BALANCE OF TRADE

Difference between a nations imports and exports.  When exports exceed imports, the balance of trade is in a surplus; when imports exceed exports, the balance of trade is in a deficit.

CAPITALISM

Economic system based on private ownership of property, production of goods for profit and competition between producers.

 COMPARATIVE ADVANTAGE

Those characteristics of a nation (such as location, climate, skilled labor or technical superiority) that enables it to make certain products at a lower cost than other countries do.

COMMUNISM

Economic system based on the principal of communal ownership of property and the distribution of goods and services based on each persons need.

CONSUMER GOODS

Products that satisfy peoples economic needs and wants. 

DEMAND

Quantity of a good or service that consumers will purchase at various prices.  The factors that determine demand are income, taste and the price of other goods.

DEMOCRATIC SOCIALISM

Economic system that combines state ownership of some industries with democratic principles such as free elections.

 DEPRESSION

Prolonged slump in business activity marked by high unemployment.

EASY MONEY

Result of an expansion of the money supply by the Federal Reserve System, giving banks more money to lend.  It leads to increased demand and production.

ECONOMICS

Study of how people and nations use their resources to produce, distribute and consume goods and services.

EMBARGO

A government order to prohibit trade with one or more nations.

EXPORT

To send goods from one nation to another.

FISCAL POLICY

Government taxing and spending decisions.

GROSS NATIONAL PRODUCT (GNP)

Dollar value of all the goods and services produced during one year in one country.

IMPORT

To bring goods from one nation to another.

INFLATION

General rise in prices and wages resulting in a decrease in purchasing power.

INTEREST RATE

Prices paid by businesses and consumers for using money secured through a loan.

KEYNESIAN ECONOMICS

Theory developed by John Maynard Keynes that supports an active role for government in maintaining a healthy economy through taxing and spending.

LAISSEZ-FAIRE

French term for leave it alone. In economic terms, it means that the economic system of a nation is based on the law of supply and demand with minimal governmental interference.

MONETARY POLICY

Those actions of the Federal Reserve System that increase or decrease the money supply.

PRODUCTIVITY

Efficiency with which goods and services are produced, as measured by the quantity produced per person per hour.

PROTECTIONISM

Trade policy that uses tariffs, quotas or other restrictions to limit the amount of goods imported into the nation for the purpose of protecting domestic industries from foreign competition.

QUOTA

 Limit on the amount of goods that can be imported into a country within a certain period of time.

RECESSION

Period of slow economic activity marked by decreases in production, spending and consumer demand, along with an increase in unemployment.

RESOURCES

A person or thing used in making goods or providing services.  There are three types of resources:

• Capital-goods such as tools, machines or buildings.
• Human-the skills, talents and knowledge that people use to produce goods and services.
• Natural-raw materials such as land, water, oil, timber, iron ore or coal from which goods are made.

 SCARCITY

Condition that exists because people want more goods, services and resources than are available.  Every society and individual must deal with scarcity, that is, they must make economic choices.

SUPPLY

Quantity of a good or service that producers provide at various prices.

SUPPLY-SIDE ECONOMICS

Theory that cuts in government spending and taxes will decrease inflation and bring about long-term economic growth.

TARIFF

Tax levied on imports to raise revenue or protect a domestic industry from foreign competition.

TIGHT MONEY

Scarcity of money that results when the Federal Reserve System decreases the money supply.

TRADE POLICY

Governments plan on how it will conduct economic relations with other nations.

UNEMPLOYMENT

The number of people available and looking for work who cannot find a job.  There are four types:

• Frictional-unemployment that occurs when people are between jobs or entering the job market for the first time.
• Seasonal-unemployment that results from weather-related changes in demand for certain products or services.
• Cyclical-unemployment that occurs because of downturn in the economy.
• Structural-unemployment that results from changes in the economy, making the skills of certain workers obsolete.