Page 900 - Krugmans Economics for AP Text Book_Neat

G-4 GLOSSARY

economies of scale long-run average equilibrium value of the marginal factor distribution of income the divi-
total cost declines as output increases. product the additional value pro- sion of total income among labor,
(p. 562) duced by the last unit of a factor land, and capital. (p. 681)
employed in the factor market as a
economy a system for coordinating a factor markets where resources, espe-
society’s productive and consumptive whole. (p. 712) cially capital and labor, are bought
activities. (p. 2) excess capacity when firms produce and sold. (p. 103)
efficiency wages wages that employers less than the output at which average federal funds market the financial mar-
set above the equilibrium wage rate as total cost is minimized; characteristic ket that allows banks that fall short of
an incentive for workers to deliver of monopolistically competitive firms. reserve requirements to borrow funds
better performance. (p. 130) (p. 665) from banks with excess reserves. (p. 263)
efficiency-wage model a model in excess reserves a bank’s reserves over federal funds rate the interest rate at
which some employers pay an above- and above the reserves required by law which funds are borrowed and lent in
equilibrium wage as an incentive for or regulation. (p. 249) the federal funds market. (p. 263)
better performance. (p. 714) exchange market intervention govern- fiat money a medium of exchange whose
efficient describes a market or econo- ment purchases or sales of currency in value derives entirely from its official
my that takes all opportunities to the foreign exchange market. (p. 432) status as a means of payment. (p. 234)
make some people better off without exchange rate the price at which cur- final goods and services goods and
making other people worse off. rencies trade, determined by the for- services sold to the final, or end, user.
(p. 17) eign exchange market. (p. 421) (p. 106)
elastic demand the price elasticity of exchange rate regime a rule governing financial account see balance of pay-
demand is greater than 1. (p. 467) policy toward the exchange rate. ments on the financial account.
(p. 431)
emissions tax a tax that depends on financial asset a paper claim that
the amount of pollution a firm pro- excise tax a tax on sales of a particu- entitles the buyer to future income
duces. (p. 732) lar good or service. (p. 499) from the seller. Loans, stocks, bonds,
employed people currently holding a excludable referring to a good, and bank deposits are types of financial
job in the economy, either full time or describes the case in which the suppli- assets. (p. 224)
part time. (p. 119) er can prevent those who do not pay financial intermediary an institution,
from consuming the good. (p. 743)
employment the total number of peo- such as a mutual fund, pension fund, life
ple currently employed for pay in the expansion period of economic insurance company, or bank, that trans-
economy, either full-time or part-time. upturn in which output and employ- forms the funds it gathers from many
(p. 12) ment are rising; most economic individuals into financial assets. (p. 227)
numbers are following their normal
entrepreneurship the efforts of entre- financial markets the banking, stock,
preneurs in organizing resources for upward trend; also referred to as a and bond markets, which channel
production, taking risks to create recovery. (p. 10) private savings and foreign lending into
new enterprises, and innovating to expansionary fiscal policy fiscal policy investment spending, government borrow-
develop new products and production that increases aggregate demand by ing, and foreign borrowing. (p. 105)
processes. (p. 3) increasing government purchases, financial risk uncertainty about future
decreasing taxes, or increasing trans-
environmental standards rules estab- outcomes that involve financial losses
lished by a government to protect the fers. (p. 205) and gains. (p. 225)
environment by specifying actions by expansionary monetary policy monetary firm an organization that produces
producers and consumers. (p. 731) policy that, through the lowering of goods and services for sale. (p. 103)
the interest rate, increases aggregate
equilibrium an economic situation in fiscal policy the use of taxes, govern-
which no individual would be better demand and therefore output. ment transfers, or government pur-
off doing something different. (p. 66) (p. 310) chases of goods and services to stabi-
equilibrium exchange rate the exchange explicit cost a cost that involves actu- lize the economy. (p. 176)
rate at which the quantity of a curren- ally laying out money. (p. 530) fiscal year the time period used for
cy demanded in the foreign exchange exports goods and services sold to much of government accounting, run-
market is equal to the quantity sup- other countries. (p. 105) ning from October 1 to September 30.
plied. (p. 423) external benefit an uncompensated Fiscal years are labeled by the calendar
equilibrium price the price at which benefit that an individual or firm con- year in which they end. (p. 300)
the market is in equilibrium, that is, fers on others; also known as positive Fisher effect the principle by which
the quantity of a good or service externalities. (p. 727) an increase in expected future inflation
demanded equals the quantity of that external cost an uncompensated cost drives up the nominal interest rate,
good or service supplied; also referred that an individual or firm imposes on leaving the expected real interest rate
to as the market-clearing price. (p. 66) others; also known as negative external- unchanged. (p. 283)
equilibrium quantity the quantity of a ities. (p. 726) fixed cost cost that does not depend
good or service bought and sold at the externalities external costs and external on the quantity of output produced. It
equilibrium (or market-clearing) price. benefits. (p. 727) is the cost of the fixed input. (p. 548)
(p. 66)