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Introduction to Business BUSN115 Chapter 2 Vocabulary
Economics
The study of how society choose to employ resources to produce goods and services and distribute
them for consumption among various competing groups and individuals.
Macroeconomics
The part of economics study that looks at the operation of a nation's economy as a whole.
Microeconomics
The part of economics study that looks at the behavior of people and organizations in particular
markets.
Recourse Development
The study of how to increase resources and to create the conditions that will make better use of those
resources.
Invisible Hand
A phrase coined by Adam Smith to describe the process that turns self-directed gain into social and
economic benefits for all.
Brain Drain
The loss of the best and brightest people to other countries.
Business Cycles
The periodic raises and falls that occur in economies over time.
Capitalism
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An economic system in which all or most of the factors of production and distribution are privately
owned and operated for profit.
Command Economies
Economic system in which the government largely decides what goods and services will be produced,
who will get them, and how the economy will grow.
Communism
An economic and political system in which the government make almost all economic decisions and
owns almost all major factors of production.
Consumer Price Index (CPI)
Monthly statistics that measure the pace of inflation or deflation.
Deflation
A situation in which prices are declining.
Depression
A severe recession, usually accompanied by deflation.
Disinflation
A situation in which price increases are slowing ( the inflation rate is declining).
Fiscal Policy
The federal government's efforts to keep the economy stable by increasing or decreasing taxes or
government spending.
Free-market Economies
Economic system in which the market largely determines what goods and services get produced, who
gets them, and how the economy grows.
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Gross Domestic Product (GDP)
The total value of final goods and services produced in a country in a given year.
Inflation
A general rise in the prices of goods and services over time.
Keynesian Economic Theory
The theory that a government policy of increasing spending and cutting taxes could stimulate the
economy in a recession.
Market Price
The price determined by supply and demand.
Mixed Economies
Economic system in which some allocation of resources is made by the market and some by the
government.
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Monetary Policy
The management of money supply and interest rates by the Federal Reserve Bank.
Monopoly
A degree of competition in which only one seller controls the total supply of a product or service and
sets the price.
National Debt
The sum of government deficits over time.
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Oligopoly
A degree of competition in which just a few sellers dominate the market.
Perfect Competition
The degree of competition in which there are many sellers in a market, and none is large enough to
dictate the price of a product.
Producer Price Index (PPI)
An index that measures price at the wholesale level.
Recession
Two or more consecutive quarters of decline in the GDP.
Socialism
An economic system based on the premise that some, if not most, basic businesses should be owned by
the government so that profits can be more evenly distributed among the people.
Stagflation
A situation when the economy is slowing but prices are going up anyhow.
Unemployment Rate
The number of civilians at least 16 years old who are unemployed and tried to find a job within the prior
four weeks.
Monopolistic Competition
The degree of competition in which many sellers produce very similar products that buyers nevertheless
perceive as different.

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