusted for inflation by applying the price deflator.

question

Recession

answer

Part of the business cycle in which the nation's output (real GDP) does not grow for at least six months.

question

Regressive Tax

answer

Tax that takes a larger percentage of lower incomes than higher incomes.

question

Representative Money

answer

Money that is backed by an item of value, such as gold or silver.

question

Reserve Requirements

answer

Regulations set by the Fed requiring banks to keep a certain percentage of their deposits as cash in their own vaults or as deposits in their Federal Reserve district bank.

question

Social Insurance Programs

answer

Government programs that pay benefits to retired and disabled workers, their families, and the unemployed; financed by taxes paid into programs by workers and employers.

question

Social Security

answer

Federal program that provides monthly payments to people who are retired or unable to work.

question

Stabilization Policies

answer

Attempts by the federal government to keep the economy healthy; includes monetary and fiscal policies.

question

Stagflation

answer

Combination of inflation and low economic activity.

question

Store of Value

answer

Use of money to store purchasing power for later use.

question

Supplemental Security Income

answer

Federal programs that include food stamps and payments to the aged, blind, and disabled.

question

Temporary Assistance for Needy Families

answer

State-run public-assistance program that provides assistance and work opportunities to needy families.

question

Thrift Institutions

answer

Mutual savings banks, S&Ls and credit unions that offer many of the same services as commercial banks.

question

Tight Money Policy

answer

Monetary policy that makes credit expensive and in short supply in an effort to slow the economy.

question

Time Lags

answer

Periods between the time fiscal policy is enacted and the time it becomes effective.

question

Transfer Payments

answer

Welfare and other supplementary payments, such as unemployment compensation, Social Security, and Medicaid, that a state or the federal government makes to individuals.

question

Trough

answer

Lowest part of the business cycle in which the downward spiral of the economy levels off.

question

Underground Economy

answer

Transactions by people who do not follow federal and state laws with respect to reporting earnings.

question

Unemployment Rate

answer

Percentage of the civilian labor force that is unemployed but is actively looking for work.

question

Unit of Accounting

answer

Use of money as a yardstick for comparing the values of goods and service in relation to one another.

question

Workers' Compensation

answer

Government program that extends payments for medical care to workers injured on the job.

1 of 102

question

Ability-to-pay principle

answer

Principle of taxation in which those with higher incomes pay more taxes than those with lower incomes, regardless of the number of government services they use

question

Aggregate Demand

answer

Total quantity of goods and services in the entire economy that all citizens will demand at any single time.

question

Aggregate Demand Curve

answer

A graphed line showing the relationship between the aggregate quantity demanded and the average of all prices as measured by the implicit GDP price deflator

question

Aggregates

answer

Total; Summation of all the individual parts in the economy.

question

Aggregate Supply

answer

Real domestic output of producers based on the rise and fall of the price level.

question

Aggregate Supply Curve

answer

A graphed line showing the relationship between the aggregate quantity supplied and the average of all prices as measured by the implicit GDP price deflator

question

Automated Teller Machines (ATMs)

answer

Units that allow consumers to do their banking without the help of a teller

question

Barter

answer

Exchange of goods and services for other goods and services.

question

Base Year

answer

Year used as a point of comparison for other years in a series of statistics.

question

Benefits-received Principle

answer

System of taxation in which those who use a particular government service support it with taxes in proportion to the benefit they receive; those who do not use a service do not pay taxes for it

question

Budget Deficit

answer

Situation when the amount of government spending exceeds its receipts during the fiscal year.

question

Budget Surplus

answer

Situation when the amount of government receipts is larger than its expenditures during the fiscal year.

question

Business Cycle

answer

Irregular changes in the level of total output measured by real GDP.

question

Business Fluctuations

answer

Ups and downs in an economy.

question

Checkable Deposits

answer

Money deposited in a bank that can be withdrawn at any time by presenting a check.

question

Check Clearing

answer

Method by which a check that has been deposited in one institution is transferred to the issuer's depositor institution.

question

Checking Account

answer

Account in which deposited money can be withdrawn at any time by writing a check.

question

Circular Flow of Income

answer

Economic model that pictures income as flowing continuously between businesses and consumers.

question

Coincident Indicators

answer

Economics indicators that usually change at the same time as changes in overall business activity.

question

Commodity Money

answer

A medium of exchange such as cattle or gems that has values as a commodity or good aside from its value as money.

question

Consumer Price Index (CPI)

answer

Measure of change in price over time of specific group of goods and services used by the average household.

question

Contraction

answer

Part of the business cycle during which economic activity is slowing down, leading to a trough.

question

Cost-push Inflation

answer

Theory that the wage demands of labor unions and the excessive profit motive of large corporations push up prices, resulting in stagflation.

question

Debit Card

answer

Device used to make cashless purchases; money is electronically withdrawn from the consumer's checkable account and transferred directly to the store's bank account

question

Deficit Financing

answer

Government policy of spending more money than it is able to bring in through revenues.

question

Deflation

answer

Prolonged decline in the general price level of goods and services.

question

Demand-pull Inflation

answer

Theory that prices rise as the result of excessive business and consumer demand; demand increases faster than total supply, resulting in shortages that lead to higher prices.

question

Depreciation

answer

Loss of value because of wear and tear to durable goods and capital goods; fall in the price of currency through the action of supply and demand.

question

Depression

answer

Major slowdown of economic activity during which millions are out of work, many businesses fail, and the economy operates at far below capacity.

question

Discount Rate

answer

Interest rate that the Fed charges on loans to member banks.

question

Disposable Personal Income (DI)

answer

Income remaining for a person to spend or save after all taxes have been paid.

question

Economic Indicators

answer

Statistics that measure variables in the economy.

question

Electronic Funds Transfer (EFT)

answer

System of putting onto computers all the various banking functions that in the past were handled on paper.

question

Expansion (Recovery)

answer

Part of the business cycle in which economic activity slowly increases.

question

Externalities

answer

Economic side effects or by-products that affect an uninvolved third party; can be negative or positive.

question

Fed

answer

The Federal Reserve System created by Congress in 1913 as the nation's central banking organization.

question

Federal Funds Rate

answer

Interest rate that banks charge each other on loans (usually overnight).

question

Federal Open Market Committee (FOMC)

answer

12-member committee in the Federal Reserve System that meets 8 times a year to decide the course of action that the Fed should take to control the money supply.

question

Fiat Money

answer

Money that has value because a government fiat, or order, has established it as acceptable for payment of debts.

question

Fiscal Policy

answer

Federal government's use of taxation and spending policies to affect overall business activity.

question

Fiscal Year

answer

Year by which accounts are kept; for the federal government, October 1 to September 30 of the next year.

question

Fractional Reserve Banking

answer

System in which only a fraction of the deposits in a bank is kept on hand, or in reserve; the remainder is available to lend to borrowers or is otherwise invested.

question

Full Employment

answer

Condition of the economy when the unemployment rate is lower than a certain percentage established by economists' studies.

question

GDP Price Deflator

answer

Price index that removes the effect of inflation from GDP so that the overall economy in one year can be compared to another year

question

Gross Domestic Product (GDP)

answer

Total dollar value of all final goods and services produced in a nation in a single year.

question

Income Redistribution

answer

Government activity that takes income from some people through taxation and uses it to help citizens in need.

question

Inflation

answer

Prolonged rise in the general price level of goods and services.

question

Innovation(s)

answer

Development of new products, systems, or processes that have wide-ranging effects.

question

Lagging Indicators

answer

Indicators that seem to lag behind changes in overall business activity.

question

Leading Indicators

answer

Statistics that point to what will happen in the economy.

question

Legal Tender

answer

Money that by law must be accepted for payment of public and private debts.

question

Loose Money Policy

answer

Monetary policy that makes credit inexpensive and abundant, possibly leading to inflation.

question

answer

Narrowest definition of the money supply; consists of moneys that can be spent immediately and against which checks can be written.

question

answer

Broader definition of the money supply; includes all of M1, plus such near moneys as money market mutual fund balances, certificates of deposit, and Eurodollars.

question

Market Basket

answer

Representative group of goods and services used to compile the consumer price index.

question

Medicaid

answer

State and federal public-assistance program that helps pay health care costs for low-income and disabled persons.

question

Medicare

answer

Government program that provides health care for the aged.

question

Medium of Exchange

answer

Use of money in exchange for goods or services.

question

Monetarism

answer

Theory that deals with the relationship between the amount of money the Fed places in circulation and the level of activity in the economy.

question

Monetarists

answer

Supporters of the theory of monetarism, often linked with Milton Friedman.

question

Monetary Policy

answer

Policy that involves changing the rate of growth of the supply of money in circulation in order to affect the cost and availability of credit.

question

Monetary Rule

answer

Monetarists' belief that the Fed should allow the money supply to grow at a smooth, consistent rate per year and not use monetary policy to stimulate or slow the economy.

question

Money

answer

Anything customarily used as a medium of exchange, a unit of accounting, and a store of value.

question

National Debt

answer

Total amount of outstanding debt for the federal government.

question

National Income (NI)

answer

Total income earned by everyone in the economy.

question

National Income Accounting

answer

Measurement of the national economy's performance, dealing with the overall economy's output and income.

question

Near Moneys

answer

Assets, such as savings accounts, that can be turned into money relatively easily without the risk of loss of value.

question

Net Domestic Product (NDP)

answer

Value of the nation's total output (GDP) minus the total value lost through depreciation on machines and equipment.

question

Net Exports

answer

Difference between what the nation sells other countries and what it buys from other countries.

question

Open-market Operations

answer

Buying and selling of United States securities by the Fed to affect the money supply.

question

Overdraft Checking

answer

Checking account that allows a customer to write a check for more money than exists in his or her account.

question

Peak (Boom)

answer

Period of prosperity in a business cycle in which economic activity is at its highest point.

question

Personal Income (PI)

answer

Total income that individuals receive before personal taxes are paid.

question

Prime Rate

answer

Rate of interest that banks charge on loans to their business customers.

question

Producer Price Index (PPI)

answer

Measure of the change in price over time that United States producers charge for their goods and services.

question

Progressive Tax

answer

Tax that takes a larger percentage of higher incomes than lower incomes; justified on the basis of the ability-to-pay principle.

question

Proportional Tax

answer

Tax that takes the same percentage of all incomes; as income rises, the amount of tax paid also rises.

question

Public-assistance Programs (Welfare)

answer

Government programs that make payments to citizens based on need.

question

Public Goods

answer

Goods or services that government supplies to its citizens; can be used by many individuals at the same time without reducing the benefit each person receives.

question

Public-works Projects

answer

Publicly used facilities, such as schools and highways, built by federal, state, or local governments with public money.

question

Purchasing Power

answer

The real goods and services that money can buy; determines the value of money.

question

Real GDP

answer

GDP that has been adjusted for inflation by applying the price deflator.

question

Recession

answer

Part of the business cycle in which the nation's output (real GDP) does not grow for at least six months.

question

Regressive Tax

answer

Tax that takes a larger percentage of lower incomes than higher incomes.

question

Representative Money

answer

Money that is backed by an item of value, such as gold or silver.

question

Reserve Requirements

answer

Regulations set by the Fed requiring banks to keep a certain percentage of their deposits as cash in their own vaults or as deposits in their Federal Reserve district bank.

question

Social Insurance Programs

answer

Government programs that pay benefits to retired and disabled workers, their families, and the unemployed; financed by taxes paid into programs by workers and employers.

question

Social Security

answer

Federal program that provides monthly payments to people who are retired or unable to work.

question

Stabilization Policies

answer

Attempts by the federal government to keep the economy healthy; includes monetary and fiscal policies.

question

Stagflation

answer

Combination of inflation and low economic activity.

question

Store of Value

answer

Use of money to store purchasing power for later use.

question

Supplemental Security Income

answer

Federal programs that include food stamps and payments to the aged, blind, and disabled.

question

Temporary Assistance for Needy Families

answer

State-run public-assistance program that provides assistance and work opportunities to needy families.

question

Thrift Institutions

answer

Mutual savings banks, S&Ls and credit unions that offer many of the same services as commercial banks.

question

Tight Money Policy

answer

Monetary policy that makes credit expensive and in short supply in an effort to slow the economy.

question

Time Lags

answer

Periods between the time fiscal policy is enacted and the time it becomes effective.

question

Transfer Payments

answer

Welfare and other supplementary payments, such as unemployment compensation, Social Security, and Medicaid, that a state or the federal government makes to individuals.

question

Trough

answer

Lowest part of the business cycle in which the downward spiral of the economy levels off.

question

Underground Economy

answer

Transactions by people who do not follow federal and state laws with respect to reporting earnings.

question

Unemployment Rate

answer

Percentage of the civilian labor force that is unemployed but is actively looking for work.

question

Unit of Accounting

answer

Use of money as a yardstick for comparing the values of goods and service in relation to one another.

question

Workers' Compensation

answer

Government program that extends payments for medical care to workers injured on the job.

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