Factor market: Supply and demand for factors of production.
Factors of demand: The price of the good in question, plus other things that determine the level of demand, called determinants of demand: consumer income, consumer tastes, the prices of complements, the prices of substitutes, consumer expectations, and the number of potential buyers. The price of the good in question is plotted on the supply and demand diagram, so any change in price would involve a movement along the demand curve. The determinants of demand are not plotted on the supply and demand diagram, so any changes in any of them would involve the demand curve being shifted.
Factors of production: Resources used in the production of goods and services: land, labor, and capital. Some economists classify entrepreneurship as a fourth factor of production while other economists classify entrepreneurship as a special class of labor.
Factors of supply: The price of the good in question, plus other things that determine the level of supply, called determinants of supply: the prices of resources, technology and productivity, expectations of producers, the number of suppliers, and the prices of alternative goods and services that the firm can produce (opportunity costs). The price of the good in question is plotted on the supply and demand diagram, so any change in price would involve a movement along the supply curve. The determinants of supply are not plotted on the supply and demand diagram, so any changes in any of them would involve the supply curve being shifted. Fallacy of composition: The fallacy of logic that involves saying that what applies to one will also apply to many.
Federal funds rate: The interest rate charged for overnight borrowing between banks in the United States.
Federal Reserve System: The central bank of the United States.
Fiat money: Currency that is not backed by any commodities, but rather is only backed by the faith and credit of the issuing government. Also called fiduciary money.
Fiduciary money: Currency that is not backed by any commodities, but rather is only backed by the faith and credit of the issuing government. Also called fiat money.
Final goods and services: Goods and services available to the ultimate consumer.
Financial account: The balance of payments account representing the flow of money between nations.
Financial capital: Financial backing in the form of personal savings, stocks, bonds, bank loans, etc., used for the costs of a business.
Financial intermediary: An organization, such as a bank, that accepts deposits and makes loans.
Firm: A private organization that produces goods and/or services. The term as used here is interchangeable with business firm, company, enterprise, business, and producer.
Fiscal policy: Government policy regarding government spending and taxing decisions. Often discussed in terms of discretionary fiscal policy, or policy designed to produce a specific economic outcome.
Fixed cost: A cost that does not change with the level of output. Fixed costs only exist in the short run, the time frame in which one or more of the factors of production cannot be changed.
Fixed income: Personal income that is set at a specified amount, and can only be changed if it is indexed for inflation. Includes such income types as pension payments and Social Security payments.
Flow concept: A flow is something that is measured over a period of time rather than at one specific point in time, which would be a stock concept. For example, standard accounting statements include an income statement, which is a flow concept, and a balance sheet, which is a stock concept.
Foreign exchange: Economic activity between people in different countries.
Foreign exchange market: A global market in which people trade one currency for another. Fractional reserve system: A system in banking in which banks are allowed to loan out an amount equal to a fraction of its reserves.
Free good: Something that there would be enough of if it was free. A good that is not scarce.
Free market: A market where transactions occur voluntarily, without government interference.
Frictional unemployment: Unemployment caused by a time lag between the time a person begins searching for a job and the time that the person is hired for a job.
Full employment: Old term for the natural rate of unemployment. It is still used in some text books.
Functions of money: What characterizes a money economy as opposed to a barter economy: medium of exchange, unit of account, and store of value.
Game theory: A branch of mathematics often used in economics to explain strategic behavior.
GDP: Gross domestic product. The market value of all final goods and services produced in a year within a country’s borders.
GDP deflator: A price index used in the calculations for real GDP. Also known as a GDP price index.
GDP gap: The amount by which actual GDP is below potential GDP. Also known as a GDP output gap or an output gap.
GDP output gap: The amount by which actual GDP is below potential GDP. Also known as a GDP gap or an output gap.
GDP price index: A price index used in the calculation for real GDP. Also known as a GDP deflator.
GDPPI: GDP price index. A price index used in the calculation for real GDP.
Global economy: The concept that economies around the world are increasingly interdependent; Globalization.
Globalization: The concept that economies around the world are increasingly interdependent; Global economy.
Gold standard: An economy in which the value of the currency is tied to the value of gold. The currency can be exchanged for an equal value of gold upon demand.
Goods: Something that people prefer to have more of than less.
Goods and services: A term used in economics meaning the output of firms. Often the term goods is used interchangeably with goods and services in order to avoid repetition in a discussion.
Government intervention: Any government involvement in economic activity.
Government bonds: A method that governments use to finance expenditures. The government issues bonds to the public in order to finance deficit spending. Outstanding bonds represent the government’s debt.
Government purchases: Government spending for the purchase of goods and services. Not all government spending is included: transfer payments are excluded.
Government sector: The role that the government plays in the economic activity of a country. Government transfer payments: Payments made by governments to one group of people, financed by taxing a different group of people.
Great Depression: The deep worldwide economic downturn that lasted from the late 1920s through much of the 1930s. The Great Depression could not be explained by classical economic theory, so new economic schools of thought were developed, starting with Keynesian Economics.
Gross domestic product: The market value of all final goods and services produced in a year within a country’s borders.
Gross investment: Total spending by businesses on the factors of production. The difference between gross investment and net investment is depreciation. Gross investment is considered to be interest-sensitive. Also called gross private domestic investment.
Gross national product: The total value of all goods and services produced by a nation’s citizens, regardless of which nation the production takes place in. Gross private domestic investment: Total spending by businesses on the factors of production. The difference between gross investment and net investment is depreciation. Gross investment is considered to be interest-sensitive.