AP Economics Glossary

Clear, exam-accurate definitions for 624 key AP Microeconomics and AP Macroeconomics terms. Each term links to an interactive graph and a study module so you can see the concept in action.

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Core Economic Concepts

21 terms

Absolute Advantage: Absolute advantage is the ability of a party to produce a greater amount of a good or service than other parties using the same amount of resources.
Allocative Efficiency: Allocative efficiency is reached when output is produced where price equals marginal cost, so the mix of goods matches what consumers value most.
Ceteris Paribus: Ceteris paribus is a Latin phrase meaning 'all else being equal' or 'holding all else constant'.
Circular Flow Model: The circular flow model represents the flow of goods, services, and payments between households and firms in a simplified economy.
Comparative Advantage: Comparative advantage is the ability to produce a good at a lower opportunity cost than another producer.
Factors of Production: Factors of production are the resources used in the production of goods and services, including land, labor, capital, and entrepreneurship.
Marginal Analysis: Marginal analysis is the process of analyzing the additional benefits and costs arising from a change in an activity, used to make optimal decisions.
Marginal Benefit: Marginal benefit is the additional satisfaction or utility a consumer enjoys from consuming one more unit of a good or service.
Microeconomics vs. Macroeconomics: Microeconomics focuses on individual economic units like households and firms, while macroeconomics studies the economy as a whole.
Opportunity Cost: Opportunity cost is the value of the next-best alternative you give up when you make a choice.
Positive vs. Normative Economics: Positive economics is the study of what is, while normative economics is the study of what ought to be.
Production Possibilities Curve: The Production Possibilities Curve (PPC) is a graphical representation showing the maximum combination of two goods or services that can be produced in an economy with a given set of resources and technology, assuming full and efficient use of those resources.
Productive Efficiency: Productive efficiency is an economic state where a firm produces a given level of output at the lowest possible cost.
Rational Self-Interest: Rational self-interest is the assumption that individuals make decisions by comparing the expected marginal benefits and marginal costs of an action.
Scarcity: Scarcity is the fundamental economic problem of having limited resources but unlimited wants and needs.
Specialization: Specialization is the concentration of an individual, firm, or country on the production of a limited scope of goods and services.
Terms of Trade: Terms of trade refers to the relative price of imports in terms of exports and is defined as the ratio of export prices to import prices.
Trade-off: A trade-off is the exchange of one thing for another, reflecting the reality that choosing more of one thing means having less of something else.
Microeconomics: Microeconomics is the study of how individual households, firms, and markets make decisions and interact through prices.
Macroeconomics: Macroeconomics is the study of the economy as a whole, total output, unemployment, inflation, and the policies that steer them.
Fallacy of Composition: The fallacy of composition is the error of assuming that what is true for one individual or part must also be true for the whole group or economy.

Supply & Demand

28 terms

Change in Demand vs. Change in Quantity Demanded: Change in demand is a shift of the demand curve, while change in quantity demanded is a movement along the demand curve.
Complementary Goods: Complementary goods are goods that are typically used or consumed together.
Consumer Surplus: Consumer surplus is the difference between the maximum price a consumer is willing to pay and the actual price they pay.
Deadweight Loss: Deadweight loss is the loss of total surplus that occurs when a market is not at its efficient competitive equilibrium.
Demand: Demand is the willingness and ability of consumers to buy different quantities of a good at different prices, holding all else constant.
Determinants of Demand: Determinants of demand are factors that shift the demand curve, changing the quantity demanded at each price.
Determinants of Supply: Determinants of supply are factors that shift the supply curve, changing the quantity supplied at each price.
Equilibrium Price: The equilibrium price is the price at which quantity demanded equals quantity supplied.
Excise Tax: An excise tax is a tax levied on the production or sale of a specific good or service.
Inferior Good: An inferior good is a good for which demand decreases as consumers' income rises and increases as income falls.
Law of Demand: The law of demand states that quantity demanded falls when price rises, holding all else constant.
Law of Supply: The law of supply states that quantity supplied rises when price rises, holding all else constant.
Market Equilibrium: Market equilibrium occurs when quantity demanded equals quantity supplied at a given price.
Normal Good: A normal good is a good for which demand increases when consumer income rises and falls when income decreases.
Price Ceiling: A price ceiling is a government-imposed maximum price that can be charged for a good or service.
Price Control: A price control is a government-imposed limit on how high or low a price can be for a particular good or service.
Price Floor: A price floor is a government-imposed minimum price that must be paid for a good or service.
Producer Surplus: Producer surplus is the difference between the minimum price a producer is willing to accept and the actual price they receive.
Quantity Demanded: Quantity demanded is the amount of a good or service consumers are willing and able to purchase at a given price.
Quantity Supplied: Quantity supplied is the amount of a good or service producers are willing and able to offer for sale at a given price.
Shortage (Excess Demand): A shortage occurs when quantity demanded exceeds quantity supplied at a given price.
Subsidy: A subsidy is a government payment to producers to lower production costs and encourage output.
Substitute Goods: Substitute goods are goods that can be used in place of each other to satisfy a particular need or want.
Supply: Supply is the willingness and ability of producers to sell different quantities of a good at different prices, holding all else constant.
Surplus (Excess Supply): A surplus occurs when quantity supplied exceeds quantity demanded at a given price.
Tax Incidence: Tax incidence refers to the distribution of the tax burden between buyers and sellers.
Total Surplus: Total surplus is the sum of consumer surplus and producer surplus.
Binding vs. Non-Binding Price Control: A price control is binding only when it forces price away from equilibrium: a binding ceiling sits below equilibrium (causing shortages) and a binding floor sits above it (causing surpluses).

Elasticity

15 terms

Cross-Price Elasticity of Demand: Cross-price elasticity of demand measures how responsive the quantity demanded of one good is to a change in the price of another good.
Elastic Demand: Elastic demand is when the quantity demanded changes more than the price changes.
Income Elasticity of Demand: Income elasticity of demand measures how responsive the quantity demanded is to a change in consumers' income.
Inelastic Demand: Inelastic demand is when the quantity demanded changes less than the price changes.
Midpoint Method: The midpoint method calculates elasticity using the average of the two prices and quantities, so it gives the same value in either direction.
Perfectly Elastic: Perfectly elastic demand is when any change in price leads to an infinite change in quantity demanded.
Perfectly Inelastic: Perfectly inelastic demand is when any change in price leads to no change in quantity demanded.
Price Elasticity of Demand: Price elasticity of demand measures how responsive quantity demanded is to a change in the good's price.
Price Elasticity of Supply: Price elasticity of supply measures how responsive the quantity supplied is to a change in price.
Total Revenue Test: The total revenue test uses how total revenue responds to a price change to tell whether demand is elastic or inelastic.
Unit Elastic: Unit elastic is when the percentage change in quantity demanded equals the percentage change in price.
Determinants of Price Elasticity of Demand: The determinants of price elasticity of demand are the factors that make demand more or less responsive to price: substitutes, necessity, budget share, and time horizon.
Marginal Revenue and Elasticity: Marginal revenue is positive when demand is elastic, zero at unit elasticity, and negative when demand is inelastic, so a price-maker never sells in the inelastic range.
Total Revenue and the Linear Demand Curve: Along a straight-line demand curve, total revenue rises in the elastic upper half, peaks at the unit-elastic midpoint, and falls in the inelastic lower half.
Arc vs. Point Elasticity: Arc elasticity measures responsiveness between two points using average (midpoint) values, while point elasticity measures it at a single point using the slope at that point.

Consumer Choice

9 terms

Budget Constraint: A budget constraint shows all combinations of goods a consumer can afford given their income and the prices of the goods.
Income Effect: The income effect is the change in quantity demanded caused by a price change altering a consumer's real purchasing power.
Law of Diminishing Marginal Utility: The law of diminishing marginal utility states that each additional unit of a good consumed adds less extra satisfaction than the unit before it.
Marginal Utility: Marginal utility is the additional satisfaction gained from consuming one more unit of a good.
Substitution Effect: The substitution effect is the change in quantity demanded when a price change makes a good relatively cheaper or pricier than its alternatives.
Total Utility: Total utility is the overall satisfaction a consumer receives from consuming a given quantity of a good.
Utility: Utility is the satisfaction or benefit a consumer gets from consuming a good or service.
Utility Maximization Rule: The utility-maximization rule says consumers maximize satisfaction by equalizing the marginal utility per dollar spent across all goods.
Engel Curve: An Engel curve shows how the quantity of a good a consumer buys changes as income changes, holding prices constant: upward-sloping for normal goods, downward for inferior goods.

Production & Costs

24 terms

Accounting Profit: Accounting profit is total revenue minus explicit costs, as recorded on a firm's financial statements.
Average Fixed Cost: Average Fixed Cost is the fixed cost per unit of output produced.
Average Product: Average Product is the total output produced per unit of a variable input, typically labor.
Average Total Cost: Average Total Cost is the total cost per unit of output produced.
Average Variable Cost: Average Variable Cost is the variable cost per unit of output produced.
Diseconomies of Scale: Diseconomies of scale occur when long-run average total cost increases as output increases.
Economic Profit: Economic profit is total revenue minus both explicit and implicit costs, including opportunity costs.
Economies of Scale: Economies of scale occur when long-run average total cost decreases as output increases.
Explicit Costs: Explicit Costs are direct, out-of-pocket payments made by a firm for inputs purchased from others.
Fixed Costs: Fixed Costs are costs that do not change with the level of output in the short run.
Implicit Costs: Implicit Costs are non-monetary opportunity costs of using the firm’s own resources.
Law of Diminishing Marginal Returns: The law of diminishing marginal returns states that adding more of a variable input to fixed inputs eventually yields smaller increases in output.
Marginal Cost: Marginal Cost is the additional cost incurred by producing one more unit of output.
Marginal Product: Marginal Product is the additional output produced by adding one more unit of a variable input, holding all other inputs constant.
Normal Profit: Normal profit is the minimum return needed to keep a firm in business, equal to the opportunity cost of the owner's resources.
Production Function: A production function shows the maximum output a firm can produce from given quantities of inputs.
Short Run vs. Long Run: The short run is a period when at least one input is fixed, while the long run is a period when all inputs are variable.
Sunk Cost: A sunk cost is a cost that has already been incurred and cannot be recovered.
Total Cost: Total Cost is the sum of all fixed and variable costs incurred by a firm in producing a given level of output.
Total Product: Total Product is the total quantity of output produced by a firm using a given amount of inputs in a specific time period.
Variable Costs: Variable Costs are costs that change directly with the level of output in the short run.
Least-Cost Rule: The least-cost rule says a firm minimizes the cost of any output when the marginal product per dollar is equal across all inputs: MPL/PL = MPK/PK.
Marginal-Average Rule: The marginal-average rule explains that an average curve falls when marginal is below it and rises when marginal is above it, so MC cuts ATC and AVC at their minimum points.
Envelope Curve (Long-Run ATC): The envelope curve is the long-run average total cost curve, which 'wraps around' and is tangent to every short-run ATC curve, lying on or below all of them.

Market Structures

28 terms

Barriers to Entry: Barriers to entry are obstacles that make it difficult for new firms to enter a market and compete with existing firms.
Break-Even Point: The break-even point is the output level where total revenue equals total cost, resulting in zero economic profit.
Cartel: A cartel is a group of firms that collude to restrict competition and increase profits by acting as a single monopolist.
Collusion: Collusion is an agreement between firms in a market to cooperate rather than compete, in order to limit competition and increase profits.
Dominant Strategy: A dominant strategy is a strategy that results in the highest payoff for a player regardless of the strategies chosen by other players.
Excess Capacity: Excess capacity occurs when a firm produces less than the quantity that minimizes average total cost.
Game Theory: Game theory is a framework for analyzing strategic interactions where the outcome for each participant depends on the actions of others.
Long-Run Equilibrium: Long-run equilibrium in perfect competition occurs when firms earn zero economic profit, with price equal to minimum average total cost.
Marginal Revenue: Marginal revenue is the additional revenue a firm earns from selling one more unit of output.
Monopolistic Competition: Monopolistic competition is a market structure with many firms selling differentiated products and facing low barriers to entry.
Monopoly: A monopoly is a market structure with a single seller producing a unique product with no close substitutes and significant barriers to entry.
Nash Equilibrium: Nash Equilibrium is a stable state of a game where no player can improve their payoff by unilaterally changing their strategy.
Natural Monopoly: A natural monopoly occurs when a single firm can produce the entire market output at a lower average total cost than multiple firms could.
Oligopoly: An oligopoly is a market structure dominated by a small number of large interdependent firms.
Perfect Competition: Perfect competition is a market structure with many small firms, identical products, free entry and exit, and perfect information.
Price Discrimination: Price discrimination is the practice of charging different prices to different consumers for the same product based on their willingness to pay.
Price Maker: A price maker is a firm that has the ability to set its own price rather than accept the market price as given.
Price Taker: A price taker is a firm that must accept the market price as given and cannot influence it through its own output decisions.
Prisoner's Dilemma: The prisoner's dilemma is a game theory scenario where two rational individuals acting in their own self-interest do not produce the optimal outcome for either.
Product Differentiation: Product differentiation is the process by which firms make their products distinct from those of competitors through features, branding, or quality.
Profit Maximization Rule (MR = MC): Profit is maximized when marginal revenue equals marginal cost.
Shutdown Point: The shutdown point is the output level where price equals minimum average variable cost.
Kinked Demand Curve: The kinked demand curve is an oligopoly model where rivals match price cuts but ignore price hikes, creating a kink at the current price and sticky (rigid) prices.
Marginal Revenue Curve Twice as Steep: For a single-price monopolist with a straight-line demand curve, the marginal revenue curve has the same intercept but twice the slope, hitting the quantity axis at half the demand's intercept.
Allocative Inefficiency of Monopoly: A monopoly is allocatively inefficient because it produces where price exceeds marginal cost (P > MC), underproducing relative to the efficient level and creating deadweight loss.
Stackelberg Model: The Stackelberg model is an oligopoly model where a leader firm sets output first and a follower firm then chooses its output in response.
Cournot Competition: Cournot competition is an oligopoly model where firms simultaneously choose how much quantity to produce, and the combined output sets the market price.
Bertrand Competition: Bertrand competition is an oligopoly model where firms simultaneously set prices, and consumers buy from whoever charges less.

Factor Markets

7 terms

Derived Demand: Derived demand is the demand for a factor of production that results from the demand for the goods and services it helps produce.
Economic Rent: Economic rent is the payment to a factor of production above the minimum necessary to keep it in its current use.
Factor Market: A factor market is a market where firms buy the factors of production (land, labor, capital, entrepreneurship) from households.
Marginal Resource Cost: Marginal Resource Cost (MRC) is the additional cost a firm incurs by employing one more unit of a factor of production.
Marginal Revenue Product: Marginal Revenue Product (MRP) is the additional revenue a firm earns by employing one more unit of a factor of production.
Monopsony: A monopsony is a market structure with a single buyer and many sellers, giving the buyer market power.
Marginal Productivity Theory of Distribution: The marginal productivity theory of distribution says each factor of production is paid the value of its marginal contribution to output, so firms hire each input until MRP equals its price.

Market Failure & Government

22 terms

Adverse Selection: Adverse selection occurs when asymmetric information leads undesirable participants to dominate a market before a transaction takes place.
Asymmetric Information: Asymmetric information exists when one party in a transaction knows more than the other, which can lead to market inefficiency.
Coase Theorem: The Coase theorem holds that if property rights are clear and bargaining is costless, private parties can negotiate to fix externalities efficiently.
Externality: An externality is a cost or benefit imposed on a third party who is not directly involved in the production or consumption of a good or service.
Free Rider Problem: The free-rider problem occurs when people benefit from a good without paying for it, leaving it underprovided by the market.
Gini Coefficient: The Gini coefficient is a numerical measure of income or wealth inequality ranging from 0 (perfect equality) to 1 (perfect inequality).
Lorenz Curve: The Lorenz curve is a graphical representation of income or wealth distribution within a population, comparing actual distribution to perfect equality.
Marginal Social Benefit: Marginal social benefit is the total benefit to society from consuming one more unit, equal to private benefits plus external benefits.
Marginal Social Cost: Marginal social cost is the total cost to society of producing one more unit, equal to private costs plus external costs.
Market Failure: Market failure is a situation where a market does not efficiently allocate resources, leading to a loss of economic efficiency.
Moral Hazard: Moral hazard occurs when one party takes greater risks because they do not bear the full consequences of those risks, often due to insurance or government protection.
Negative Externality: A negative externality is a cost imposed on a third party who is not part of a market transaction, such as pollution.
Pigouvian Tax: A Pigouvian tax is a tax on a good with a negative externality, set equal to the external cost to restore the efficient quantity.
Positive Externality: A positive externality is a benefit enjoyed by a third party not involved in a transaction, such as vaccination or education.
Private Good: A private good is both excludable and rival: people can be prevented from using it, and one person's use reduces what is left for others.
Progressive Tax: A progressive tax is a tax system in which the tax rate increases as the taxpayer's income increases.
Proportional Tax: A proportional tax is a tax system in which the tax rate remains constant regardless of the taxpayer's income level.
Public Good: A public good is non-excludable and non-rival: no one can be excluded from it, and one person's use does not reduce another's.
Regressive Tax: A regressive tax is a tax system in which the tax rate decreases as the taxpayer's income increases, placing a higher relative burden on lower-income individuals.
Tragedy of the Commons: The tragedy of the commons is the overuse and depletion of a shared resource that is rival but non-excludable and owned by no one.
Marginal-Cost Pricing (Socially Optimal Price): Marginal-cost pricing regulates a monopoly by forcing price down to where demand meets marginal cost (P = MC), the allocatively efficient 'socially optimal' output.
Fair-Return Price (Average-Cost Pricing): A fair-return price regulates a natural monopoly at the point where price equals average total cost (P = ATC), so the firm earns zero economic (normal) profit.

Measuring the Economy

11 terms

Consumer Price Index (CPI): The Consumer Price Index (CPI) is a price index tracking the cost of a fixed basket of goods a typical household buys, with the base year set to 100.
Expenditure Approach: The expenditure approach calculates GDP by summing all final spending on goods and services produced within a country.
Final Goods: Final goods are goods bought by their end user rather than used up as an input into another good, and only their value is counted in GDP.
GDP Deflator: The GDP deflator is a measure of the level of prices of all new, domestically produced, final goods and services in an economy.
Gross Domestic Product (GDP): Gross Domestic Product is the total market value of all final goods and services produced within a country in a given period of time.
Intermediate Goods: Intermediate goods are goods a firm buys and uses up as inputs in producing another good in the same period, so their value is excluded from GDP.
Nominal GDP: Nominal GDP is the value of all final goods and services produced in a given year, evaluated at current-year prices.
Nominal vs. Real Values: Nominal values are measured in current dollars, while real values are adjusted for inflation so they measure purchasing power in constant dollars.
Per Capita GDP: Per capita GDP is the total GDP of a country divided by its population, measuring average economic output per person.
Real GDP: Real GDP is the value of all final goods and services produced in a given year, evaluated at base-year prices to remove the effects of inflation.
Value Added: Value added is the value of a firm's output minus the cost of the intermediate goods it used, and summing value added across firms gives GDP.

Unemployment & Inflation

19 terms

Cost-Push Inflation: Cost-push inflation is a rise in the general price level caused by higher production costs, which shift short-run aggregate supply to the left.
Cyclical Unemployment: Cyclical unemployment is unemployment that occurs due to a decline in economic activity during a recession.
Deflation: Deflation is a sustained fall in the general price level of an economy, measured as a negative annual percent change in a price index such as the CPI.
Demand-Pull Inflation: Demand-pull inflation is a rise in the general price level caused by an increase in aggregate demand that outpaces what the economy can produce.
Discouraged Workers: Discouraged workers are people who have given up looking for work because they believe no jobs are available for them.
Disinflation: Disinflation is a fall in the rate of inflation while prices are still rising, so the price level keeps increasing but more slowly than before.
Frictional Unemployment: Frictional unemployment is short-term unemployment that occurs when people are between jobs or looking for their first job.
Full Employment: Full employment is the level of employment where there is no cyclical unemployment.
Inflation: Inflation is a sustained rise in the general price level of an economy, measured as the annual percent change in a price index such as the CPI.
Inflation Rate: Inflation rate is the percentage change in CPI.
Labor Force: The labor force is the total number of people aged 16 and over who are employed or actively seeking employment.
Labor Force Participation Rate: The labor force participation rate is the percentage of the civilian non-institutional population that is in the labor force.
Natural Rate of Unemployment: The natural rate of unemployment is the lowest level of unemployment that can be sustained without causing inflation to rise.
Real vs. Nominal Wage: Real wages are wages adjusted for inflation, while nominal wages are the actual dollar amount of wages received.
Structural Unemployment: Structural unemployment is long-term unemployment that occurs when workers' skills do not match the jobs available.
Unemployment Rate: The unemployment rate is the percentage of the labor force that is jobless and actively looking for work: unemployed divided by labor force, times 100.
Long-Run Phillips Curve: The long-run Phillips curve is vertical at the natural rate of unemployment, showing no permanent trade-off between inflation and unemployment.
Phillips Curve: The Phillips curve shows the short-run inverse relationship between the inflation rate and the unemployment rate.
Short-Run Phillips Curve: The short-run Phillips curve shows the inverse relationship between the inflation rate and the unemployment rate in the short run.

The Business Cycle

8 terms

Business Cycle: The business cycle is the fluctuation in economic activity over time, characterized by periods of expansion and contraction.
Expansion: An expansion is a period of increasing economic activity, characterized by rising output, employment, and income.
Inflationary Gap: An inflationary gap is the difference between actual real GDP and full-employment real GDP when actual exceeds full employment.
Output Gap: The output gap is the difference between actual real GDP and potential real GDP.
Peak: The peak is the highest point of economic activity in a business cycle.
Recession: A recession is a significant decline in economic activity lasting more than a few months.
Recessionary Gap: A recessionary gap is the difference between full-employment real GDP and actual real GDP when actual is less than full employment.
Trough: The trough is the lowest point of economic activity in a business cycle.

Aggregate Demand & Supply

20 terms

AD-AS Model: The AD-AS model explains real output and the price level as the intersection of aggregate demand and aggregate supply.
Aggregate Demand: Aggregate demand is the total demand for final goods and services in an economy at a given time.
Aggregate Supply: Aggregate supply is the total supply of final goods and services in an economy at a given time.
Interest Rate Effect: The interest rate effect is the change in investment that results from a change in the interest rate due to a change in the price level.
Long-Run Aggregate Supply: Long-run aggregate supply is the total supply of goods and services when all factors of production are fully employed.
Marginal Propensity to Consume (MPC): The marginal propensity to consume is the fraction of each additional dollar of disposable income that households spend.
Marginal Propensity to Save (MPS): The marginal propensity to save (MPS) is the fraction of each additional dollar of disposable income that households save.
Multiplier Effect: The multiplier effect is the magnified change in total output and income that results from an initial change in spending.
Net Export Effect: The net export effect is the change in net exports that results from a change in the price level.
Short-Run Aggregate Supply: Short-run aggregate supply is the total supply of goods and services at different price levels, holding factor costs and resource prices constant.
Spending Multiplier: The spending multiplier measures how much real GDP changes for each dollar change in autonomous spending.
Stagflation: Stagflation is the simultaneous combination of stagnant growth, high unemployment, and high inflation.
Tax Multiplier: The tax multiplier measures the change in real GDP from a change in taxes; it is negative and smaller in size than the spending multiplier.
Wealth Effect: The wealth effect is the change in consumption that results from a change in the real value of wealth.
Sticky-Wage Theory of SRAS: The sticky-wage theory says SRAS slopes upward because nominal wages adjust slowly, so a higher price level raises firm profits and output in the short run.
Sticky-Price Theory (Menu Cost Theory) of SRAS: The sticky-price (menu cost) theory says SRAS slopes upward because some firms keep prices fixed despite menu costs, so rising overall prices boost their sales and output.
Misperceptions Theory of SRAS: The misperceptions theory says SRAS slopes upward because producers temporarily mistake a rise in the overall price level for a rise in their own relative price and produce more.
Determinants of Aggregate Demand: The determinants of aggregate demand are the non-price factors that shift the AD curve by changing consumption, investment, government spending, or net exports.
Determinants of Aggregate Supply: The determinants of aggregate supply are non-price factors, input prices, productivity, taxes/subsidies on producers, and expectations, that shift the SRAS curve.
Paradox of Thrift: The paradox of thrift is the idea that if everyone tries to save more at once, falling spending can lower total income so that aggregate saving doesn't rise and may fall.

Fiscal Policy

15 terms

Automatic Stabilizers: Automatic stabilizers are features of fiscal policy that adjust without new legislation to dampen the business cycle.
Budget Deficit: A budget deficit occurs when government spending exceeds its tax revenue in a given year.
Budget Surplus: A budget surplus occurs when government tax revenue exceeds its spending in a given year.
Contractionary Fiscal Policy: Contractionary fiscal policy is a decrease in government spending or an increase in taxes used to reduce aggregate demand and fight inflation.
Crowding Out: Crowding out is the fall in private investment that happens when government borrowing pushes up real interest rates.
Discretionary Fiscal Policy: Discretionary fiscal policy is deliberate changes in government spending or taxes enacted by legislation to influence the economy.
Expansionary Fiscal Policy: Expansionary fiscal policy is an increase in government spending or a cut in taxes used to boost aggregate demand in a recession.
Fiscal Policy: Fiscal policy is the government's use of spending and taxation to influence aggregate demand and the economy.
Fiscal Policy vs. Monetary Policy: Fiscal and monetary policy both steer aggregate demand, but fiscal policy uses spending and taxes while monetary policy uses the money supply and interest rates.
National Debt: The national debt is the total accumulated amount the government owes from past deficits not offset by surpluses.
Balanced Budget Multiplier: The balanced budget multiplier equals 1: an equal rise in government spending and taxes raises real GDP by exactly the amount of the spending change.
Crowding In: Crowding in is when government spending raises private investment, the opposite of crowding out, typically during a recession with idle resources.
Policy Lags: Policy lags are the delays, recognition, implementation/administrative, and impact, between an economic problem and when stabilization policy actually affects the economy.
Ricardian Equivalence: Ricardian equivalence says a debt-financed tax cut leaves spending unchanged, because households save all of it to pay the future taxes the borrowing implies.
Fiscal Multiplier: The fiscal multiplier is the change in real output produced by a one dollar change in government spending or taxes.

Money & Monetary Policy

28 terms

Contractionary Monetary Policy: Contractionary monetary policy decreases the money supply to raise interest rates and reduce inflation.
Discount Rate: The discount rate is the interest rate the Federal Reserve charges commercial banks that borrow from it directly for the short term.
Excess Reserves: Excess reserves are the funds a bank holds above its required reserves, which are available to lend out.
Expansionary Monetary Policy: Expansionary monetary policy increases the money supply to lower interest rates and stimulate aggregate demand.
Federal Funds Rate: The federal funds rate is the interest rate at which banks lend their excess reserves to other banks overnight.
Fractional Reserve Banking: Fractional reserve banking is a system in which banks hold only a fraction of deposits as reserves and lend out the rest.
Functions of Money: Money serves three functions: a medium of exchange, a unit of account, and a store of value.
M1 and M2: M1 and M2 are measures of the money supply; M1 is the most liquid money and M2 includes M1 plus less-liquid near-money.
Monetary Policy: Monetary policy is the central bank's use of the money supply and interest rates to influence the economy.
Money Demand: Money demand is the amount of wealth people choose to hold as money rather than in interest-bearing assets.
Money Market: The money market is the model in which the supply of and demand for money determine the nominal interest rate.
Money Multiplier: The money multiplier is the maximum amount the money supply can increase for each dollar of new bank reserves.
Money Supply: The money supply is the total amount of money circulating in an economy, including cash and checkable deposits.
Open Market Operations: Open market operations are the central bank's buying and selling of government bonds to change the money supply.
Quantity Theory of Money: The quantity theory of money states that the general price level is directly proportional to the money supply, expressed by the equation MV = PQ.
Required Reserve Ratio: The required reserve ratio is the fraction of deposits that banks must hold in reserve rather than lend out.
Reserve Requirement: The reserve requirement is the percentage of deposits that banks are legally required to hold as reserves rather than lend out.
Velocity of Money: The velocity of money is the average number of times a unit of money is spent on final goods and services in a given period.
Net Export Effect of Monetary Policy: The net export effect is the channel by which monetary policy changes interest rates, which move the exchange rate and net exports, amplifying the policy's impact on AD.
Monetary Policy Transmission Mechanism: The transmission mechanism is the chain by which a central bank's interest-rate change passes through to investment, consumption, exchange rates, and ultimately AD and inflation.
Money Neutrality: Money neutrality is the idea that changes in the money supply affect only nominal variables (prices, wages) in the long run, leaving real GDP and employment unchanged.
Vault Cash: Vault cash is the physical currency a bank keeps on its premises; it counts toward the bank's reserves alongside its deposits at the Fed.
Monetary Base (High-Powered Money): The monetary base, or high-powered money, is currency in circulation plus bank reserves, the money the central bank directly controls.
Interest on Reserve Balances (IORB): Interest on reserve balances (IORB) is the rate the Fed pays banks on reserves held at the Fed; it is now the Fed's main tool for steering the federal funds rate.
Real Money Balances: Real money balances (M/P) are the money supply adjusted for the price level, the purchasing power of money rather than its dollar amount.
Taylor Rule: The Taylor rule is a formula prescribing how a central bank should set the policy interest rate based on inflation gaps and the output gap.
Lender of Last Resort: A lender of last resort is a central bank that supplies emergency liquidity to solvent banks during a panic to stop bank runs from spreading.
Currency in Circulation: Currency in circulation is the physical cash held by the public outside banks; it counts in M1, while cash sitting in bank vaults does not.

Financial Sector & Loanable Funds

7 terms

Bonds and Interest Rates: Bond prices and interest rates move in opposite directions: when market interest rates rise, the price of existing bonds falls, and vice versa.
Fisher Equation: The Fisher equation states that the nominal interest rate equals the real interest rate plus the expected inflation rate.
Loanable Funds Market: The loanable funds market is where savers supply funds and borrowers demand funds, and its equilibrium determines the real interest rate.
Nominal Interest Rate: The nominal interest rate is the stated interest rate on a loan or investment, before any adjustment for inflation.
Private Saving: Private saving is the portion of disposable income that households and businesses do not spend on consumption.
Real Interest Rate: The real interest rate is the nominal interest rate minus the inflation rate, showing the true cost of borrowing or return to saving.
Investment Demand Curve: The investment demand curve shows the inverse relationship between the real interest rate and the quantity of investment spending firms want to undertake.

Economic Growth

14 terms

Economic Growth: Economic growth is a sustained increase in an economy's real output, usually measured as the rise in real GDP or real GDP per capita.
Human Capital: Human capital is the knowledge, skills, and health embodied in workers that make them more productive.
Physical Capital: Physical capital is the stock of manufactured tools, machinery, equipment, and structures used to produce goods and services.
Productivity: Productivity is the amount of output produced per unit of input, most often output per worker or per hour worked.
Convergence (Catch-Up Effect): The catch-up (convergence) effect is the tendency for poorer economies to grow faster than rich ones because capital has higher returns where it is scarce.
Aggregate Production Function: The aggregate production function links an economy's total output to its inputs, physical capital, labor, human capital, and technology, at the economy-wide level.
Growth Accounting: Growth accounting decomposes the growth of output into contributions from capital, labor, and total factor productivity (the Solow residual).
Malthusian Trap: The Malthusian trap is a cycle in which any gain in output per person is absorbed by population growth, pushing living standards back down to subsistence.
Infrastructure Investment: Infrastructure investment is spending on long-lived public capital, such as roads, ports and power grids, that lowers costs across every industry using it.
Creative Destruction: Creative destruction is the process by which new products and methods displace older ones, so productivity rises only by destroying existing firms and jobs.
Solow Growth Model: The Solow growth model shows diminishing returns to capital push an economy to a steady state, so lasting growth per worker needs technological progress.
Endogenous Growth Theory: Endogenous growth theory models long-run growth as the result of choices inside the economy, such as research and human capital, not outside technical change.
Malinvestment: Malinvestment is capital sunk into projects that look profitable only because interest rates or price signals are distorted, and that fail when they correct.
Capital Deepening: Capital deepening is an increase in the stock of physical capital per worker, which raises labor productivity and output per worker.

International Trade & Finance

27 terms

Balance of Payments: The balance of payments is a record of all economic transactions between a country and the rest of the world over a period.
Capital and Financial Account: The capital and financial account records international purchases and sales of assets such as stocks, bonds, and real estate.
Currency Appreciation: Currency appreciation is an increase in the value of a currency relative to another in the foreign exchange market.
Currency Depreciation: Currency depreciation is a decrease in the value of a currency relative to another in the foreign exchange market.
Current Account: The current account records a country's trade in goods and services plus net income and net transfers with the rest of the world.
Exchange Rate: An exchange rate is the price of one country's currency expressed in terms of another currency.
Fixed Exchange Rate: A fixed exchange rate is set and maintained by a government or central bank at a specific value against another currency.
Floating Exchange Rate: A floating exchange rate is determined freely by market supply and demand without government intervention.
Free Trade: Free trade is international trade conducted without government barriers such as tariffs, quotas, or subsidies.
Import Quota: An import quota is a legal limit on the quantity of a good that can be imported during a period.
Net Exports: Net exports are the value of a country's exports minus its imports, a key component of aggregate demand.
Tariff: A tariff is a tax on imported goods that raises their price and protects domestic producers from foreign competition.
Trade Deficit: A trade deficit occurs when a country's imports exceed its exports, making net exports negative.
Trade Surplus: A trade surplus occurs when a country's exports exceed its imports, making net exports positive.
J-Curve Effect: The J-curve effect is the pattern where a currency depreciation first worsens the trade balance before improving it as trade volumes adjust over time.
Marshall-Lerner Condition: The Marshall-Lerner condition states that a currency depreciation improves the trade balance only if the combined price elasticities of export and import demand exceed 1.
Twin Deficits Hypothesis: The twin deficits hypothesis holds that a larger government budget deficit tends to widen the current-account (trade) deficit through interest rates and the exchange rate.
Effective Rate of Protection: The effective rate of protection measures how much a tariff structure raises an industry's value added per unit, accounting for tariffs on both outputs and imported inputs.
Infant Industry Argument: The infant industry argument holds that new domestic industries deserve temporary tariff or quota protection until they grow large enough to compete with established foreign rivals.
Optimum Currency Area: An optimum currency area is a region where the gains from sharing one currency outweigh the costs of giving up independent monetary policy and exchange-rate adjustment.
Devaluation: Devaluation is a deliberate official cut in a currency's fixed exchange rate, decided by the government or central bank rather than by market trading.
Capital Flight: Capital flight is a large, rapid outflow of money from a country as savers and investors move funds abroad to escape devaluation, default, or seizure.
Hot Money: Hot money is short-term capital that moves quickly between countries chasing higher interest rates or currency gains, and can leave just as fast.
Crawling Peg: A crawling peg is an exchange rate regime in which the official rate is fixed but moved in small, frequent steps, usually to track an inflation differential.
Carry Trade: A carry trade borrows in a low interest rate currency and invests in a higher-yielding one, earning the interest gap if the exchange rate holds.
Balance of Trade: The balance of trade is a country's exports minus its imports over a period, a surplus when exports are larger and a deficit when imports are larger.
Sterilized Intervention: Sterilized intervention is a central bank foreign currency trade offset by an opposite open market operation, leaving the domestic monetary base unchanged.

Money, Banking & Finance

34 terms

Interest Rate: An interest rate is the cost of borrowing money or the reward for saving it, expressed as a percentage of the principal per year.
Bond: A bond is a debt security in which an investor lends money to a government or company in exchange for periodic interest and repayment at maturity.
Stock (Equity): A stock is a share of ownership in a company, giving the holder a claim on part of its assets and profits.
Central Bank: A central bank is a national institution that manages a country's money supply, interest rates, and banking system.
Federal Reserve System: The Federal Reserve is the central bank of the United States, responsible for monetary policy, bank supervision, and financial stability.
Quantitative Easing: Quantitative easing is a central bank policy of buying large amounts of long-term assets to inject money and lower interest rates when short-term rates are near zero.
Liquidity Trap: A liquidity trap occurs when interest rates are so low that monetary policy can't stimulate the economy because people hoard cash instead of spending or investing.
Compound Interest: Compound interest is interest earned on both the original principal and on previously accumulated interest.
Present Value: Present value is what a future sum of money is worth today, after discounting for the interest that could be earned in the meantime.
Diversification: Diversification is spreading investments across different assets to reduce risk without necessarily lowering expected return.
Fiat Money: Fiat money is currency that has value because a government declares it legal tender, not because it's backed by a commodity like gold.
Commodity Money: Commodity money is money that has intrinsic value as a good, such as gold, silver, or salt, in addition to its use as money.
Barter: Barter is the direct exchange of goods and services for other goods and services without using money.
Maturity Transformation: Maturity transformation is banks borrowing short-term (deposits) and lending long-term (loans), profiting from the rate spread while taking on liquidity and interest-rate risk.
Prime Rate: The prime rate is the benchmark interest rate banks charge their most creditworthy customers; it tracks the federal funds rate, usually running about 3 percentage points above it.
Credit Risk: Credit risk is the risk that a borrower fails to repay a loan or bond, causing the lender to lose principal or interest.
Liquidity Risk: Liquidity risk is the risk of being unable to meet cash obligations on time, either because assets can't be sold quickly or funding dries up.
Interest Rate Risk: Interest rate risk is the risk that rising market interest rates reduce the value of a bond or fixed-rate asset, since bond prices move inversely to rates.
Term Structure of Interest Rates: The term structure of interest rates is the relationship between bond yields and their time to maturity, visualized as the yield curve.
Default Risk Premium: The default risk premium is the extra yield a risky bond pays over a risk-free bond to compensate investors for the chance the issuer defaults.
Bank Run: A bank run is a sudden mass withdrawal of deposits by customers who fear a bank will fail, which can push a solvent bank into failure.
Deposit Insurance: Deposit insurance is a government guarantee that pays depositors up to a set limit if their bank fails, removing most of the incentive to join a run.
Forward Guidance: Forward guidance is a central bank's public signal about the likely future path of its policy rate, used to move longer-term interest rates immediately.
Zero Lower Bound: The zero lower bound is the floor on how far a central bank can cut its policy rate, set by the fact that holding physical cash always pays zero.
Discount Window: The discount window is the facility through which a central bank lends directly to banks against collateral, at a rate it sets itself.
Shadow Banking: Shadow banking is credit intermediation outside regulated banks, by firms that borrow short and lend long without deposit insurance or a central bank backstop.
Inflation Targeting: Inflation targeting is a framework in which a central bank publicly commits to a numerical inflation goal and sets policy to reach it over the medium term.
Seigniorage: Seigniorage is the revenue a government earns from issuing money, the gap between what the money is worth and what it costs to create.
Cryptocurrency: A cryptocurrency is a digital asset recorded on a shared ledger and issued according to a network's rules rather than by a central bank or government.
Stablecoin: A stablecoin is a cryptocurrency designed to hold a fixed value against a reference asset, usually a national currency, through backing or an algorithmic rule.
Central Bank Digital Currency: A central bank digital currency is digital money issued by the central bank itself, giving holders a direct claim on it rather than a deposit at a bank.
Gresham's Law: Gresham's law says that when law fixes the rate between two moneys, the one overvalued at that rate stays in circulation and the undervalued one is hoarded.
Systemic Risk: Systemic risk is the danger that one institution's or market's failure spreads through the financial system and disrupts credit for the whole economy.
Capital Adequacy: Capital adequacy is the rule that a bank must fund itself with enough loss-absorbing capital, mostly equity, in proportion to the riskiness of its assets.

Microeconomic Theory

26 terms

Indifference Curve: An indifference curve shows all combinations of two goods that give a consumer the same total satisfaction (utility).
Marginal Rate of Substitution: The marginal rate of substitution is the rate at which a consumer will give up one good to get more of another while staying equally satisfied.
Giffen Good: A Giffen good is a rare good whose quantity demanded rises when its price rises, violating the law of demand.
Veblen Good: A Veblen good is a luxury good whose demand increases as its price rises, because the high price signals status.
Economies of Scope: Economies of scope exist when it is cheaper to produce several products together than to produce each separately.
Network Effect: A network effect occurs when a product becomes more valuable to each user as more people use it.
Price Leadership: Price leadership is when one dominant firm sets a price that other firms in the industry follow, common in oligopolies.
Rent-Seeking: Rent-seeking is spending resources to gain wealth through favorable policy or market position rather than by producing value.
Two-Part Tariff: A two-part tariff is a pricing scheme with a fixed entry/access fee plus a separate per-unit price, used to capture consumer surplus beyond a single uniform price.
Budget Line: A budget line shows every combination of two goods a consumer can buy by spending all income, with slope equal to minus the price ratio, -Px/Py.
Isoquant: An isoquant is a curve showing every combination of two inputs, usually labor and capital, that produces the same quantity of output.
Isocost Line: An isocost line shows every combination of two inputs a firm can buy for the same total cost, with slope equal to minus the input price ratio.
Returns to Scale: Returns to scale describes how output responds when a firm scales all inputs up by the same proportion in the long run.
Cobb-Douglas Production Function: The Cobb-Douglas production function is Q = A × K^α × L^β, a multiplicative form whose exponents give each input's output elasticity.
General Equilibrium: General equilibrium is a state in which every market in the economy clears at once, with all prices adjusted so supply equals demand everywhere.
Partial Equilibrium: Partial equilibrium is the analysis of a single market on its own, holding prices and conditions in all other markets constant.
Pareto Efficiency: Pareto efficiency is an allocation in which no one can be made better off without making at least one other person worse off.
Edgeworth Box: An Edgeworth box is a diagram showing every way two people can divide two goods, used to find the trades that make both better off.
Social Welfare Function: A social welfare function is a rule that combines individual well-being into a single ranking of social outcomes, letting a society compare allocations.
Compensating Variation: Compensating variation is the amount of money that, after a price change, would return a consumer to exactly the utility they had before it.
Revealed Preference: Revealed preference is the idea that a consumer's choices show what they prefer, so preferences are inferred from what people buy rather than assumed.
Risk Aversion: Risk aversion is a preference for a certain outcome over a gamble with the same expected value, shown by diminishing marginal utility of wealth.
Expected Utility: Expected utility is the probability-weighted average of the utility of each possible outcome, used to rank risky choices.
Certainty Equivalent: The certainty equivalent is the guaranteed amount of money that gives a person the same utility as a risky gamble.
Comparative Statics: Comparative statics is the method of solving a model for equilibrium, changing one exogenous parameter, solving again, and comparing the two equilibria.
Hedonic Pricing: Hedonic pricing estimates the implicit value of a good's individual characteristics by regressing observed market prices on those characteristics.

Behavioral Economics

23 terms

Behavioral Economics: Behavioral economics studies how psychological factors and cognitive biases cause people to make decisions that depart from pure rationality.
Bounded Rationality: Bounded rationality is the idea that people make reasonable decisions within the limits of their information, time, and mental capacity.
Sunk Cost Fallacy: The sunk cost fallacy is continuing an endeavor because of money or effort already spent, even when it is no longer worthwhile.
Loss Aversion: Loss aversion is the tendency to feel the pain of a loss more strongly than the pleasure of an equal-sized gain.
Prospect Theory: Prospect theory describes how people choose among risky options based on perceived gains and losses relative to a reference point, not final wealth.
Anchoring Bias: Anchoring bias is the tendency to rely too heavily on the first piece of information (the anchor) when making decisions.
Nudge: A nudge is a small change in how choices are presented that steers behavior without banning options or changing incentives.
Framing Effect: The framing effect is when people react differently to the same choice depending on how it is worded or presented.
Endowment Effect: The endowment effect is the tendency to value something more highly simply because you own it, so you demand more to sell it than you would pay to buy it.
Mental Accounting: Mental accounting is the tendency to sort money into separate mental 'buckets' and treat it differently depending on its source or intended use.
Decoy Effect: The decoy effect is when adding a clearly inferior third option nudges shoppers toward a specific one of the two original choices.
Status Quo Bias: Status quo bias is the tendency to stick with the current situation or default option rather than switch, even when a better alternative exists.
Availability Heuristic: The availability heuristic is the mental shortcut of judging how likely something is by how easily examples of it come to mind.
Confirmation Bias: Confirmation bias is the tendency to seek, notice and remember evidence that supports what you already believe, while discounting evidence that does not.
Present Bias: Present bias is giving extra weight to costs and rewards that arrive right now, so plans made for later get overturned once later actually arrives.
Hyperbolic Discounting: Hyperbolic discounting values future rewards with a discount rate that falls as the delay grows, so waiting now costs far more than the same wait later on.
Choice Architecture: Choice architecture is the design of how options are presented, including their order, defaults, number and wording, which shapes what people end up picking.
Default Option: The default option is the outcome that takes effect when a person makes no active choice, and it usually ends up being what most people get.
Overconfidence Bias: Overconfidence bias is systematically overrating your own knowledge, ability or precision, so predictions come out more certain than the evidence warrants.
Herd Behavior: Herd behavior is copying what a crowd is doing instead of acting on your own information, which can push prices and decisions far from the fundamentals.
Satisficing: Satisficing is searching until you find an option that clears a good-enough standard, then stopping, instead of comparing every option to find the best.
Ultimatum Game: The ultimatum game is an experiment where one player proposes how to split a sum and the other can accept it or reject it, leaving both with nothing.
Bayesian Updating: Bayesian updating is the rule for revising a probability after new evidence, weighting each possibility by how likely that evidence would be if it were true.

Game Theory & Information

21 terms

Zero-Sum Game: A zero-sum game is a situation where one player's gain exactly equals another player's loss, so the total is unchanged.
Principal-Agent Problem: The principal-agent problem arises when one party (the agent) acts on behalf of another (the principal) but has different incentives and better information.
Signaling: Signaling is when an informed party credibly reveals private information to a less-informed party to overcome asymmetric information.
Screening: Screening is when a less-informed party designs choices to get an informed party to reveal hidden information.
Median Voter Theorem: The median voter theorem says that under majority rule with single-peaked preferences, the outcome chosen matches the preference of the median voter.
Condorcet Paradox: The Condorcet paradox is when majority preferences cycle (A beats B, B beats C, C beats A) even though each individual voter has consistent rankings.
Arrow's Impossibility Theorem: Arrow's impossibility theorem proves no ranked voting system can convert individual preferences into a group ranking while satisfying a few basic fairness conditions and avoiding a dictator.
Logrolling: Logrolling is vote trading in which legislators swap support across bills so each can pass a measure they care intensely about.
Tit-for-Tat: Tit-for-tat is a repeated-game strategy that cooperates on the first move, then simply copies whatever the opponent did last round.
Grim Trigger Strategy: A grim trigger strategy cooperates until the opponent defects even once, then punishes by defecting forever after.
Folk Theorem: The folk theorem states that in an infinitely repeated game with patient players, almost any reasonable (individually rational) outcome can be sustained as an equilibrium.
Backward Induction: Backward induction solves a sequential game by reasoning from the last decision backward, choosing each player's best move at every stage.
Dominated Strategy: A dominated strategy is one that pays less than some other strategy of yours no matter what the opponent does, so a rational player never plays it.
Mixed Strategy: A mixed strategy is a plan to randomize over your moves with fixed probabilities, used when always making the same predictable choice would be exploited.
Payoff Matrix: A payoff matrix is a table listing every combination of the players' strategies and the payoff each one earns, written as (row player, column player).
Sequential Game: A sequential game is one where players move in turns and later movers see what came before, so it is drawn as a game tree and solved backward from the end.
Repeated Game: A repeated game is the same game played again and again by the same players, so cheating today can be punished later and cooperation becomes possible.
Credible Threat: A credible threat is one the threatening player would actually want to carry out when the time comes, which is why a rival believes it.
First-Mover Advantage: First-mover advantage is the gain a player wins by committing to a move before rivals, so they must take that choice as given and react to it.
Coordination Game: A coordination game is one where players do best by making the same choice, so it has two or more Nash equilibria and the problem is agreeing on one.
Market for Lemons: The market for lemons is George Akerlof's model showing that when only sellers know quality, buyers offer average prices and good goods leave the market.

Economic Systems & Schools of Thought

19 terms

Capitalism: Capitalism is an economic system based on private ownership of resources, where prices and production are guided by markets and the pursuit of profit.
Socialism: Socialism is an economic system in which resources and major industries are owned or heavily regulated collectively, often by the state, to distribute output more equally.
Mixed Economy: A mixed economy combines private markets with government intervention, such as regulation, public goods, and welfare programs.
Command Economy: A command economy is a system in which the government, not markets, decides what to produce, how, and for whom.
Market Economy: A market economy is a system in which production and prices are determined by the free interaction of supply and demand.
Laissez-Faire: Laissez-faire is the principle that the economy works best with minimal government intervention in markets.
Invisible Hand: The invisible hand is Adam Smith's metaphor for how individuals pursuing self-interest can unintentionally promote the good of society through markets.
Keynesian Economics: Keynesian economics holds that aggregate demand drives output in the short run and that government should use fiscal and monetary policy to fight recessions.
Classical Economics: Classical economics holds that free markets self-correct to full employment in the long run, so government intervention is largely unnecessary.
Monetarism: Monetarism holds that the money supply is the main driver of inflation and economic activity, so central banks should control money growth steadily.
Supply-Side Economics: Supply-side economics argues that lower taxes and less regulation boost growth by increasing the incentive to work, save, and invest.
Mercantilism: Mercantilism was an early economic doctrine that a nation's wealth comes from accumulating gold and running trade surpluses through protectionism.
Classical Dichotomy: The classical dichotomy is the idea that real variables (output, employment) and nominal variables (prices, money) can be analyzed separately in the long run.
Austrian School: The Austrian School is a tradition in economics built on individual choice, subjective value, and market prices as signals of widely dispersed knowledge.
Institutional Economics: Institutional economics is the study of how rules, norms and organizations shape economic behavior and outcomes, rather than prices and preferences alone.
Marxian Economics: Marxian economics is the tradition built on Karl Marx's analysis of capitalism, centered on the labor theory of value, surplus value and class conflict.
Traditional Economy: A traditional economy is a system in which custom, inheritance and long-standing roles decide what gets produced, how it is produced and who receives it.
Rational Expectations: Rational expectations is the assumption that people form forecasts using all available information, so their errors are random rather than systematic.
Adaptive Expectations: Adaptive expectations is the assumption that people predict future inflation from recent past inflation, adjusting only after they are proved wrong.

Economic Indicators & Data

26 terms

Leading Economic Indicators: Leading economic indicators are data that tend to change before the overall economy does, helping forecast future activity.
Lagging Indicators: Lagging indicators are economic data that change after the economy has already begun a trend, confirming its direction.
Yield Curve: The yield curve plots interest rates on bonds of the same quality across different maturities, usually government bonds.
Consumer Confidence Index: The consumer confidence index measures how optimistic households feel about the economy and their finances.
Misery Index: The misery index is the sum of the unemployment rate and the inflation rate, used as a rough gauge of economic hardship.
Okun's Law: Okun's law is the observed relationship that each extra percentage point of cyclical unemployment is associated with roughly a 2% fall in real GDP below potential.
Producer Price Index (PPI): The producer price index measures the average change over time in the selling prices that domestic producers receive for their output.
Seasonal Unemployment: Seasonal unemployment is joblessness that recurs at certain times of year because demand for some work rises and falls with the seasons.
Regression to the Mean: Regression to the mean is the statistical tendency for extreme measurements to be followed by ones closer to the average, due to chance.
Simpson's Paradox: Simpson's paradox is when a trend that appears in separate subgroups of data reverses or disappears once the groups are combined.
Coincident Indicator: Coincident indicators are series that rise and fall roughly in step with the overall economy, so they describe where the business cycle stands now.
Purchasing Managers' Index: Purchasing Managers' Index readings come from monthly surveys of supply managers, where a value above 50 means expansion and below 50 means contraction.
PCE Price Index: PCE Price Index figures track prices for the consumption counted in the national accounts, published monthly by the Bureau of Economic Analysis.
Core Inflation: Core inflation is the inflation rate computed after food and energy prices are removed, because those two components swing sharply from month to month.
Initial Jobless Claims: Initial jobless claims count people filing for unemployment insurance for the first time in a given week, reported weekly by the Department of Labor.
Nonfarm Payrolls: Nonfarm payrolls measure the net change in jobs on employer payrolls outside farming, reported monthly by the Bureau of Labor Statistics.
Housing Starts: Housing starts count the residential building projects on which construction began during a month, reported monthly by the Census Bureau.
Industrial Production Index: Industrial Production Index values track the real output of factories, mines and utilities, published monthly by the Federal Reserve as an index number.
Capacity Utilization: Capacity utilization is the share of an economy's productive capacity actually in use, stated as a percentage of the output plants could sustainably produce.
Retail Sales: Retail sales measure the value of goods sold by retail stores and food services in a month, reported by the Census Bureau in nominal dollars.
Inventory-to-Sales Ratio: Inventory-to-sales ratios compare the goods a business holds in stock with its monthly sales, showing how many months of sales that stock would cover.
Seasonal Adjustment: Seasonal adjustment is a statistical correction that removes predictable within-year patterns from a data series so consecutive months can be compared.
Base Year: Base years are the reference periods an index is set equal to 100, so every other reading in the series is a percentage of that period's level.
Index Number: Index numbers express a value as a percentage of its own level in a chosen base period, which is set equal to 100.
Nominal Value: Nominal values are measured in the prices of the period when they occurred, so they mix changes in quantity together with changes in prices.
Real Value: Real values are nominal figures adjusted for price changes, so they are stated in the prices of one base year and reflect quantities rather than inflation.

International & Development Economics

38 terms

Globalization: Globalization is the increasing integration of economies worldwide through trade, investment, technology, and the movement of people.
Protectionism: Protectionism is government policy that shields domestic industries from foreign competition using tariffs, quotas, and subsidies.
Dumping: Dumping is when a country or firm exports a product at a price below its cost or its home-market price to gain foreign market share.
World Trade Organization (WTO): The WTO is an international body that sets the rules for global trade and helps settle trade disputes between countries.
Purchasing Power Parity (PPP): Purchasing power parity is the idea that exchange rates should adjust so a basket of goods costs the same across countries.
Gross National Product (GNP): GNP is the total value of goods and services produced by a country's residents, wherever in the world they produce them.
Foreign Direct Investment (FDI): Foreign direct investment is when a firm or individual from one country builds or buys business operations in another country.
Human Development Index (HDI): The Human Development Index is a composite measure of a country's development based on income, education, and life expectancy.
Developing Economy: A developing economy is a country with lower average income, less industrialization, and lower living standards than developed nations.
Heckscher-Ohlin Model: The Heckscher-Ohlin model predicts that countries export goods that intensively use their relatively abundant factor of production and import goods using their scarce factor.
Rybczynski Theorem: The Rybczynski theorem says that, at constant prices, increasing one factor's endowment raises output of the good using it intensively more than proportionally and reduces output of the other good.
Prebisch-Singer Hypothesis: The Prebisch-Singer hypothesis argues that the long-run terms of trade for primary-commodity exporters tend to deteriorate relative to manufactured-goods exporters.
Lewis Dual-Sector Model: The Lewis dual-sector model explains development as the transfer of surplus, low-productivity labor from a traditional agricultural sector to a modern industrial sector.
Export Subsidy: An export subsidy is a government payment to domestic producers for each unit they sell abroad, which raises exports above the free-trade level.
Customs Union: A customs union is a trade bloc whose members remove tariffs on trade with each other and also apply one common external tariff to non-members.
Common Market: A common market is a customs union that also lets labor and capital move freely between member countries, not just goods and services.
International Monetary Fund: The International Monetary Fund (IMF) is a global institution that lends to countries facing balance of payments crises and monitors the world economy.
World Bank: The World Bank is an international institution that lends to developing countries for long-term projects and reforms intended to reduce poverty.
Poverty Line: A poverty line is an income or consumption threshold below which a household counts as poor, used to measure how much poverty a country has.
Absolute Poverty: Absolute poverty is being below a fixed threshold of income or consumption set by the cost of basic needs, regardless of what everyone else has.
Relative Poverty: Relative poverty is having income far below the typical income in your own country, usually below half or sixty percent of the national median.
Microfinance: Microfinance is the supply of small loans, savings accounts and insurance to low-income borrowers whom commercial banks turn away for lacking collateral.
Remittances: Remittances are the money migrant workers send back to households in their home country, recorded as transfers in the current account.
Brain Drain: Brain drain is the emigration of a country's highly skilled workers, such as doctors and engineers, to countries offering better pay and conditions.
Dutch Disease: Dutch disease is the decline of a country's manufacturing and farming after a resource boom raises the real exchange rate and prices their exports out.
Resource Curse: The resource curse is the pattern in which countries rich in oil or minerals often grow more slowly and govern worse than countries without them.
Import Substitution Industrialization: Import substitution industrialization is a strategy of building domestic industry behind tariffs and quotas to replace imported manufactured goods.
Export-Led Growth: Export-led growth is a development strategy of growing by selling manufactures on world markets rather than by protecting industry for the home market.
Convergence Hypothesis: The convergence hypothesis predicts that poorer countries grow faster than richer ones and catch up, since capital earns higher returns where it is scarce.
Middle-Income Trap: The middle-income trap is the idea that countries stall at middle income, too costly to compete on cheap labor but not yet able to compete on technology.
Trade Bloc: A trade bloc is a group of countries that lower trade barriers among themselves while keeping them against outsiders, favoring trade inside the group.
Informal Economy: The informal economy is legal production that goes unregistered and untaxed, so its output and its workers are missing from official statistics.
Demographic Transition: The demographic transition is the shift from high birth and death rates to low ones as incomes rise, with a population surge in between as deaths fall first.
Subsistence Agriculture: Subsistence agriculture is farming aimed at feeding the household that does the work, leaving only a small marketed surplus and very little cash income.
Foreign Aid: Foreign aid is money, goods or expertise transferred to a poorer country on better terms than the market offers, as grants or as loans below commercial rates.
Conditional Cash Transfer: A conditional cash transfer pays a poor household a cash grant only if it meets a stated requirement, such as school attendance or clinic visits.
Poverty Trap: A poverty trap is a self-reinforcing state in which being poor creates the conditions that keep you poor, so income stays low unless a push clears a threshold.
Sovereign Default: A sovereign default is a government's failure to pay interest or principal on its debt as promised, or a forced restructuring that pays creditors less.

Financial Markets & Investing

28 terms

Derivative: A derivative is a financial contract whose value is based on the price of an underlying asset like a stock, commodity, or currency.
Futures Contract: A futures contract is an agreement to buy or sell an asset at a set price on a specific future date.
Options Contract: An options contract gives the holder the right, but not the obligation, to buy or sell an asset at a set price before a deadline.
Exchange-Traded Fund (ETF): An ETF is a basket of securities that trades on a stock exchange like a single stock, often tracking an index.
Index Fund: An index fund is a fund that passively tracks a market index, such as the S&P 500, rather than picking stocks actively.
Mutual Fund: A mutual fund pools money from many investors to buy a professionally managed portfolio of stocks, bonds, or other assets.
Initial Public Offering (IPO): An IPO is the first sale of a private company's stock to the public, turning it into a publicly traded company.
Market Capitalization: Market capitalization is the total value of a company's shares, found by multiplying the share price by the number of shares outstanding.
Dividend: A dividend is a portion of a company's profits paid out to shareholders, usually in cash and on a regular schedule.
Capital Gain: A capital gain is the profit from selling an asset for more than you paid for it.
Price-to-Earnings (P/E) Ratio: The P/E ratio is a stock's price divided by its earnings per share, showing how much investors pay per dollar of earnings.
Bear Market: A bear market is a prolonged period of falling asset prices, typically a decline of 20% or more from recent highs.
Leverage: Leverage is using borrowed money to increase the potential return of an investment.
Short Selling: Short selling is borrowing an asset to sell it now, hoping to buy it back later at a lower price and pocket the difference.
Yield to Maturity (YTM): Yield to maturity (YTM) is the total annual return an investor earns if a bond is bought at its current price and held until it matures.
Primary Market: The primary market is where new securities are sold for the first time by the issuer, so the money raised goes directly to the company or government.
Secondary Market: The secondary market is where investors trade securities that already exist, so the payment goes to the selling investor rather than to the original issuer.
Systematic Risk: Systematic risk is market-wide risk that moves nearly all assets at once, such as recessions or interest rate shifts, and diversification cannot remove it.
Efficient Market Hypothesis: The efficient market hypothesis says asset prices already reflect all available information, so no one can reliably beat the market by using it.
Arbitrage: Arbitrage is buying an asset in one market while selling the same asset at a higher price in another, locking in a profit with no exposure to price moves.
Asset Bubble: An asset bubble is a sustained rise in an asset's price far above what its earnings or use value justify, driven by expectations of reselling it higher.
Credit Rating: A credit rating is a rating agency's graded opinion of how likely a borrower is to repay its debt in full and on time.
Venture Capital: Venture capital is money that specialized funds invest in young, high-growth companies in exchange for an ownership stake rather than repayment.
Private Equity: Private equity is investment in companies whose shares are not publicly traded, usually by funds that buy control of a business and sell it years later.
Hedge Fund: A hedge fund is a private investment fund, open only to institutions and wealthy investors, that can borrow, sell short and trade derivatives freely.
Credit Default Swap: A credit default swap is a contract in which the buyer pays a periodic fee and the seller pays out if a named borrower defaults or hits a defined credit event.
Securitization: Securitization is the practice of pooling illiquid loans into a trust and selling investors tradable securities whose payments come from the pooled loans.
Random Walk: A random walk is a price series whose next change cannot be predicted from its past, so today's price is the best forecast of tomorrow's price.

Public Finance & Taxation

31 terms

Tax Bracket: A tax bracket is a range of income taxed at a particular rate within a progressive income-tax system.
Marginal Tax Rate: The marginal tax rate is the tax rate applied to the next dollar of income earned.
Average Tax Rate: The average tax rate is total taxes paid divided by total income.
Sales Tax: A sales tax is a tax on goods and services collected at the point of sale as a percentage of the price.
Value-Added Tax (VAT): A VAT is a tax collected at each stage of production on the value added, ultimately paid by the final consumer.
Tax Credit: A tax credit directly reduces the amount of tax owed, dollar for dollar.
Laffer Curve: The Laffer curve shows that tax revenue rises with the tax rate up to a point, then falls as high rates discourage work and investment.
Transfer Payment: A transfer payment is money the government gives to individuals without receiving a good or service in return.
Entitlement Program: An entitlement program is a government benefit that everyone who meets set eligibility rules is legally guaranteed to receive.
Tax Wedge: A tax wedge is the gap a per-unit tax drives between the price buyers pay and the price sellers receive, equal to the tax per unit at the new quantity.
Excess Burden of Taxation: The excess burden of a tax is the deadweight loss it creates beyond the revenue collected, arising because the tax distorts consumption and production decisions.
Benefit Principle vs. Ability-to-Pay Principle: The benefit principle taxes people according to the public services they use; the ability-to-pay principle taxes them according to their capacity to bear the burden.
Payroll Tax: A payroll tax is a tax on wages and salaries, usually split between employer and employee, that funds social insurance programs.
Capital Gains Tax: A capital gains tax is a tax on the profit from selling an asset for more than you paid, owed only when the gain is realized through a sale.
Estate Tax: An estate tax is a tax on the value of a deceased person's assets before they pass to heirs, charged only on the amount above an exemption threshold.
Corporate Income Tax: A corporate income tax is a tax on a company's profits, that is, on revenue minus deductible costs, rather than on its sales or its assets.
Tax Base: The tax base is the total amount of economic activity a tax applies to, such as all taxable income or all taxable sales, before the rate is applied.
Tax Expenditure: A tax expenditure is revenue a government gives up through a deduction, credit or exclusion, which works like spending delivered through the tax code.
Benefits-Received Principle: The benefits-received principle says people should pay taxes in proportion to the benefits they get from public services, like a gasoline tax funding roads.
Means-Tested Program: A means-tested program is a government benefit available only to households whose income or assets fall below a set eligibility limit.
Earned Income Tax Credit: The Earned Income Tax Credit is a refundable tax credit for low- and moderate-income workers that rises with earnings, then plateaus, then phases out.
Negative Income Tax: A negative income tax is a scheme in which households below a break-even income receive a payment from the tax system instead of paying tax.
Universal Basic Income: Universal basic income is a regular cash payment to every individual regardless of income or employment, with no work requirement and no means test.
Fiscal Federalism: Fiscal federalism is the division of taxing and spending powers among national, state and local governments, and the transfers that flow between them.
Balanced Budget Amendment: A balanced budget amendment is a constitutional rule requiring the government to keep annual spending within annual revenue, so it cannot run a deficit.
Sovereign Debt: Sovereign debt is money borrowed by a national government, usually by issuing bonds, and it is the accumulated stock of past deficits.
Debt Ceiling: A debt ceiling is a legal cap on how much a government may borrow in total, which must be raised before new borrowing can fund spending already approved.
Debt-to-GDP Ratio: The debt-to-GDP ratio is a government's outstanding debt divided by one year of nominal GDP, expressed as a percentage.
Primary Balance: The primary balance is government revenue minus government spending other than interest payments on existing debt.
Horizontal Equity: Horizontal equity is the tax principle that people in the same economic circumstances should pay the same amount of tax.
Vertical Equity: Vertical equity is the tax principle that people with greater ability to pay should bear a larger tax burden, usually through a rising average tax rate.

Labor Economics

23 terms

Minimum Wage: A minimum wage is a legal price floor on wages, the lowest amount employers may legally pay workers.
Labor Union: A labor union is an organized group of workers that bargains collectively with employers over wages, benefits, and conditions.
Collective Bargaining: Collective bargaining is the process where a union negotiates wages and working conditions with an employer on behalf of all workers.
Gig Economy: The gig economy is a labor market based on short-term, flexible, independent work rather than permanent jobs.
Efficiency Wage: An efficiency wage is a wage set above the market level to boost worker productivity, loyalty, and retention.
Unemployment Insurance: Unemployment insurance is a government program that pays temporary benefits to workers who lose their jobs.
Living Wage: A living wage is the income a worker needs to afford basic necessities like housing, food, and healthcare in their area.
Compensating Differential: A compensating differential is the extra pay needed to attract workers to undesirable, dangerous, or unpleasant jobs.
Labor Mobility: Labor mobility is the ease with which workers can move between jobs, occupations, or geographic regions.
Backward-Bending Labor Supply Curve: The backward-bending labor supply curve shows hours worked rising with wages at first, then falling once the income effect of higher wages outweighs the substitution effect.
Labor Demand Curve: The labor demand curve shows how many workers a firm hires at each wage, and for a single firm it is simply its marginal revenue product curve.
On-the-Job Training: On-the-job training is skill building that happens while a person works, raising their productivity and the wage they can command without more schooling.
Right-to-Work Law: A right-to-work law is a state law that bans requiring workers to join a union or pay union fees as a condition of keeping a job.
Wage Discrimination: Wage discrimination is paying equally productive workers different wages because of a personal characteristic such as race or sex rather than their output.
Occupational Segregation: Occupational segregation is the uneven spread of demographic groups across jobs, so some occupations end up heavily male, heavily female or racially skewed.
Gender Pay Gap: The gender pay gap is the average earnings difference between men and women, measured either unadjusted or adjusted for hours, occupation and experience.
Signaling Theory of Education: The signaling theory of education says schooling raises pay largely by revealing a worker's existing ability to employers, not by adding productive skill.
Search and Matching: Search and matching is the framework in which unemployment persists because it takes time and effort for job seekers and vacancies to find each other.
Reservation Wage: A reservation wage is the lowest wage at which a person will accept a job, so any offer below it is turned down in favor of continued search.
Underemployment: Underemployment is working below your capacity, either part time when you want full time hours or in a job that uses far less skill than you have.
Union Wage Premium: The union wage premium is the percentage by which a unionized worker's pay exceeds that of a comparable non-union worker doing similar work.
Automation and Labor: Automation and labor describes how machines take over some tasks and complement others, cutting labor demand for tasks they replace and raising it elsewhere.
Dual Labor Market: A dual labor market is split into a primary segment of stable, well paid jobs and a low wage, high turnover secondary segment, with little mobility between.

Environmental Economics

17 terms

Cap and Trade: Cap and trade is a system that limits total pollution and lets firms buy and sell permits to emit within that cap.
Carbon Tax: A carbon tax is a fee on the carbon content of fuels, designed to make polluters pay for the external cost of emissions.
Common-Pool Resource: A common-pool resource is rival but non-excludable, one person's use reduces what's left, but it's hard to stop anyone from using it.
Sustainable Development: Sustainable development is economic growth that meets present needs without compromising the ability of future generations to meet theirs.
Renewable Resource: A renewable resource is one that replenishes naturally over time, like solar energy, wind, timber, or fish stocks.
Ecological Footprint: An ecological footprint measures the demand human activity places on nature, in terms of the land and resources needed to support it.
Marginal Abatement Cost: Marginal abatement cost is the cost of reducing pollution by one additional unit, and it typically rises as more pollution is cut.
Hotelling's Rule: Hotelling's rule states that, for efficient extraction of a nonrenewable resource, its net price (price minus marginal extraction cost) should rise over time at the rate of interest.
Environmental Kuznets Curve: The environmental Kuznets curve hypothesizes an inverted-U relationship in which pollution rises with income at low levels of development, then falls once income passes a threshold.
Emissions Trading: Emissions trading is a system where a regulator caps total pollution, issues permits equal to that cap, and lets firms buy and sell them.
Social Cost of Carbon: The social cost of carbon is an estimate of the total dollar damage caused by emitting one more ton of carbon dioxide, expressed in present value.
Nonrenewable Resource: A nonrenewable resource has a fixed stock that does not regenerate on a human timescale, so every unit used today is one fewer unit available later.
Green GDP: Green GDP is conventional GDP adjusted downward for the value of environmental damage and the depletion of natural resources caused by producing that output.
Existence Value: Existence value is what people are willing to pay just to know something exists, such as a species or wilderness, even if they never use or see it.
Contingent Valuation: Contingent valuation is a survey method that values a nonmarket good by asking people what they would pay for it in a described hypothetical situation.
Command-and-Control Regulation: Command-and-control regulation controls pollution by direct mandate, ordering each source to meet an emissions limit or install a required technology.
Marketable Permit: A marketable permit is a tradable allowance to emit a set quantity of pollution, issued under a cap, that a firm can buy or sell instead of abating.

Economic History & Events

18 terms

Great Depression: The Great Depression was a severe worldwide economic downturn in the 1930s, with mass unemployment and collapsing output and prices.
Great Recession: The Great Recession was the deep global downturn of 2007–2009 triggered by a housing and financial crisis.
Gold Standard: The gold standard was a monetary system in which a currency's value was fixed to and convertible into a specific amount of gold.
Bretton Woods System: Bretton Woods was the post-WWII system of fixed exchange rates pegged to the U.S. dollar, which was convertible to gold.
Hyperinflation: Hyperinflation is extremely rapid, out-of-control inflation, often exceeding 50% per month.
New Deal: The New Deal was a set of U.S. government programs in the 1930s aimed at relief, recovery, and reform during the Great Depression.
Economic Bubble: An economic bubble is when an asset's price rises far above its fundamental value, driven by speculation, before crashing.
Soft Landing: A soft landing is when a central bank slows the economy enough to curb inflation without causing a recession.
Stagflation of the 1970s: Stagflation of the 1970s was the combination of high inflation and high unemployment that broke the simple Phillips curve trade-off.
Oil Price Shock: An oil price shock is a sudden, large jump in crude oil prices that raises costs across the economy and shifts short-run aggregate supply left.
Dot-Com Bubble: The dot-com bubble was the surge in internet company share prices during the late 1990s, followed by a crash when the promised profits never came.
Subprime Mortgage Crisis: The subprime mortgage crisis was the wave of American home loan defaults that, amplified by securitization and bank leverage, set off a global financial panic.
Weimar Hyperinflation: Weimar hyperinflation was the collapse of the German mark in the early 1920s, when the government printed money to cover deficits and prices doubled in days.
Japan's Lost Decade: Japan's lost decade was the long stagnation after its asset bubble burst, when debt-heavy firms repaid loans instead of investing and interest rates hit zero.
Marshall Plan: The Marshall Plan was American aid to Western Europe after the Second World War, supplying the dollars needed to buy imported fuel, food and machinery.
Industrial Revolution: The Industrial Revolution was the shift to machine and factory production that first made growth in output per person continuous rather than temporary.
Smoot-Hawley Tariff: The Smoot-Hawley Tariff was an American law of the early 1930s that raised import duties, provoked retaliation abroad and helped shrink world trade.
Volcker Disinflation: The Volcker disinflation was the Federal Reserve's early-1980s campaign that broke double-digit inflation by accepting a deep recession to gain credibility.

Market Structures & Industrial Organization

17 terms

Market Structure: Market structure is how a market is organized: the number of firms, how differentiated their products are, how hard entry is, and how much firms set price.
Contestable Market: A contestable market is one where entry and exit are cheap, so the threat of new firms holds price near cost even when only one or two sellers are active.
Market Power: Market power is a firm's ability to raise price above marginal cost without losing all of its buyers, which comes from facing a downward-sloping demand curve.
Limit Pricing: Limit pricing is when an established firm sets a price low enough that entry would be unprofitable, giving up profit now to keep potential rivals out.
Predatory Pricing: Predatory pricing is cutting price below cost to drive rivals out of a market, with the plan of raising price once the competition is gone.
Vertical Integration: Vertical integration is one firm owning two or more stages of the same supply chain, such as a manufacturer that also owns its parts supplier or its stores.
Horizontal Merger: A horizontal merger is a combination of two firms that compete in the same market at the same stage of production, which raises concentration directly.
Conglomerate Merger: A conglomerate merger joins firms in unrelated markets, so the two are neither competitors nor supplier and customer to each other.
Antitrust Law: Antitrust law is the set of laws that ban price fixing, monopolizing conduct and anticompetitive mergers in order to protect competition in markets.
Sherman Antitrust Act: The Sherman Antitrust Act is the first United States antitrust law: Section 1 bans agreements that restrain trade and Section 2 bans monopolizing.
Clayton Act: The Clayton Act is a United States antitrust law banning mergers, tying and exclusive dealing where the effect may be to substantially lessen competition.
Duopoly: A duopoly is a market with only two sellers, the simplest kind of oligopoly, where each firm's best price or output depends on what the other one chooses.
Switching Costs: Switching costs are the costs a customer faces when moving from one seller to another, including fees, setup time, learning a new system and lost compatibility.
Minimum Efficient Scale: Minimum efficient scale is the smallest output at which a firm reaches the lowest point on its long-run average total cost curve.
Regulatory Capture: Regulatory capture is when a regulator ends up serving the industry it oversees rather than the public, because the industry lobbies and the public does not.
Rate-of-Return Regulation: Rate-of-return regulation sets a utility's prices so its revenue covers operating costs plus an approved percentage return on the capital it has invested.
Patent: A patent is a government-granted exclusive right to make, use or sell an invention for a limited time, in exchange for publishing how the invention works.

Common comparisons

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Core Economic Concepts

Supply & Demand

Elasticity

Consumer Choice

Production & Costs

Market Structures

Factor Markets

Market Failure & Government

Measuring the Economy

Unemployment & Inflation

The Business Cycle

Aggregate Demand & Supply

Fiscal Policy

Money & Monetary Policy

Financial Sector & Loanable Funds

Economic Growth

International Trade & Finance

Money, Banking & Finance

Microeconomic Theory

Behavioral Economics

Game Theory & Information

Economic Systems & Schools of Thought

Economic Indicators & Data

International & Development Economics

Financial Markets & Investing

Public Finance & Taxation

Labor Economics

Environmental Economics

Economic History & Events

Market Structures & Industrial Organization

Common comparisons

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