Glossary Terms:

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Glossary terms from:
http://www.econedlink.org/e1010


Bank

A financial institution that provides various products and services to its customers, including checking and savings accounts, loans and currency exchange.

Business

Any activity or organization that produces or exchanges goods or services for a profit.

Causes of Inflation

Too much money chasing too few goods is common cause for inflation. Additionally, a rise in production costs can also lead to a rise in inflation. International lending and federal taxes can also be causes of inflation, while war is also a leading cause of inflation as well.

Check

A written order to a financial institution directing the financial institution to pay a stated amount of money, as instructed, from the customer's account.

Consumer Price Index (CPI)

A price index that measures the cost of a fixed basket of consumer goods and services and compares the cost of this basket in one time period with its cost in some base period. Changes in the CPI are used to measure inflation.

Consumers

People who use goods and services to satisfy their personal needs and not for resale or in the production of other goods and services.

Cost-Push Inflation

Inflation caused by rising costs of production.

Costs

An amount that must be paid or spent to buy or obtain something. The effort, loss or sacrifice necessary to achieve or obtain something.

Costs of Production

Amounts paid for resources (land, labor, capital and entrepreneurship) used to produce goods and services.

Credit

The opportunity to borrow money or to receive goods or services in return for a promise to pay later.

Deflation

A sustained decrease in the average price level of all the goods and services produced in the economy.

Demand

The quantity of a good or service that buyers are willing and able to buy at all possible prices during a period of time.

Demand-Pull Inflation

Inflation caused by increasing demand for output or "too much money chasing too few goods."

Exchange

Trading a good or service for another good or service, or for money.

Federal Reserve

The central bank of the United States. Its main function is controlling the money supply through monetary policy. The Federal Reserve System divides the country into 12 districts, each with its own Federal Reserve bank. Each district bank is directed by its nine-person board of directors. The Board of Governors, which is made up of seven members appointed by the President and confirmed by the Senate to 14-year terms, directs the nation's monetary policy and the overall activities of the Federal Reserve. The Federal Open Market Committee is the official policy-making body; it is made up of the members of the Board of Governors and five of the district bank presidents.

Goods

Tangible objects that satisfy economic wants.

Households

Individuals and family units that buy goods and services (as consumers) and sell or rent productive resources (as resource owners).

Inflation

A rise in the general or average price level of all the goods and services produced in an economy. Can be caused by pressure from the demand side of the market (demand-pull inflation) or pressure from the supply side of the market (cost-push inflation).

Labor

The quantity and quality of human effort available to produce goods and services.

Long Run

A period of time long enough for firms to change the quantities of all the resources they use; the exact amount of time varies depending on the industry.

Market Economy

An economy that relies on a system of interdependent market prices to allocate goods, services, and productive resources and to coordinate the diverse plans of consumers and producers, all of them pursuing their own self-interest.

Money

Anything that is generally accepted as final payment for goods and services; serves as a medium of exchange, a store of value and a standard of value. Characteristics of money are portability, stability in value, uniformity, durability and acceptance.

Money Supply

Narrowly defined by economists as currency in the hands of the public plus checking-type deposits; also called M1. Other definitions of the money supply (M2, M3) include various savings deposits, money market deposits and money market mutual fund balances.

Price

The amount of money that people pay when they buy a good or service; the amount they receive when they sell a good or service.

Price Level

The weighted average of the prices of all goods and services in an economy; used to calculate inflation.

Producers

People and firms that use resources to make goods and services.

Product

A good or service that can be used to satisfy a want.

Production

A process of manufacturing, growing, designing, or otherwise using productive resources to create goods or services used to to satisfy a want.

Purchasing Power

The amount of goods and services that a monetary unit of income can buy.

Real vs. Nominal

Two ways of expressing monetary values. Nominal monetary values are measured in current prices; real monetary values are measured in constant prices, that is, in prices of a given or base period. Real monetary values are obtained by adjusting nominal monetary values with an appropriate index of prices.

Resources

The basic kinds of resources used to produce goods and services: land or natural resources, human resources (including labor and entrepreneurship), and capital.

Revenue

The money a business receives from customers who buy its goods and services. Not to be confused with profit.

Savings

Money set aside for a future use that is held in easily-accessed accounts, such as savings accounts and certificates of deposit (CDs).

Scarcity

The condition that exists because human wants exceed the capacity of available resources to satisfy those wants; also a situation in which a resource has more than one valuable use. The problem of scarcity faces all individuals and organizations, including firms and government agencies.

Services

Activities performed by people, firms or government agencies to satisfy economic wants.

Short Run

A period of time long enough for existing firms to change some--but not all--of the resources they use.

Supply

The amount of a good or service that producers are willing and able to offer for sale at each possible price during a given period of time.