Individuals who would like to work but have given up looking for a job

The interest rate on the loans that the Fed makes to banks

The property whereby the benefit from an extra unit of an input declines as the quantity of the input increases

The property whereby the marginal product of an input declines as the quantity of the input increases

A severe recession

A decrease in the value of a currency as measured by the amount of foreign currency it can buy

A table that shows the relationship between the price of a good and the quantity demanded

Balances in bank accounts that depositors can access on demand by writing a check

A graph of the relationship between the price of a good and the quantity demanded

The fall in total surplus that results from a market distortion, such as a tax

The deviation of unemployment from its natural rate

The paper bills and coins in the hands of the public

The offset in aggregate demand that results when expansionary fiscal policy raises the
interest rate and thereby reduces investment spending

A decrease in investment that results from government borrowing

A measure of how much the quantity demanded of one good responds to a change in the price of another good, computed as the percentage change in quantity demanded of the
first good divided by the percentage change in the price

A study that compares the costs and benefits to society of providing a public good

The value of everything a seller must give up to produce a good

Spending by households on goods and services, with the exception of purchases of new
housing

A buyer’s willingness to pay minus the amount the buyer actually pays

A measure of the overall cost of the goods and services bought by a typical consumer

The property whereby long-run average total cost stays the same as the quantity of output changes

Two goods for which an increase in the price of one leads to a decrease in the demand for the other

A market with many buyers and sellers trading identical products so that each buyer and seller is a price taker

A difference in wages that arises to offset the nonmonetary characteristics of different jobs

The comparison among producers of a good according to their opportunity cost

A doctrine according to which jobs deemed comparable should be paid the same wage

Goods that are rival but not excludable

Money that takes the form of a commodity with intrinsic value

An agreement among firms in a market about quantities to produce or prices to charge

The process by which unions and firms agree on the terms of employment

The proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own

An economy that does not interact with other economies in the world

The theoretical separation of nominal and real variables

A visual model of the economy that shows how dollars flow through markets among households and firms

A Latin phrase, translated as “other things being equal,” used as a reminder that all variables other than the ones being studied are assumed to be constant

An institution designed to oversee the banking system and regulate the quantity of money in the economy

The property whereby countries that start off poor tend to grow more rapidly than countries that start off rich

A group of firms acting in unison

A large and sudden reduction in the demand for assets located in a country

The equipment and structures used to produce goods and services

An excess of government receipts over government spending

A shortfall of tax revenue from government spending

The limit on the consumption bundles that a consumer can afford

A certificate of indebtedness

The idea that people should pay taxes based on the benefits they receive from government services

A situation in which exports equal imports

Variable costs divided by the quantity of output

Total cost divided by the quantity of output

Total taxes paid divided by total income

Total revenue divided by the quantity sold

fixed costs divided by the quantity of output

Changes in fiscal policy that stimulate aggregate demand when the economy goes into a recession without policymakers having to take any deliberate action

An increase in the value of a currency as measured by the amount of foreign currency it can buy

A curve that shows the quantity of goods and services that firms choose to produce and sell at each price level

a curve that shows the quantity of goods and services that households, firms, and the government want to buy at each price level

total revenue minus total explicit cost

is the comparison among producers of a good according to their productivity

ability-to-pay principle

the idea that taxes should be levied on a person according to how well that person can shoulder the burden