Economics Final Exam Review Material Advertising: Attempts by business to inform people about their products or persuade them

to buy their products. AFL-CIO: Two labor unions, the American Federation of Labor and the Congress of Industrial Organizations merged into a single union in 1955. Altruism: A concern for the welfare of others. An example of altruism is when people volunteer to help the homeless. Articles of incorporation: An application for a corporation charter with a state in which the corporation will have its headquarters. Automation: The replacement of human labor with machines. Blue-collar jobs: Work done by people employed in crafts, manufacturing, or nonfarm labor. Boards of directors: Groups of individuals, elected by the stockholders, who act as the governing body for corporations. Capitalist: An individual who privately owns and operates a business for a profit is called a capitalist. Collateral: Something of value that the borrower owns and is used by the borrower as a promise to repay a loan. Collective bargaining: This is a process by which labor and management negotiate the conditions of employment. Compromise is important in negotiations. Command economic system: An economic system in which decisions on questions of what to produce, how much to produce, and for whom to produce, are made by the government. This is usually accomplished by a small group called the economic or central planners. Competition: The rivalry that exists among businesses selling similar products is competition. Businesses make an effort to attract customers and factors of production. Conglomerate: The merger of two or more companies producing or marketing different products. Constant: This term refers to things that remain the same. Consumers People who buy goods or services for personal use. Corporate profits: The amount of money that remains after all of the corporations costs of production have been paid. Corporations: Forms of businesses that are owned by stockholders and are treated by law as if they were individual people. Craft: A skill or trade that usually requires training. Examples of crafts are carpenters, plumbers, and electricians. Craft union: A union composed of members who have a particular skill or trade. Demand: The amount of a good or a service that consumers want at each of its possible prices is considered demand. Demand curve: A graph line that shows how much of a product consumers will demand at various prices is called a demand curve. Democracy: A form of government by the people who exercise their rights either directly or through elected representatives. Dividends: Payments to a stockholder from a corporation are dividends. It is paid for each share of stock that the shareholder owns. Elastic: Elastic refers to the degree or amount of change. The situation in which a change in price of a product greatly affects the supply and demand. Employee: A person who works for someone else. Employer: A person or business who hires people for wages or salary. Equilibrium price: The price at which the amount of a product that sellers will supply and that consumers will demand are the same is called the equilibrium price. Export: Goods and services that a country sells to another country. Exports: Goods that are sold to other countries. Factor market: The situation where business buys the natural, labor, and capital resources that are needed to produce their goods and services. Factor markets: The situation where businesses buy the natural, labor, and capital resources that are needed to produce their products and services. An example of a factor market is the job market in which people look for work and employers seek workers. Featherbedding: To employ more workers than are actually needed for the job. Federation: A level of union organization which is made up of national unions. Most unions are affiliated with the AFL-CIO. Goods: Tangible items that satisfy human wants and needs. Government planning: Government decisions that determine how the economy operates. The government promotes economic activity in order to encourage economic growth and stability. Graph: A model that shows the changing values of one or more variables. It can show changes or trends in the economy. Horizontal mergers: A combination or merger of companies in the same business is considered a horizontal merger. It occurs when firms that do the same thing join together.

Imports: Goods that are bought from another country. Incentive: A motive for taking some action. The desire to make a profit is the incentive for taking the risk to start a business. Income elastic: The measurement of how responsive demand is to changes in the incomes of consumers. It is determined by the percentage of change in quantity divided by the percentage of change in income that caused the change in demand. Income inelastic: When demand is not too responsive to a change in income. Independent union: A union that does not belong to the AFL-CIO is considered an independent union. Interest: The money that a borrower must pay for the use of borrowed funds. Invisible hand: When business owners serve the interest of society while at the same time serves their own self-interests. Labor force: The total number of people who are working or seeking work. Labor unions: Organizations of workers that negotiate with employers for better working conditions, job security, and better wages. Marginal productivity: The additional production obtained by hiring one more unit of labor. Market economic system: An economic system in which most of the basic economic decisions are made by merchants, consumers, and businesspeople in the market. The United States is a country with a market system. Minimum wage: The lowest legal hourly wage rate that may be paid to certain types of workers by employers. Monopolies: A market condition in which one seller supplies all the demand for a product. Monopoly: A market condition characterized by a single seller, a product for which there are no close substitutes, and barriers to entry that prevent potential competitors from entering the market. Monopoly markets: A market characterized by a single seller of a particular product or service. Natural monopoly: A monopoly that is allowed because competition is not practical or economical. Need: Items such as food, shelter, and clothing that are essential for survival. Oligopoly: An imperfect market condition in which a few firms dominate an industry. Opportunity cost: The value of what a person gives up in making a choice, such as, time, money, goods, and services is considered opportunity costs. Parity: The concept that the price a farmers receive for his or her products and the price that is paid for goods and services should be constant. Partnerships: Businesses that are owned and operated by two or more people. Perfect competition: A market condition in which there are many buyers and sellers seeking to sell similar products, easy movement in and out of the market, and no seller can control the price. Price: The amount of money that individuals pay in exchange for a particular good or service is called price. Principal: The amount of money that is borrowed on a loan. Produce: To produce something is to make goods and provide services that consumers use. Producers: People who make goods or provides services for consumers. Product: This term refers to a good or service. Product markets: A market condition in which consumers buy goods and services. Food, clothing, and housing are examples of items purchased in the product market. Production: The making of goods or providing services to meet the wants and needs of the consumer is called production. Production markets: A market situation in which consumer products are bought by the consumer. Production possibilities graph: A model that shows the production choices open to a country. It shows the tradeoffs a country must make to increase production of an item. Products: Products refers to either goods or services. Profit: The amount of money that remains after all the production costs have been paid is the profit. Profit motive: The desire to make money encourages producers to respond to changing demands for goods and services. Public utilities: A business that exhibits the characteristics of a monopoly. Most of these single-firm markets are supervised closely by the government. Quotas: A limit placed on the amount of imports and exports. The United States uses tariffs and quotas to control imports. Receipts: The money that a business is paid for goods sold or delivered. Rent: Payment for the use of a natural resource or a fee charged for the temporary use of property. Resource: A person or thing used to make goods or to provide services is a resource. Examples are people, time, coal, oil, lumber,tools, and machines. Retailers: Types of businesses that sell directly to the consumer. Service cooperative: A business that provides services to its members. Service jobs: Jobs by workers who provide service directly to individuals. Cooks, health-care aids, and barbers are people who perform service jobs. Set aside programs: This government program attempts to reduce the supply of farm goods by keeping land out of production. Soil Bank Act of 1956: The government rented land from farmers to reduce the amount of land used to grow crops. Sole proprietorships: Businesses that are owned and operated by one individual. Stable: A condition that remains the same is considered stable. An example is when inflation does not change. Strike: A work stoppage by workers to force an employer to give in to the demands of labor.

Strikes: A mutual agreement by the employees to stop working until their demands are met. Subsidy: A payment by the government to a particular group for the purpose of stimulating or encouraging some economic activity. Suppliers: The people who are the producers of goods and provide services, and then sell them to the consumer. Supply: The amount of goods or services that producers offer at different prices is the supply. Usually the price decreases when the supply of a product is greater than the demand. Supply curve: A line plotted on a graph that shows the amount of goods and services that producers are willing to supply at different prices is called a supply curve. Surplus: The amount that remains after use or need has been satisfied is the surplus. Trade off: When people choose how to use their resources, they are trading off one resource for another. Tradition: Tradition is the passing down of elements of a culture from generation to generation. Union: An organization of workers is a union. The union negotiates with the employer for higher wages, and better working conditions. Union local: The most basic level of union organization is the local union. Locals consist of people in a specific community or factory. Unlimited liability: Much of the owner's personal property may be taken over by creditors if the business goes bankrupt. This condition occurs with single proprietorships or partnerships. Vertical merger: A combination or merger between two or more companies that are involved in different phases of a service or of a good's production. Wage: Payment for the services that labor provides. Wages: Payments for labor. X-axis: The horizontal axis or line is used to construct a graph. Y-axis: The vertical axis or line is used to construct a graph. Zero point: The point at which the vertical and horizontal axes of a graph meet is the zero point.

"Market Basket" This term relates to the price changes of a specific group of goods used by the average household. The economists who determine the CPI also state the goods that a household would put in their "Market Basket".

Board of Governors The Board of Governors are appointed by the President and approved by the Senate. Their job is to direct the operations of the Federal Reserve System. Each serves a 14 year term.

Boycott A campaign by workers to discourage people from buying the employer's products. This is designed to put economic pressure on the employer.

Business cycle The business cycle includes expansion, peak, contraction, and trough. These phases are part of the growth or decline pattern in the real GNP.

Consumer price index A measure of the change in price of a specific group of goods and services, used by an average household, over a period of time.

Consumer spending The spending of individuals on goods and services for personal use.

Contraction The condition in the business cycle which describes a slow down in economic activity. During this period, the real GNP declines as a result of production slow downs and unemployment.

Corporate income tax A percentage of the corporation profits is paid to the federal government in the form of corporate income tax.

Credit cards A form of identification that allows individuals to receive small loans to make purchases of goods and services.

Currency The United States uses coins and paper bills as their currency. This currency is a medium of exchange.

Deficit spending Government spending that exceeds the revenues that the government takes in through taxes.

Deflation A period when the prices of goods and services decline.

Demand deposits Another name for demand deposits is checking accounts. Because checks are payable to the holder of the check on demand, they are often called demand deposits.

Export Goods and services that a country sells to another country. Federal Open Market Committee The FOMC makes decisions concerning the purchase and sale of government securities. Federal Reserve This system is a network of banks. Power is shared by a governing board and twelve district banks. The board regulates certain activities of member banks and all other depository institutions. It is the central banking system of the United States.

Federal Reserve Bank There is a Federal Reserve Bank in each of the 12 Federal Reserve Districts. They have 25 bank branches and the member banks own the Federal Reserve Bank in their district.

Fiscal policies The taxing and spending policies of the government. These policies are designed to increase the GNP or to reduce unemployment and inflation.

GNP The Gross National Product is the statistic that measures the total production of the nation in any given year. Economist use the GNP to measure the economic growth of the country as well as for comparisons to other countries.

Imports Goods that are bought from another country.

Income tax Mandatory payment of money to the government based on an individual's earnings. The government uses this revenue to provide goods and services for the people.

Inflation The condition that exists when there is an increase in the average price level of all goods and services. During a period of inflation, the demand for goods and services usually exceeds the supply.

Interest The money that a borrower must pay for the use of borrowed funds.

Investment spending Money used to buy capital goods, such as, machinery.

Labor A factor of production contributing human effort in the production process.

Labor demand curve A graphic representation of a demand schedule for labor. It shows that the higher the wage, the fewer workers will be hired.

Labor unions Organizations of workers that negotiate with employers for better working conditions, job security, and better wages.

Medium of exchange Something of value that is generally accepted in trade, such as, money.

Monetary policies Decisions that are made concerning the nation's money supply and credit. A change in the money supply can affect credit as well as business activities.

Monetary policy The decisions made by the Federal Reserve Board which are designed to control the nation's supply of money and economy.

Money Any item that people use to exchange for goods and services is considered money.

Money supply The money supply in the United States includes M1 and M2. M1 consists of all paper bills and coins, traveler's checks, demand deposits, and other checking-type accounts. M2 includes all of M1 as well as near monies, money market mutual fund balances, money market deposit accounts, and savings in small time deposits.

National banks A bank that receives a charter from the federal government is called a national bank. If a bank has the word national in its name, it is a member of the Federal Reserve.

National debt The total amount of money owed by the federal government.

Open market operation The system of buying and selling government bonds by the Federal Reserve.

Open shop A situation where workers do not have to join the union and they do not have to pay union dues. Union membership is optional.

Peak The condition which describes the highest point in the business cycle with economic prosperity is the peak. This is followed by a period of contraction.

Profit The amount of money that remains after all the production costs have been paid is the profit. Progressive tax The type of tax that is based on an individual's ability to pay. People with higher incomes pay a larger percentage of their incomes in taxes than people with lower incomes. The federal income tax is an example of a progressive tax. Proportional tax The type of tax that places the same percentage of tax rate on everyone. The school tax is an example of a proportional tax. Recession Part of the contraction phase of the business cycle when the real GNP declines for six months. Regressive tax This type of tax takes a larger percentage of lower incomes than higher incomes. A sales tax on food is a regressive tax because the lower income families spend a larger percentage of their income on food than higher income families. Reserve Individuals or businesses set aside something, such as, money for future use. Reserve deposits Financial institutions are required to keep a particular percentage of their total deposits as a cash reserve with their district Federal Reserve Bank.

Stagflation A condition that exist when there is a combination of inflation and low economic activities.

Store of value Something that can be held to buy goods or services in the future. Strike A work stoppage by workers to force an employer to give in to the demands of labor. Surplus The amount that remains after use or need has been satisfied is the surplus. Trough The condition which describes the lowest point in the business cycle. It is followed by a period of expansion. Union shop

An agreement between labor and management that all workers are required to join the union after they are hired. Balanced budget The condition that exists when the income equals the expenditures.

Depression This is a period of major economic slow down. It is characterized by high unemployment, many business failures, and low productivity.

Fed The Federal Reserve System is sometimes referred to as the Fed.

Fractional reserve banking This system requires a portion of the deposits of a bank to be kept on hand, or in reserve. The remainder of the deposits is available to be lent to borrowers or invested.

Near money A type of asset, such as savings accounts, that can be turned into money relatively easily and without any risk of loss of value.

Real GNP The real GNP is measured in dollars of a given year. It is also known as real dollars. This is the gross national product adjusted for inflation or deflation.

Recovery The phase of the business cycle characterized by increasing economic activity. This is sometimes known as the expansion period.

Spending The consumption of disposable income is called spending.

Tight money Money that is in short supply from banks because of higher interest rates.

Wage Payment for the services that labor provides.