Understanding Economics: Cost of Living, Inflation, Productivity, and Financial Markets, Quizzes of Economics

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TERM 1 CPI DEFINITION 1 What calculates the cost of living TERM 2 CPI DEFINITION 2 A measure of the overall cost of goods and services bought by a typical household TERM 3 CPI DEFINITION 3 Fixed basket of goods find the prices of these goods compute the baskets cost Choose a base year and compute the index compute inflation rate TERM 4 Substitution Bias DEFINITION 4 a bias in economics index numbers arising from tendency to purchase inexpensive substitutes for expensive items when prices change.Overstates the cost of living TERM 5 Introduction of a new good DEFINITION 5 more variety to choose from which in turn makes the dollar more valueable because it increases the number of goods you can buy TERM 6 Inflation DEFINITION 6 a situation in which the economy's overall price level is rising TERM 7 Inflation Rate DEFINITION 7 the percentage change in the price level from the previous period TERM 8 Unmeasured quality Change DEFINITION 8 f the quality of a good deteriorates from one year to the next while its price remains the same the value of the dollar falls because you are getting a lesser good for the same amount of money TERM 9 Nominal GDP DEFINITION 9 current output valued at current prices TERM 10 Real Gdp DEFINITION 10 current out put valued at base year prices TERM 21 human Capital DEFINITION 21 The knowledge and skills that workers acquire through education training and experience TERM 22 Natural Resources per worker DEFINITION 22 The inputs into the production of goods and services that are provided by nature such as land rivers and mineral deposits TERM 23 Technological kNowledge DEFINITION 23 the understanding of the best ways to produce goods and servicesThe Assembly line and coca cola recipe TERM 24 diminishing returns DEFINITION 24 the property whereby the benefit from an extra unit of an input declines as the quantity of the input increasesWhen workers already have enough capital to use in the production of goods and services giving them an additional unit of capital increases their productivity only slightly TERM 25 catch-up effect DEFINITION 25 The idea of convergence in economics is the hypothesis that poorer economies' per capita incomes will tend to grow at faster rates than richer economies. TERM 26 Foreign direct investment DEFINITION 26 a direct investment into production or business in a country by a company in another country, either by buying a company in the target country or by expanding operations of an existing business in that country. TERM 27 Foreign Portfolio Investment DEFINITION 27 the entry of funds into a country where foreigners make purchases in the country-s stock and bond markets, sometimes for speculation. TERM 28 Financial System DEFINITION 28 the system that allows the transfer of money between saversmatch one persons saving with another ones investments TERM 29 Saver DEFINITION 29 People that spend less than they earn TERM 30 Borrower DEFINITION 30 People that spend more than they earn TERM 31 Financial Markets DEFINITION 31 the institutions through which a person who wants to save can diretly supply funds to a person who wants to borrow TERM 32 the Bond Market DEFINITION 32 A certificate of indebtedness which ties the borrower (major corporations) to the holder of the bonddebt finance TERM 33 Stock DEFINITION 33 represents ownership in a firm or business therefore the stock buyer has a claim to the profits produced by the corporationequity finance TERM 34 Financial Intermediaries DEFINITION 34 banks and mutual fundsfinancial institutions through which savers can indirectly provide funds to borrowers TERM 35 Banks DEFINITION 35 Pay depositors interest on their deposits and charge borrowers slightly higher interest rates on their loans which in turn balances out saving and investment TERM 46 Investers DEFINITION 46 The source of the demand for loanable funds TERM 47 crowding out DEFINITION 47 government borrowing affects the quantity of loanable funds which turns away investors from investing TERM 48 discouraged Workers DEFINITION 48 individuals who would like to work but have given up looking for a job TERM 49 Frictional unemployment DEFINITION 49 short term trying to match workers with jobs takes time TERM 50 structural unemployment DEFINITION 50 Unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one TERM 51 structural unemployment DEFINITION 51 a form of unemployment where, at a given wage, the quantity of labor supplied exceeds the quantity of labor demanded, because there is a fundamental mismatch between the number of people who want to work and the number of jobs that are available. TERM 52 Trade surplus DEFINITION 52 the amount of exports is greater than the amount of imports TERM 53 Trade deficit DEFINITION 53 The amount of imports are greater than the amount of exports TERM 54 Net Capital Outflow DEFINITION 54 the net flow of funds being invested abroad by a country during a certain period of time (usually a year). purchase of foreign assets minus foriegner purchase of domestic assets TERM 55 Positive Net capital outflow DEFINITION 55 domestics are buying more foreign assets than foreigners are buying domestic assets TERM 56 Purchasing power parity DEFINITION 56 an economic theory and a technique used to determine the relative value of currencies, estimating the amount of adjustment needed on the exchange rate between countries in order for the exchange to be equivalent to (or on par with) each currency's purchasing power. shows results for different inflation rates TERM 57 Arbitrage DEFINITION 57 the process of taking advantage of price differences for the same item in different markets