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Flashcards in Section 101 Unit 8 Deck (42):


Is the amount of a good or service available for purchase by suppliers at a given price.



Is the quantity of goods and services consumers want to purchase at a give price.


Substitution Effect

When the price of a good rises, consumers substitute other similar lower-priced goods for it.


Income Effect

When the price of a good rises, consumers will discontinue or significantly reduce their use of it, unless their incomes are also rising at a comparable pace.


Price Elasticity

Is the responsiveness of the quantity of a good demanded to changes in the good's price, all other economic forces remaining constant.



Not susceptible to price change. Still demanded regardless of price.



The price of a good or service and how much will be produced is indicated at the intersection of the supply and demand curves.


Gross Domestic Product GDP

Is the total market value of all goods and services produced within the domestic United States over the course of a given year, including income generated domestically by a foreign firm. (based on geographic location)


Gross National Product GNP

Is the total market value of all goods and services produced by US residents' labor and property. (based on ownership)


Monetary Policy

One of two methods to influence the level of future economic activity. Is conducted by the Federal Reserve Board and attempts to affect economic activity by raising and lowering short-term interest rates because they affect consumer spending, or demand.


Fiscal Policy

The second of the two methods to influence the level of future economic activity. It is conducted by congress and also attempts to influence consumer demand but does so through government policies.


Monetary Policy
Three Methods

1. Lowering or increasing the amount of required reserves that must be held by banking members of the Federal Reserve System.
2. Raising or lowering the Fed's discount rate (the amount of interest that is charged by one of the 12 Federal Reserve Banks to other Banks)
3. Engaging in open-market operations, which is the buying or selling of government securities in the open marketplace by the Federal Reserve Board.


Open Market Operations by the FED

An easy way to remember buying securities drive down the interest rates and increasing money supply or selling government securities to drive up the interest rates and decrease money supply is through BEST. Buy-Easy-Sell-Tight


Discount Rate

The FED only directly controls one interest rate, The Discount Rate. When the FED raises the discount rate, it increases the borrowing cost and discourages member banks from borrowing funds, resulting in a contraction of the money supply. Just the opposite if they lower the discount rate. Increase the money supply allowing for more lending.


Federal Fund Rate

Is the interest rate charged on short-term borrowing (often overnight to fulfill reserve requirements) between banks; the Fed targets this rate in all of its interest rate decisions but, again, does not directly control it.


Prime Rate

Is the rate of interest charged by commercial banks to its best business and personal customers. This rate is set directly by the commercial bank lending it's money; however, it normally is about three percentage points higher than the federal fund rate. Thus being connected to the the Feds still.


Exercising Fiscal Policy

Two tools are:
1. The power to tax
2. The power to spend


Business Cycle

Reflects movements in economic activity and is a reflection of concepts of supply and demand. Peak, Contraction, Trough, Expansion.



Occurs when the GDP has experienced a decrease in real terms for two consecutive quarters or a minimum of six months from a baseline of zero.



Is when the GDP has experienced a decrease in real terms for six consecutive quarters or a minimum of 18 months from a baseline of zero.


Leading Indicators

Are those that tend to precede actual economic change
1. housing starts
2. new claims for unemployment
3. bond yields
4. orders for durable goods
changes in investor sentiment


Coincident Indicators

Are those that occur simultaneously during the business cycle and confirm the stage that the economy is currently experiencing.
1. Unemployment
2. Industrial production
3. Level of personal Income
4. Amount of corporate profits


Lagging or Confirming Indicators

Are those that usually change after the economy has passed through on business cycle and is in another.
1. Prime rate of interest
2. Change in consumer price index, particularly for services
3. Amount of business and consumer loans outstanding
4. Average duration of unemployment



Denotes and increase in the general level of prices.


Rate of Inflation

Is the rate of change in the general price level.



Indicates a decline in the rate of inflation



Is a decline in the general price level and is often caused by a reduction in the money supply and consumer demand.



Occurs when inflation and unemployment rise and general growth of the economy is slow as business output falls.


Agent owes the principal five essential duties

1. Performance
2. Notification
3. Loyalty
4. Obedience
5. Accounting


Four duties of a principal to an agent

1. Compensation
2. Reimbursement and Indemnification
3. Cooperation
4. Safe Working Conditions


Chapter 13 Bankruptcy

Involves the adjustment of debts of an individual with regular income.


Chapter 7 Bankruptcy

Permits a debtor to claim either the federal exemptions or the exemptions that are available under state law.


Chapter 11 Bankruptcy

Reorganization. A voluntary or involuntary petition may be filed and the automatic stay and entry or order for relief provisions will apply. The debtor remains in possession and may continue to operate the debtor's business.


Consumer Credit Protection Act

Requires lenders, before extending credit, to disclose both the dollar amount of finance charges and the annual percentage rate APR, as well as other loan terms and conditions. Also, Limits consumer liability for a lost or stolen credit card to the lesser of them amount charged or a maximum of $50 per card.


Fair Credit Billing Act

Requires consumers to notify the creditor in writing of any billing errors within 60 days of the date they receive the billing statement. Creditors then have 30 days to respond to the consumer with respect to the possible billing error and 90 days to resolve the complaint.


Consumer Credit Reporting Reform Act

Requires credit bureau reports to include accurate, relevant, and recent information about the financial situation of credit applicants. Applicants who are denied credit must be told why and must be given the name and address of the reporting credit agency.


Equal Credit Opportunity Act

Prohibits credit discrimination on the basis of race, color, religion, national origin, gender, marital status, or age.


Fair Debt Collection Practices Act

Prohibits debt collectors from engaging in certain practices such as contacting a debtor at his place of employment if the employer objects, harassing or intimidating the debtor, or using false and misleading approaches.


Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD)

Was enacted to establish fair practices and to enable consumers to better understand the credit transactions they enter into.


Privacy Act of 1974

Regulates the types of personal information the federal government can collect and how it can be used. Written consent from an individual must be given before information regarding them may be disclosed.


Fair and Accurate Credit Transaction Act of 2003

Consumers can obtain a free credit report every 12 months from each of the three national credit reporting agencies, equinox, TransUnion, and Experian.



Involves the stealing of credit or debit card information by using a special storage device when processing these types of cards.