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69 Cards in this Set
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macroeconomics
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the part of ecomonic theory dealing with the economy as a whole and decisionmaking by large units such as government and unions
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equilibrium wage
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wage rate leaving neither a surplus nor a shortage in the market
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Sin Tax
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relatively high tax designed to raise revenue and discourage consumption of a socially undesirable product
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Incidence of Tax
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the final burden of the tax
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Benefit principle of taxation
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those who benefit from government goods and services should pay in proportion to the amount of benefits they recieve
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Ability to pay principle of Taxaion
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the belief that ppl should be taxed according to their ability to pay, regardless of the benefits they recieve
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Proportional Tax
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imposes the same percentage rate of taxation on everyone, regardless of income
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Progressive Tax
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a tax that imposes a higher percentage rate of taxation on persons with higher incomes
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Regressive tax
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tax that imposes a higher percentage rate of taxation on low incomes than on high incomes
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Payroll Withholding Taxes
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a system that requires an employer to automatically deduct income taxes from an employers paycheck and send it directly to the goverment
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FICA Taxes
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the Federal Insurance contribution Act tax levied on both employers and employees to pay for social security and medicare
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Intergovernmental Revenue
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funds collected by 1 leel of gov for that are distributed to another level of government for expenditures
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Value Added Tax (VAT)
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a tax placed on the value that manufactureres add at each stage of production
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per capta
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per peson
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public sector
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the part of the economy made up of private individuals
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Private Sector
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the part of the economy made up of private individuals
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Transfer payment
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a payment in which the gov recieves neither goods nor services
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Grant-in-aid
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a tranfer payment level of government for another
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Mandatory Spending
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Spending autorized by law
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Discretionary Spending
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progrmas that recieve annual authorization
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Fiscal year
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9-12 month planning period
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Executive Formation
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The first step in the process to develop a a budget
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Federal Budget Deficit
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Expenditures are higher than revenues
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Federal Budget Surplus
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revenues are higher than surplus
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Crowding Out effect
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higher than normal interest rates occur b/c of gov spending
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Barter economy
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moneyless economy that relies on trade or barter
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Medium of exchange
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money or other substance genearly accepted in exchange
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Measure of value
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a common denominator that can be used to express worth in terms
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Store of value
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the property that allows purchasing power to be saved until needed
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Inconvertible Fiat Money Standard
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fiat money that cannot be exchanged for gold or silver
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Federal Reserve System
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Privately Owned publicaly contolled, central bank of US
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Board of govenors
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sets general policies for Federal Reserve and member banks to folloiw, regulates certain operations of state-chartered member banks and conducts some aspects of monetary policy
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Federal Open Market Commitee
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made up of 12 members: even members from Board of Governors, the president of NY district fed and 4 district Fed Reserve bank who serve one y ear rotating terms and they make decisions about the growth of $ supply and level of interest rates
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Monetary Policy
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actions by the Federal Reserve System to expand or contracct the money supply in order to affect the cost and availability of credit
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Fractional Reserve System
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System requiring financial institutions to set aside a fraction of their deposits in the form of reserves
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Legal reserves
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currency and deposits used to meet the reserve requirement
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Reserve Requirement
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formula used to compute the amount of a depository institution required reserves
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Excess Reserves
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financial institutions cash, currency, and reserves not needed to back existing loans; potential source of new loans
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Discount rate
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Interest rate that the Federal Reserve System charges on loas to th nations financial institutions
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Open market operations
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monetary policy in the form of US treasurey bills or bond sales and purchases or both
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savings
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the dollars that become available for investors to use when others save
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saving
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absence of spending that frees resources for use in other activities or investments
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capital formation
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when ppl save making money available to go back into the econ
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Gross domestic product
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dollar value of all final goods, services, and structures produced within a coutnrys nat'l borders during a 1 yr period
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Inflation
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rise in the general level of prices
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Price Index
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Statistical series used to measure changes in the price level overtime
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Market basket
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representative colleection of goods and services used to comple a price index
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Consumer Price Index
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Index used to measure price changes for a market basket of frequently used consumer items
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Producer Price Index
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index used to measure prices recieved by domestic producers
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Unemployed
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state of working for less than 1 hour per week for pay or profit in a non-family owned business while being available and having made an effort to find a job during the past month
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unemployment rate
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ratio of unemployed individuals divided by total # of persons in the civillian labor force, expressed as percentage.
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Frictional unemploymen
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unemployment caused by workers changing jobs or waiting to go to new ones
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Structural unemployment
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unemployment caused by a fundamental change in the economy that reduces the dmand for some workers
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Cyclical unemployment
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unemployment directly related to savings in the business cycle
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Seasonal unemployment
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unemployment caused by annual changes in the weather or other conditions that prevail at certaini times of the year
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technological unemployment
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unemployment caused by technological developments or automation that mkae some worker's skills obsolete
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Market structure
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market classification according to # and size of firms type of product, type of competition
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Perfect competition
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charactarized by a large # of well-informed independent buyers and sellers who exchange identical prouducts
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Imperfect competitior
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all conditions of pure competition arent met
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monopolistic competition
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has all conditions of perfect competition except for identical products form imperfect competition
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product differentiation
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real or imagined differences b/w competitng products in the same industry
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non price competition
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competition involving the advertising of products appearance quality or design rather than its price
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Oligopoly
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market sturcture in which a few large sellers dominate and have the ability to affect prices in the industry rom imperfect comp.
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Economics of scale
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increasingly efficent use of personnal plant and equp. as a frim becomes larger
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Market failure
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market where any of the reurements for a competitive market-adequate comp., knowledge of prices, and opportuniteies, mobility of resources or comp. profits are lacking
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externality
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economic side effect that affects an uninvilved 3rd party
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neg externality
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harmful side effect that affects uninvolved 3rd party
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pos. externaility
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beneficial side effect that affects univnolved 3rd party
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Public goods
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econ product that is consumed collectively highways, national defense, police and fire protection
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