E-Team Intermediate Glossary

INELASTIC SUPPLY
supply that is relatively unresponsive to changes in price; the percentage change in quantity supplied by producers is greater than the percentage change in price
INFLATION
a general increase in the price of goods and services; may be caused by an increase in production costs or increases in demand for goods and services
INHERITANCE
property or money received from an estate or through a will
INNOVATION
a new and better way to do something
INPUT
resources used to produce a good or service; also called factor input or factor of production
INSTALLMENT
required payments of equal amounts, every month until the loan is paid in full
INSURANCE
protection against the risk of large losses; purchased by paying a relatively small price called the premium; types include automobile, homeowners, life, health, disability to protect against cost associated with losses such as auto accidents, damage to homes, death or illness
INTERDEPENDENCE
dependence on others for goods and services; occurs as a result of specialization; two or more persons, regions or countries that depend upon each other to supply goods and/or services to satisfy their wants and needs; increases as division of labor and/or specialization increase Example: Wisconsin specializes in the production of cheese while Florida specializes in the production of citrus products. Since neither state wants to exist solely on its own output, they trade and become interdependent
INTEREST
the amount of money paid to a customer by the bank for keeping the customer’s money; the amount of money paid to the bank by the customer when the customer borrows money from the bank; also called carrying charge or finance charge
INTEREST RATE
interest payments expressed as a percentage of principal amount
INTERMEDIATE GOODS
goods that will be further processed for resale; Example: Sheet metal and glass are intermediate goods by the auto industry and processed further into automobiles
INTERNATIONAL TRADE
exchange of goods and services that takes place between nations
INVENTORY
a supply of a product or products that a business has “on hand”
INVERSELY RELATED
in a given situation two factors will respond in the opposite direction to one another; Example: When the price of coffee went up, the amount of coffee consumed went down
INVESTMENT
the use of money to produce income or profit
JOINT ACCOUNT
a bank account shared by two or more people who are official signers on the account
LABOR
one factor of production; the human input into the production process; workers hired by a business whose efforts are directed toward production of goods and/or services in exchange for which they are paid a wage or salary; Both physical and mental effort are considered
LABOR FORCE
the total of all people over 16, working or looking for work
LABOR UNION
an association of workers who are organized to bargain collectively with employers
LAISSEZ FAIRE
a policy that calls for government not intervening in business or economic activities; French term literally meaning “let do” or “allow to act”
LAND
one factor of production; the natural resources available for production; includes real estate (earth) and all natural resources such as mineral deposits, water and timber
LAW OF INCREASING COSTS
economic principle stating that the opportunity cost of additional units of a good tend to increase as the society attempts to produce more of the good
LENDER
person or financial institution that loans money to another
LIMITED RESOURCES
see scarce resources
LIQUIDITY
ability to convert an asset into cash easily and quickly
LOCAL GOVERNMENT
see city government
LOSS
negative difference between cost and sale price; see profit
MANAGEMENT
1. the process of organizing and utilizing resources to produce goods and/or services;
2. the group or individual in a business that does the organizing of resources to produce goods and/or services
MANAGERIAL ABILITY
the skill needed to organize and utilize resources, including human resources, to produce goods and/or services; see entrepreneurship
MARGINAL UTILITY
the extra utility or satisfaction one receives from consuming one more unit of a good or service
MARKET
a specified category of potential buyers; any setting where buyers and sellers exchange goods, services, resources and currencies
MARKET CLEARING PRICE
the price at which the quantity that people are willing to buy is equal to the quantity sellers are willing to offer that is, there is neither shortage nor surplus ; see equibilirium price
MARKET ECONOMY
an economic system where most goods and services are exchanged through private transactions by private household and businesses; Buyers and sellers making exchanges in private markets determine prices
MARKET EQUILIBRIUM
situation occurring when there is equality between quantities supplied and demanded and the price at which goods are being exchanged has no tendency to change
MARKET PRICE
the price at which a good or service is selling in the open market; also called market value
MARKET SYSTEM
a method of coordinating economic activity that relies on the individual choices of competing buyers and
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SALARY
a fixed wage paid periodically for regular work Example: My salary is $400 per week. see wage
SALE
the transfer of ownership rights or title to property or goods and services
SALES TAX SAVE
taxes paid on the goods and services people buy the opposite of spend
SAVINGS
the portion of (after tax) income that is not spent for consumer goods or services
SAVINGS ACCOUNT
an account in a financial institution where a person deposits that part of his/her income which he or she chooses not to spend at the present time; These institutions usually pay interest on money in savings account.
SCARCE RESOURCES
resources (used to produce goods and services) that are short in supply, relative to unlimited human wants
SCARCITY
the condition of not being able to have all the goods and services that one wants
SCARCITY PROBLEM
Because resources are limited, relative to human wantsand needs, we have to make choices. Example: Shall we use our limited supply of oil for gasoline (transportation) or for producing heat for homes and power for factories?
SEASONAL FLUCTUATIONS
regular and predictable variations in the level of some economic activity over the period of a year; also called seasonal variations; Example: Youth unemployment is seasonally high during the summer.
SECURITIES
stocks and bonds collectively
SELLING PRICE
the price asked for and paid for a good or service in the market
SERVICE CHARGE
an additional cost or fee for the privilege of purchasing a good or service on credit; see minimum balance
SERVICES
activities that can satisfy people’s wants or needs
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STOCK CERTIFICATE
a piece of paper that represents partial ownership of a corporation
STOCK MARKET
marketplace where stocks are bought and sold
STORE OF VALUE
see functions of money
STRIKE
action used by labor and labor unions in which workers voluntarily stop working to bring pressure on their employers to meet their demands.
ECONOMIC EFFICIENCY
producing some quantity of output at least cost, in terms of alternative output sacrificed
ECONOMIC GROWTH
an increase in a nation’s total output of goods and services; usually measured in per capita terms
ECONOMIC PROFIT
excess of revenue over all costs of production, including a normal profit; the return a business makes on invested capital, minus the cost of capital, times the amount of invested capital; see normal profit
ECONOMIC QUESTIONS
the four questions that every society must answer as it allocates its scarce resources to meet the unlimited wants of its people: WHAT will be produced? (composition of output) HOW will it be produced? (productive methods) FOR WHOM is the output intended? (allocation of final goods and services) HOW MUCH will be produced (How large is the GDP? How large should it be?) The first three are microeconomic questions and the last is the macroeconomic question. see microeconomics and macroeconomics
ECONOMIC RENT
payment to a factor of production in excess of the minimum required to keep that factor in the particular line of production
ECONOMIC STABILITY
1. the absence of large changes in economic activity 2. a situation with steady growth of production, employment and standard of living with no change in the price level
ECONOMIC SYSTEMS
the way a society organizes the production, consumption and distribution of goods and services
ECONOMICAL
not wasteful, particularly of resources such as money
ECONOMICS
the study of how people make choices about the best use of scarce resources
EFFICIENT
making the best possible use of scarce resources; producing the largest output with the least input
ELASTIC DEMAND
demand that is relatively responsive to changes in price; occurs when the percentage change in quantity demanded by buyers is greater than the percentage in change in price
ELASTIC SUPPLY
supply that is relatively responsive to changes in price; occurs when the percentage change in quantity that producers are willing to supply is more than the percentage change in price
ELASTICITY OF DEMAND
the degree of consumer responsiveness to changes in price; Demand is elastic when a change in price results in a relatively greater (more than proportional) change in the quantity of a good that people will buy.
ELASTICITY OF SUPPLY
the degree of sellers’ responsiveness to changes in prices; Supply is elastic when a change in price results in a relatively greater (more than proportional) change in the quantity offered for sale.
EMBARGO
a government prohibition against the shipment of certain products to a particular country for economic or political reasons; a government order imposing a trade barrier
EMERGENCY
a sudden, urgent, unexpected occurrence requiring immediate activity (response)
ENERGY
something that can produce heat, light and/or motion
ENTREPRENEUR
one who organizes and manages resources—including labor—to produce goods and/or services and who assumes the risks of a business for the sake of the possible profit
ENTREPRENEURSHIP
assuming the risks of owning your own business; one of the factors of production; see factors of production and managerial ability
EQUILIBRIUM PRICE
the price at which the quantity demanded by buyers equals the quantity supplied by sellers; see market clearing price
EURO
the basic monetary unit of most members of the European Union (introduced in 1999)
EUROPEAN UNION
family of democratic European countries, committed to working together for peace and prosperity; In the early years, much of the co-operation between EU countries was about trade and the economy, but now the EU also deals with many other subjects of direct importance for our everyday life. The historical roots of the European Union lie in the Second World War. May 9 1950 is the “birthday” of what is now the EU and is celebrated annually as Europe Day. Initially, the EU consisted of six countries: Belgium, Germany, France, Italy, Luxembourg and the Netherlands. Denmark, Ireland and the United Kingdom joined in 1973, Greece in 1981, Spain and Portugal in 1986, Austria, Finland and Sweden in 1995. In 2004 the biggest ever enlargement takes place with 10 new countries joining.
EXCHANGE
trading a good or service for another good or service or for money; may be accomplished with or without money; see barter and trade
EXCHANGE RATE
1. the price of currency of one country in terms of the currency of another country; 2. the rate at which one currency can be exchanged for the currency of another country; The rate of exchange can be used to convert prices from one currency standard to another.
EXPENDITURES
the outlays of cash in a given period; distinguished from costs which include items not involving current cash outlays
EXPLICIT COSTS
costs requiring cash outlays payable to persons outside the firm
EXPORT
selling our country’s products to other nations; the item being sold
EXTERNAL BENEFITS
benefits accruing to persons outside the market transaction; also called an external economy or spillover benefit; Example: A large tree in your yard shades the sidewalk, a benefit to the entire neighborhood.
EXTERNAL COSTS
costs imposed on persons who are not involved in the production or use of a good or service; sometimes called a spillover cost or external diseconomy; Example: Air pollution from a factory is a cost imposed on everyone in the vicinity.
EXTERNAL DISECONOMY
see external cost
EXTERNAL ECONOMY
see external benefit
EXTERNALITIES
effects, good or bad, on parties not directly involved in the production or use of a good or service
FACTOR INPUTS
land, labor, capital; also called resources; see factors of production
FACTOR PAYMENTS
payments made to the owners of the factors of production—wages to labor; rent to owners of land or capital goods; interest to those who have loaned the money to buy capital goods or land; and profit to the owners of the business
FACTORS OF PRODUCTION
resources used by businesses to produce goods and services; The four are land, labor, capital and entrepreneurship or managerial ability.
FDIC
Federal Deposit Insurance Corporation – the federal government agency that insures bank depositors’ accounts FICA Federal Insurance Contributions Act—name of the
FEDRAL COMMUNICATION COMMISION
the federal agency that regulates interstate communications including the right to operate radio and TV stations
FEDERAL GOVERNMENT
the government of a nation; Example: the government of the United States; see government
FEDERAL GOVERNMENT
the government of a nation; Example: the government of the United States; see government
FEDERAL RESERVE NOTE
paper currency; printed and distributed by the Federal Reserve Bank of the United States the value of which is guaranteed by the US government
FEDERAL RESERVE SYSTEM
a nationwide network of 12 banks, controlled by the Federal Reserve Board (the Fed), which do not deal with the public but implement Federal Reserve policies; They act as depositories for member banks.
FTC
Federal Trade Commission—the federal government agency charged with maintaining competition by preventing “unfair competition” or the development of monopolies
FEE
a charge to the customer by the bank for a service such as writing a check or using an ATM machine
REAL GDP
the gross domestic product expressed in dollars of a constant value; This calculation allows GDP of various years to be compared without the distortion of inflation or deflation.
REAL INCOME
purchasing power of money income; the quantity of goods and services that can be bought with money income; see money income Note: If one’s money income doubles and the prices double at the same time, real income has not changed.
REAL VALUE OF MONEY
buying power
REAL VS. NOMINAL
MEASUREMENT
Nominal values are measured using current market MEASUREMENT prices whereas real values are nominal values adjusted for the effects of inflation or deflation.
REAL WAGE
see real income
RECESSION
a contraction in the economy; a reduction in real GDP over at least 2 quarters of the year
REGRESSIVE TAX
a tax that takes a larger percentage of the income of low-income people than of high-income people; Example: People with low incomes pay a higher percentage of their income in sales taxes than do those with high incomes.
REGULATORY AGENCY
a government agency responsible for preparing and administering government regulations; may also be responsible for research on changing conditions in their appointed area, for suggesting new legislation, for setting standards of compliance and for determining violations and setting penalties; may be administered by either elected or appointed officials
RENEWABLE RESOURCES
natural resources that are not used up in consumption (solar energy, wind or wave power) or that reproduce themselves, wholly or in part (timber)
RENT
1. money payments for the use of a house, land or some other property or space; 2. payment to those who supply the factor of production, land. 3. return to a fixed factor of production
TRADITION DIRECTED ECONOMY
a method of coordinating economic activity that relies on generally accepted historical practices, beliefs, customs and religious traditions to guide economic choices
TRANSFER PAYMENTS
other payments to a person that are not payments for the use of a resource in production; Examples: social security, welfare payments
TRANSPORTATION
the act of moving goods and services from one geographic location to another
TRUTH IN LENDING LAW
a federal law that requires creditors (lenders) to tell the annual percentage rate, finance charge and deferred payments for an item purchased on credit; also called Regulation Z
UNEMPLOYMENT
the situation in which people are willing and able to work at current wages, but do not have jobs
UNEMPLOYMENT
COMPENSATION
payments made to workers who are unemployed and who meet the requirements of the law to qualify for such payments; The requirements usually are:
1. that the worker has worked in employment that is :”covered” by the law, 2. that the worker be willing and able to take employment offered him,
3. that the worker did not leave his previous place of employment voluntarily, 4. that an initial period (the “waiting period”) of unemployment has elapsed before compensation is due
UNEMPLOYMENT
RATE
the percent of the labor force not employed; see labor force
UNLIMITED WANTS
It is the nature of human wants to be unlimited in total. When basic needs for food, clothing and shelter are met, people tend to develop wants for additional goods and/or services. see wants
USDA
United States Department of Agriculture; the federal agency concerned with regulating the quality of agriculture output
SPILLOVER BENEFIT
see external benefit
SPILLOVER COST
see external cost
STAGFLATION
a period in which the economy is experiencing both high unemployment and high inflation
STANDARD OF
LIVING
the per capita level of production of goods and services achieved in an economy; computed by dividing the GDP by the population
STATE GOVERNMENT
government of a state; Example: the government of the State of Florida; see government
STOCK
share of ownership in a corporation; Corporations sell stock to acquire funds to operate or expand the organization. The two types are common and preferred.
BUSINESS CYCLE
a predictable long-term pattern of alternating periods of economic growth (recovery) and decline (recession), characterized by changing employment, industrial productivity, and interest rates; also called economic cycle
BUSINESS PLANNER
a professional who systematically manages the tasks of the business to achieve success
CAPITAL
1. one of the factors of production; 2. a man-made resource used in the production of goods and services; includes factories, equipment, machinery, etc.; 3. durable goods used to produce final goods and services; also called capital goods or capital resources
CAPITAL FORMATION
addition to the stock of capital goods; also called capitalgrowthCAPITAL GOODS tools, machinery, buildings, etc. used to produce final goods and services seecapital goods
CAPITAL GROWTH
see capital formation
CAPITAL RECOURCES
goods made by people and used to produce other goodsand services; also called intermediate goods
CAPITALISIM
an economic system based on private ownership ofproperty or productive resources that owners may use toproduce goods or services and receive the profits orlosses from this use; system characterized by
competition, the profit incentive and free markets
CARYING CHARGE
interest paid to a business when the firm allows one topurchase goods or services on credit; also calledinterest or finance charge
CARTEL
an organization of producers designed to limitcompetition between members usually by restrictingoutput to raise prices;Example: OPEC is a petroleum cartel.
CASH
coins, currency, or the equivalent;Examples: money orders, personal checks, cashier’schecks
CASH PRICE
the full price one pays for a good or service if one payswith cash; see credit price
CHECK
a written order to a bank to pay a certain amount ofmoney from a person’s account to a business or someother person
CHECKING ACCOUNT
a bank, credit union or other financial institution
account that is available on demand; the owner of the
account writes a check that is treated like currency in
the market;
Note: Demand deposits—the amount of money
deposited in checking accounts—are one component
(part) of the money supply.
CHOICE
a model of an economy showing the interactionsbetween households and businesses as they exchangegoods and services and resources in markets
CIRCULAR FLOW
a model of an economy showing the interactionsbetween households and businesses as they exchangegoods and services and resources in markets
CITY GOVERNMENT
the government of the local town or incorporated municipality;Example: the government of the City of Lakeland
COIN
1. one of the components (parts) of the money supply;2. a piece of metal stamped with a design and issued tothe public to be used as money
COLLATERAL
assets that can be pledged to obtain a loan
COLLECTIVE BARGAINING
by a committee or union (representing theBARGAINING employees of a business or industry) with an employeror group of employers to arrive at agreements regardingwages, hours or conditions of employment for allemployees
COLLECTIVE FARM
a model of an economy showing the interactionsbetween households and businesses as they exchangegoods and services and resources in markets
COMMAND ECONOMY
an economy in which decisions are made by thegovernment: what goods and services to produce, whatproductive methods to use, how to allocate resources,how to distribute output and what prices tocharge
COMMON MARKET
a group of countries that agree to eliminate all tariffs (orother restrictions) on international trade between eachother and to have a common external tariff onallproducts coming from non-membersCOMMERCIAL BANK a financial institution whose main function is toacceptdeposits and make loans
COMPOUND INTREST
interest paid upon money deposited in an account andalso on all the interest already earned by the deposit;see simple interest
CONSERVATION
the wise use of natural resources
CONSUME
to buy and/or use goods and/or services
CONSUMERS
people or businesses whose wants are satisfied by usinggoods and services; those who buy and make final useof goods and services
CONSUMER GOODS
tangible objects—food, automobiles, shoes, etc.—that
CONSUMER PRICE INDEX
satisfy consumer wants and/or needs.
CONSUMER SERVICES
productive acts of labor that do not result in tangible
CONSUMER SOVERENTY
productive acts of labor that do not result in tangible
CONSUMTION
the consumer determining the types and quantities of
COOPERATIVE
GOOD OR PLEASANT
CORPORATION
the act of buying and/or using goods and services to SATISFY WANTS AND NEEDS
CO-SIGNER
a special form of corporation that differs from normal

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