Page 902 - Krugmans Economics for AP Text Book_Neat

G-6 GLOSSARY

industry supply curve a graphical rep- networks, and other parts of an econo- labor the effort of workers. (p. 3)
resentation that shows the relation- my, that provides the underpinnings, labor force the number of people who
ship between the price of a good and or foundation, for economic activity. are either actively employed for pay or
the total output of the industry for (p. 389) unemployed and actively looking for
that good. (p. 599) in-kind benefit a benefit given in the work; the sum of employment and
inefficient allocation of sales among form of goods or services. (p. 768) unemployment. (pp. 12, 119)
sellers a form of inefficiency in input a good or service used to pro- labor force participation rate the
which sellers who would be willing to duce another good or service. (p. 62) percentage of the population age 16
sell a good at the lowest price are not or older that is in the labor force.
always those who actually manage to interdependent the outcome (profit) (p. 119)
sell it; often the result of a price floor. of each firm depends on the actions
(p. 84) of the other firms in the market. labor productivity (productivity) out-
(p. 638) put per worker. (p. 372)
inefficient allocation to consumers a
form of inefficiency in which people interest rate the price, calculated as a land all resources that come from
who want a good badly and are willing percentage of the amount borrowed, nature, such as minerals, timber, and
to pay a high price don’t get it, and charged by lenders to borrowers for petroleum. (p. 3)
those who care relatively little about the use of their savings for one year. law of demand the principle that a
the good and are only willing to pay a (p. 222) higher price for a good or service,
low price do get it; often a result of a interest rate effect of a change in the other things equal, leads people to
price ceiling. (p. 80) aggregate price level the effect on con- demand a smaller quantity of that
sumer spending and investment spending good or service. (p. 50)
inefficiently high quality a form of
inefficiency in which sellers offer caused by a change in the purchasing law of supply other things being
high-quality goods at a high price even power of consumers’ money holdings equal, the price and quantity supplied
though buyers would prefer a lower when the aggregate price level changes. of a good are positively related.
quality at a lower price; often the A rise (fall) in the aggregate price (p. 60)
result of a price floor. (p. 85) level decreases (increases) the pur- leisure the time available for purposes
chasing power of consumers’ money
inefficiently low quality a form of holdings. In response, consumers try other than earning money to buy
inefficiency in which sellers offer low- to increase (decrease) their money marketed goods. (p. 696)
quality goods at a low price even holdings, which drives up (down) leverage the degree to which a
though buyers would prefer a higher interest rates, thereby decreasing financial institution is financing its
quality at a higher price; often a result (increasing) consumption and invest- investments with borrowed funds.
of a price ceiling. (p. 81) ment. (p. 174) (p. 258)
inelastic demand when the price elas- intermediate goods and services goods liability a requirement to pay income
ticity of demand is less than 1. (p. 467) and services, bought from one firm by in the future. (p. 224)
inferior good a good for which a rise another firm, that are inputs for pro- license gives its owner the right to
in income decreases the demand for duction of final goods and services. supply a good or service. (p. 88)
the good. (p. 54) (p. 106)
life insurance company a financial
inflation a rise in the overall price internalize the externality when indi- intermediary that sells policies guaran-
level. (p. 12) viduals take into account external costs teeing a payment to a policyholder’s
inflation rate the annual percent and external benefits. (p. 728) beneficiaries when the policyholder
change in a price index—typically the inventories stocks of goods and raw dies. (p. 228)
consumer price index. The inflation rate materials held to satisfy future sales. liquid describes an asset that can be
is positive when the aggregate price level (pp. 105, 168) quickly converted into cash without
is rising (inflation) and negative when inventory investment the value of the much loss of value. (p. 226)
the aggregate price level is falling change in total inventories held in the liquidity preference model of the inter-
(deflation). (p. 135) economy during a given period. Unlike est rate a model of the market for
inflation targeting an approach to other types of investment spending, money in which the interest rate is
monetary policy that requires that the inventory investment can be negative, determined by the supply and demand
central bank try to keep the inflation if inventories fall. (p. 168) for money. (p. 273)
rate near a predetermined target rate. investment bank a bank that trades in liquidity trap a situation in which
(p. 312) financial assets and is not covered by monetary policy is ineffective because
inflation tax the reduction in the deposit insurance. (p. 257) nominal interest rates are up against the
value of money held by the public investment spending spending on pro- zero bound. (p. 339)
caused by inflation. (p. 325) ductive physical capital, such as loan a lending agreement between an
inflationary gap exists when aggregate machinery and construction of struc- individual lender and an individual
output is above potential output. tures, and on changes to inventories. borrower. Loans are usually tailored to
(p. 196) (p. 106) the individual borrower’s needs and
infrastructure physical capital, such as job search when workers spend time ability to pay but carry relatively high
roads, power lines, ports, information looking for employment. (p. 127) transaction costs. (p. 226)