Page 898 - Krugmans Economics for AP Text Book_Neat

G-2 GLOSSARY

brand name a name owned by a par- change in demand a shift of the complements pairs of goods for which
ticular firm that distinguishes its demand curve, which changes the a rise in the price of one good leads to
products from those of other firms. quantity demanded at any given price. a decrease in the demand for the
(p. 672) (p. 51) other good. (p. 53)
break-even price the market price at change in supply a shift of the supply concentration ratios measure the
which a firm earns zero profits. curve, which changes the quantity sup- percentage of industry sales account-
(p. 592) plied at any given price. (p. 60) ed for by the “X” largest firms.
budget balance the difference between checkable bank deposits bank accounts (p. 573)
tax revenue and government spending. on which people can write checks. constant returns to scale long-run
A positive budget balance is referred to (p. 231) average total cost is constant as output
as a budget surplus; a negative budget classical model of the price level a increases. (p. 563)
balance is referred to as a budget model of the price level in which the consumer price index (CPI) a measure
deficit. (p. 223) real quantity of money is always at its of the cost of a market basket intended
budget constraint the cost of a con- long-run equilibrium level. This model to represent the consumption of a
sumer’s consumption bundle cannot ignores the distinction between the typical urban American family of four.
exceed the consumer’s income. short run and the long run but is use- It is the most commonly used meas-
(p. 514) ful for analyzing the case of high ure of prices in the United States.
budget deficit the difference between inflation. (p. 322) (p. 144)
tax revenue and government spending Coase theorem the proposition that consumer spending household spending
when government spending exceeds even in the presence of externalities an on goods and services from domestic
tax revenue. (p. 223) economy can always reach an efficient and foreign firms. (p. 103)
budget line all the consumption bundles solution as long as transaction costs consumer surplus a term often used to
available to a consumer who spends are sufficiently low. (p. 728) refer both to individual consumer sur-
all of his or her income. (p. 514) collusion cooperation among produc- plus and to total consumer surplus.
budget surplus the difference between ers to limit production and raise prices (p. 485)
tax revenue and government spending so as to raise one another’s profits. consumption function an equation
when tax revenue exceeds government (p. 639) showing how an individual house-
spending. (p. 223) command economy industry is publicly hold’s consumer spending varies with
business cycle the short-run alterna- owned and a central authority makes the household’s current disposable
tion between economic downturns, production and consumption deci- income. (p. 162)
known as recessions, and economic sions. (p. 2) consumption possibilities the set of all
upturns, known as expansions. (p. 10) commercial bank a bank that accepts consumption bundles that are afford-
capital manufactured goods used to deposits and is covered by deposit able, given a consumer’s income and
make other goods and services. (p. 3) insurance. (p. 257) prevailing prices. (p. 514)
capital inflow the net inflow of funds commodity-backed money a medium of contractionary fiscal policy fiscal policy
into a country; the difference between exchange that has no intrinsic value that reduces aggregate demand by
the total inflow of foreign funds to whose ultimate value is guaranteed by decreasing government purchases,
the home country and the total out- a promise that it can be converted into increasing taxes, or decreasing trans-
flow of domestic funds to other coun- valuable goods on demand. (p. 233) fers. (p. 205)
tries. A positive net capital inflow rep- commodity money a medium of contractionary monetary policy mone-
resents funds borrowed from foreign- exchange that is a good, normally gold tary policy that, through the raising of
ers to finance domestic investment; a or silver, that has intrinsic value in the interest rate, reduces aggregate
negative net capital inflow represents other uses. (p. 233) demand and therefore output.
funds lent to foreigners to finance for- common resource a resource that is (p. 310)
eign investment. (p. 223) nonexcludable and rival in consumption. convergence hypothesis a theory of
cartel an agreement among several (p. 749) economic growth that holds that
producers to obey output restrictions comparative advantage the advantage international differences in real GDP
in order to increase their joint profits. conferred if the opportunity cost of per capita tend to narrow over time
(p. 639) producing the good or service is lower because countries with low GDP per
central bank an institution that over- for another producer. (p. 26) capita generally have higher growth
sees and regulates the banking system compensating differentials wage dif- rates. (p. 383)
and controls the monetary base. ferences across jobs that reflect the copyright the exclusive legal right of
(p. 253) fact that some jobs are less pleasant or the creator of a literary or artistic
chain-linking the method of calculat- more dangerous than others. (p. 711) work to profit from that work; like a
ing changes in real GDP using the competitive market a market in which patent, it is a temporary monopoly.
average between the growth rate cal- there are many buyers and sellers of (p. 572)
culated using an early base year and the same good or service, none of cost (of potential seller) the lowest
the growth rate calculated using a late whom can influence the price at which price at which a seller is willing to sell
base year. (p. 115) the good or service is sold. (p. 48) a good. (p. 489)