|
N |
| NAIRU |
Think of this as "how low can you go," meaning how low can the unemployment rate go before it triggers inflation. |
| Nash equilibrium |
The key is what strategy each player chooses, based on what the others choose. |
| Natural monopoly |
The idea here is that monopoly is the "natural" result in the industry due to its characteristics, as, for example, significant economies of scale. |
| Natural rate of population increase |
For example, if the birth rate is 5%, and the death rate is 3%, then the population is growing by 2%. |
| Near monies |
While these items cannot be spent, they are easily transformed into a something spendable. |
| Net exports |
Remember, net means a subtraction. |
| Net taxes |
Remember, net means that something has been subtracted. In this case, transfer payments are subtracted from the tax revenues collected. |
| Nominal wage rate |
"Nominal" as in "name" or what the wage appears to be in money. |
| Nonexcludable |
How would you exclude someone from the protection of our national defense system? |
| Nonlabor or nonwage income |
For example, think of people who win a lottery and decide to stop working. Okun's law: In fact, it has not turned out to be a "law." The economy is far too complex for there to be such a simple and stable relationship between two macroeconomic variables. Permanent income: What people expect their income will be in the future, as opposed to what it is now. Plant-and-equipment investment: "Plant" is another word for a factory; equipment refers to tools, computers, etc. Productivity or labor productivity: For example, if one lab technician can review 20 slides in an hour, that would be the person's productivity. Real wage rate: What the wage in money terms can really buy. Unconstrained supply of labor: In other words, without any constraint from the lack of availability of work at the current wage rate. |
| Nonrival in consumption |
If you and a friend share a pizza, the more one of you eats, the less there is for the other person; that's rival in consumption. This is not true with national defense; there is not "less army" for you because it is also protecting your friend! |
| Nonsynchronization of income and spending |
For example, a person may be paid only once a month but has to buy groceries every week. |
| Normal goods |
These are most of the goods that we buy, and because they are "goods," if we had more money, we'd buy more of them. |
| Normal rate of return |
If an owner or investor can't earn as big of a return as he or she could get elsewhere, why would they own or invest? |
| Normative economics |
This approach deals with what "should" be; two people might agree on the facts, for example, on how much money the U.S. government spends on education, but could disagree as to whether that is enough or too much money. |
| North American Free Trade Agreement (NAFTA) |
By 1998 most economists agreed that it had led to expanded employment opportunities on both sides of the border. |
|
P |
| Pareto efficiency or Pareto optimality |
The condition for allocative efficiency defined by the economist Vilfredo Pareto. |
| Partial equilibrium analysis |
This means considering markets in isolation without examining how changes in one market may affect others. |
| Patents |
The idea is that, if a firm puts money into research and development, it should be able to profit from its effort for a period of time; otherwise, there would be less of an incentive to develop new products or processes. |
| Perfect competition |
The best examples of this kind of industry structure are those of agriculture if there are lots of small farms all growing the same crop. |
| Perfect knowledge |
The idea here is that someone could know everything they need to know in making a purchasing decision so that the decision would be the best possible. |
| Perfect substitutes |
Two products that are exactly the same; an example would be one producer's low fat (1%) milk as compared to that of another producer. |
| Perfectly contestable market |
The idea here is that the market interactions don't depend just on what firms are already in the market but also on which ones may enter. |
| Perfectly elastic demand |
When the demand curve is horizontal. |
| Perfectly inelastic demand |
When the demand curve is vertical, it means that the amount of the product purchased will be exactly the same whether the price goes up or down. |
| Phillips curve |
As the economy moves closer to capacity output, the price level rises more and more. |
| Physical or tangible capital |
These are things that can be touched, like buildings. |
| Planned aggregate expenditure (AE) |
What consumers and businesses intend to spend added together. |
| Policy mix |
This is a question of whether the government should use more fiscal policy relative to monetary policy (or vice versa) to affect the economy. |
| Positive economics |
This approach deals with the facts, with what is. For example, we can find data on how much money the U.S. government spends on education. |
| Post hoc, ergo propter hoc fallacy |
Just because one event happens after another doesn't mean it was caused by the first event. For example, I turn on the television to watch my favorite baseball team that has been on a 10-game winning streak, none of which I have seen on television. They lose this game. Did they lose because I was watching them on television? |
| Potential output or potential GDP |
What the economy is capable of producing (think of the phrase "living up to one's potential"). |
| Poverty line |
An income number that represents the cutoff point for determining who is categorized as poor. |
| Price |
For most goods purchased by consumers in the United States, this is the dollar amount probably printed on a tag on an item. |
| Price ceiling |
A "lid" or maximum limit set on the price; the purpose is usually so that the product does not become too expensive. |
| Price elasticity of demand |
The law of demand tells us that people buy more at lower prices and less at higher prices, but this helps us assess how much more or less. Some products will go on sale, and people will rush out to buy them; others don't evoke as much response. |
| Price feedback effect |
Price increases can trigger other price increases. |
| Price leadership model |
Like a game of "follow the leader," one firm changes its price and the others follow suit. |
| Price rationing |
If the price of a product increases, some consumers will choose not to buy it any longer, or will buy less. Others will still be willing to buy even at the higher price. Hence the higher price "rations" or divides up the available amount of the product to those most willing to pay. |
| Price surprise |
The price is not what some worker or firm thought it was going to be; therefore, they are surprised, and they react to what they think is the new situation. |
| Principle of neutrality |
A tax that does not distort decisions is better than one that does. |
| Principle of second best |
A tax that causes distortions may correct other distortions and actually improve efficiency (two wrongs may in fact make a right?). |
| Private goods |
These are most of the goods that we consume. They are consumed by the person who pays for them. |
| Privately held federal debt |
That part of the government's debt that is not held by the government itself. |
| Producers |
Remember, these are not just businesses; governments produce services, and households may produce things for themselves too. |
| Product differentiation |
As the words suggest, this means making your product different in the eyes of consumers. |
| Product or output markets |
In these markets, firms offer their goods and services for sale, and households look to buy those goods and services. |
| Production |
This is the process in which "ingredients" become goods and services. |
| Production function or total product function |
The equation that relates the inputs to the output. |
| Production possibility frontier |
The word "frontier" in the name suggests that it represents a boundary, the idea of going as far as one can. In this case, it means producing as much as the society can. |
| Production technology |
The relationship between how much of the inputs go in and how much of the outputs come out. |
| Productivity of an input |
Literally, what the input is capable of producing. |
| Profit |
When a firm has greater revenues than costs. |
| Property income |
For example, if you owned a piece of land and rented it out, that property would be providing you with rental income. Similarly, if you have a savings account at a bank that pays interest, that property is providing you with interest income. |
| Protection |
A domestic industry or sector of the domestic economy is "protected" from foreign competition. |
| Public assistance or welfare |
The biggest cash transfer payment program in the United States; it is aimed specifically at the poor. |
| Public choice theory |
Public officials act in their own self-interest instead of that of the public. |
| Public goods or social goods |
Other examples are police protection, preservation of wilderness lands, and public health. |
| Public (social or collective) goods |
An example is national defense. |
| Purchasing-power-parity theory |
For example, if a pound of salt costs 10 pesos in Mexico and $1 in the United States, then the equilibrium exchange rate should be 10 pesos to one dollar. (Think of the mathematical rule that says if A = B and C = B then A = C.) |
| Pure monopoly |
Note all the parts of this definition because they are all important. |
| Pure rent |
Most of us tend to associate rent with apartments or maybe cars. In economics, the term has a particular use, and its association with land may be confusing. |
|
R |
| Rational-expectations hypothesis |
This implies that people use all available information in forming their expectations (not just what happened in the past). |
| Ration coupons |
To obtain the good, one must pay for it but must also have a coupon that entitles the consumer to make the purchase. An example would be concerts where the would-be ticket buyers have to first obtain a bracelet (usually from a music store) and then with the bracelet they can pay money for the tickets. |
| Rawlsian justice |
If we all believed we could end up poor, then we as a society would have a much greater commitment to taking care of the poor. |
| Real business cycle theory |
Attempts to explain fluctuations in real output. |
| Real wealth or real balance effect |
Changes in the price level alter the real value (what it is worth in terms of what it can buy) of what a consumer is holding as wealth or the consumer's balances in things like savings accounts. That then affects spending behavior. |
| Relative-wage explanation of unemployment |
The key idea here is that workers don't look just at how much their wage is in terms of money but how it compares to that of others. |
| Rent-seeking behavior |
Remember that "rent" refers to payments to factors of production that are in strictly limited supply. |
| Required reserve ratio |
For example, if a bank has $1,000,000 in deposits, and the reserve ratio is 10 percent, the amount of its reserves is required to be $100,000. |
| Reserves |
Just as you or I would have a deposit at a commercial bank, those banks have deposits at the Fed. |
| Resources or inputs |
Think of these as the ingredients, what goes "in" to the production process. |
| Run on a bank |
Think of everyone running to the bank to get their funds out. |
