AP Gov Econ vocab

Refers to how currency is lightweight, convenient, and easily transferred from one person to another.

Refers to how money is reasonably, physically, durable.

• Ex: Coins and paper money (ish).

Refers to how money is made up in various units and is divisible. Think of the size of a penny, or how checks can be written for mucho dinero.

Refers to how money is in a limited supply. The Fed monitors the money supply size, keeping it from growing too fast.

AKA The “Fed.” Created in 1913 by Congress as the nation’s national bank.

A banker’s bank. Can lend to other banks in times of need.

Refers to when account holders become worried about their bank and rush to withdraw money before it fails.

• Ex: 1929 Stock Market Crash and Great Depression.

Brief period where every bank in the country is required to close.

• APUSH. FDR made it on March 5th, 1933.

Made by the Banking Act of 1933. Insures customer deposits to a maximum of $2500. Today, the limit is 250k per customer per bank.

A bank or depository institution, similar to businesses in that its products are all services.

Certificates of deposits. A document showing that an interest-bearing loan has been made to a bank or other financial institution.

• Considered loans from a consumer to the bank.

Money requirement for a bank to hold from a deposit. They cannot loan out this money.

Percentage of every deposit that must be set aside as legal reserves.

• Fed can change requirement for all checking, time, and savings accounts.

When a bank is unable to make any more loans.

Dollars that become available when people abstain from consumption.

• Businesses borrow savings to produce new goods or services.

Claims on the property and the income of the borrower.

• Ex: Bonds, CDs, and other documents that show borrowing has taken place and that there is a claim on the income and assets of the borrower.

Savings —> Financial Intermediates —> Borrowers —> Financial Assets

Institutions like banks, credit unions, life insurance companies, pension funds, and finance companies.

• They collect the funds that savers provide so that they can be loaned to borrowers.

Those who use the funds from financial intermediaries for various purposes.

Network of savers, investors, financial institutions, and financial assets that work together to transfer savings from savers to investors.

Depends on saving and borrowing. Borrowing leads to investments that flow through the system.

Federal government’s attempt to influence or stabilize the economy through taxing and government spending.

Approach designed to lower unemployment and raise output by stimulating aggregate demand.

Change in investment spending that will have a magnified effect on total spending.

The change in investment spending caused by a change in total spending.

Term that suggests only a relatively small amount of government spending is needed to initiate a bigger round of spending in the economy. Used in 1960s.

Programs that automatically trigger government spending on certain benefits when economic growth slows down.

Insurance that workers who lose their jobs through no fault of their own can collect from individual states for a limited amount of time.

Broad social programs that use established eligibility requirements to provide income supplements.

• Functions as Automatic Stabilizers

Delayed spending caused by the many months it takes to collect reliable data on economy.

Delayed spending caused by the time it takes to pass spending programs in Congress.

Delayed spending due to the time it takes to actually pump money and jobs from an approved plan.

There is a possibility that people will become increasingly dependent on the government.

• Ex: Due to unemployment checks, people will stop relying on themselves.

Members of a body of citizens entitled to elect a representative.

Policies that target producers who are also suppliers, to stimulate their output, and therefore provide jobs.

A possible relationship between federal income tax rates and tax revenues.

Relaxing or removing government regulations that restrict the activities of firms in certain industries.

Popular term referring to economic policies of President Ronald Reagan (1981 - 89). Policies include widespread tax cuts, decreased social spending, increased military spending, and deregulation of domestic markets.

Focuses on economy as a whole and decision making by large units.

The state that occurs when forces of market supply and market demand are balanced, resulting in stable prices.

Total value of goods and services that all firms would produce, in a specific period of time, at various price levels.

Shows the amount of real GDP that would be produced at various price levels.

Measure of total demand, found from adding everyone’s demand for every good and service in the economy.

Represents the sum of all consumer, business, government, and net foreign demand at various price levels.

Intersection of the aggregate supply and aggregate demand curves. Represents specific situation at a particular point in time.

Commercial bank that is a member of, and holds shares of stock in, the Fed.

7-member board that leads the Fed. Appointed by the president and approved by the Senate to serve one 14 year, non-renewable term.

12 of them, located near institutions they serve. Mostly the same functions as banks that provide for us.

Paper and coin part of the money supply. Largely made of Federal Reserve notes printed by the US Bureau of Engraving and Printing.

Produces coins.

In Department of Treasury. Involved in Fed’s consumer protection activities.

System where banks are required to keep a portion of their total deposits on hand.

Coins and currency that banks hold in their vaults.

Legal reserves beyond the reserve requirement.

Changes in the money supply that affect the availability and cost of credit.

Price of credit to a borrower

Policy where Fed expands the size of the money supply, causing interest rates to fall.

Fed restricts the size of the money supply.

Buying and selling of government securities in financial markets. Most popular tool for Feds.

Interest the Fed charges on loans to financial institutions.

Lowest rate of interest commercial banks charge their best customers.

Interest rate banks charge each other for short-term loans (usually overnight).

Philosophy that places primary importance on the role of money in the economy.

If the money supply expands for a long period, we will have too many dollars chasing too few goods, resulting in demand-pull inflation.

Regulations that make it illegal for businesses to give workers raises or to raise prices without the explicit permission of the government.

Classification that describes the nature and degree of competition among firms in the same industry.

Theoretical market structure with 3 necessary conditions

• Very Large Numbers

• Freedom of Entry and Exit

• Identical Products

No complications. Essentially Pure Competition with extra conditions.

• Perfect knowledge by all buyers and all sellers of all conditions in the market.

• Perfect mobility of resources.

Market structure with all the conditions of pure competition except identical products.

Real or perceived differences between competing products in the same industry.

The use of advertising, giveaways, or other promotions designed to convince buyers that the product is somehow unique or fundamentally better than its competitors’.

Market structure in which few very large sellers dominate the industry.

Formal agreement to set specific prices or to otherwise behave in a cooperative manner.

Market structure with only one seller of a particular product.

Government plays little role in controlling development. Monopolies might be more common.

A single firm can produce a product more cheaply than any number of competing firms could.

Monopoly based on the absence of other sellers in a certain geographic area.

Based on ownership or control of a manufacturing method, process, or other scientific method.

Monopoly owned and operated by the government. Usually provides products or services that private industries cannot adequately supply.

Occurs whenever a flaw in the market system prevents an efficient allocation of resources.

Product that is collectively consumed by everyone, and whose use by one individual does not diminish the satisfaction or value available to others.

Uncompensated side effects that either benefit or harm a third party not involved in the activity causing it.

Uncompensated harm, cost, or inconvenience suffered by a third party because of other’s actions.

Unreimbursed benefit received by someone who was not involved in the activity that generated the benefit.

Relatively high tax designed to raise revenue while reducing consumption of a socially undesirable product

• Ex: Liquor / Alcohol

The way in which income is allocated among families, individuals, or other groups.

Final burden of a tax. The matter of who actually pays the tax.

Exceptions or oversights in the tax law that allow some people/businesses to avoid paying taxes.

General tax levied on most consumer purchases. It’s paid at time of purchase, and the amount of tax is computed and collected by the merchant.

Federal tax on people’s earning. Example of a complex tax.

The branch of the US. Treasury Department in charge of collecting taxes.

Annual report to the IRS summarizing total income, deductions, and taxes withheld.

Principle based on belief that people should be taxed according to their ability to pay, regardless of the benefits they receive.

Imposes same percentage rate of taxation on everyone, regardless of income.

Total tax paid, divided by the total taxable income.

Federal health-care program available to all senior citizens (moreno? orlando? toscano?)

Imposes higher percentage rate of taxation on higher incomes than on lower ones.

Tax rate that applies to the next dollar of taxable income.

Imposes higher percentage rate of taxation on low incomes than on high incomes.

Proportional tax on individual income after a specified threshold has been reached.

Tax placed on value that manufacturers add at each state of production.

• The US does not have this tax.