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54 Cards in this Set

  • Front
  • Back
Stabilization Properties
attempts by the federal govt to keep the economy healthy; includes monetary and fiscal policies
Unemployment Rate
percentage of the civilian labor force that is unemployed but is actively looking for work
Full Employment
condition of the economy when the unemployment rate is lower than a certain percentage established by economists' studies
Underground Economy
transactions by people who do not follow federal and state laws with respect to reporting earnings
Demand-Pull Inflation
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
combination of inflation and stagnation (low economic activity)
Cost-Push Inflation
theory that higher wages push up prices
Fiscal Policy
federal government's use of taxation and spending policies to affect overall business activity
Circular Flow of Income and Output
economic model that pictures income as flowing continuously between businesses and consumers
theory that deals with the relationship between the amount of money the Fed places in circulation and the level of activity in the economy
supporters of the theory of monetarism, often associated with Milton Friedman
Monetary Rule
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
Inflation Targeting
a possible central bank policy in which the head of the central bank is given a specified annual rate of inflation as a goal
Time Lags
periods between the time fiscal policy is enacted and the time it becomes effective
goods bought from other countries for domestic use
goods sold to other countries
Absolute Advantage
ability of one country to produce more output per unit of input than can another country
concept that a nation should produce and export a limited assortment of goods for which it is particularly suited in order to use its resources most efficiently
Comparative Advantage
ability of a country to produce a product at a lower opportunity cost than another country
Exchange Rate
the price of one nation's currency in terms of another nation's currency
Foreign Exchange Markets
markets dealing in buying and selling foreign currency for businesses that want to import goods from other countries
Fixed Rate of Exchange
system under which a national government sets the value of its currency in relation to other currencies
International Monetary Fund (IMF)
agency whose member governments once were obligated to keep their foreign exchange rates more or less fixed; today it offers monetary advice and provides loans to developing nations
lowering a currency's value in relation to other currencies by government order
Flexible Exchange Rates
arrangement in which the forces of supply and demand are allowed to set the price of various currencies
fall in the price of a currency through the action of supply and demand
Balance of Trade
difference between the value of a nation's exports and its imports
tax placed on an imported product
Revenue Tariff
tax on imports used primarily to raise government revenue without restricting imports
Protective Tariff
tax on imports used to raise the cost of imported goods and thereby protected domestic producers
Import Quota
restriction imposed on the number of units of a particular good that can be brought into the country
complete restriction on the import or export of a particular good or goods going to or coming from a specific country
people who argue for trade restrictions to protect domestic industries
World Trade Organization (WTO)
world's largest trade agreement, currently with more than 140 members
North American Free Trade Agreement (NAFTA)
trade agreement designed to reduce and gradually eliminate tariff barriers between Mexico, Canada, and the US
Central American Free Trade Agreement (CAFTA)
trade agreement designed to reduce tariff barriers between Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, the Dominican Republic and the US
European Union (EU)
organization of European nations whose goal is to encourage economic integration as a single market
Developed Nations
Nations with relatively high standards of living and economies based more on industry than o agriculture
Developing Nations
Nations with little industrial development and relatively low standards of living
Subsistence Agriculture
growing of just enough food by a family to take care of its own needs; no crops are available for export or to feed an industrial workforce
Infant Mortality Rate
death rate of infants who die during the first year of life
taking over industries by government without paying for them
Foreign Aid
funds, goods, and services given by governments and private organizations to help other nations and their citizens
Economic Assistance
loans and outright grants of funds or equipment to other nations
Technical Assistance
aid in the form of engineers, teachers, and technicians to teach skills to individuals in other nations
Military Assistance
aid given to a nation's armed forces
offices and agencies of the government that each deal with a specific area
Capital Flight
the legal or illegal export of currency or money capital from a nation by that nation's leaders
Five-Year Plans
centralized planning system that used to be the basis for China's economic system; eventually was transformed to a regional planning system leading to limited free enterprise
Global Integration
interdependency among the countries of the world, especially within financial markets and telecommunications
long-distance communication, usually electronic, using communications satellites and fiber-optic cables
Direct Foreign Investment (DFI)
the purchase by foreigners of real estate and businesses in another country
firms that do business and have offices or factories in many countries
Foreign Affiliates
branches of multinational firms