The equilibrium level of output and the price level where aggregate demand equals aggregate supply.
Macroeconomic indicators include Gross Domestic Product (GDP), Gross National Product (GNP), New Durable Goods orders, Retail Sales Indicator, New Home/Construction Sales, and Stock Prices.
Government actions designed to affect economic activity in an attempt to reach one or more macroeconomic goals, such as reducing unemployment and inflation. Also called economic policies, the most common types are fiscal policy and monetary policy.
The study of economics concerned with the economy as a whole, involving aggregate demand, aggregate supply, and monetary and fiscal policy.
A decision-making tool for comparing the additional or marginal benefits of a course of action to the additional or marginal costs.
The additional gain obtained from producing or consuming one more unit of a good or service.
Marginal Cost (MC)
The change in a producer’s total cost when output is increased by one unit.
Marginal Physical Product (MPP)
The additional quantity that is produced when one additional unit of a resource is used in combination with the same quantities of all other resources.
Marginal Propensity to Consume (MPC)
Change in consumption as a proportion of change in disposable income; the ratio of the change in consumption to the change in disposable income that produces the change in consumption.
Marginal Propensity to Save (MPS)
Change in saving as a proportion of change in disposable income; the ratio of the change in saving to the change in disposable income that produces the change in saving.
Marginal Resource Product
The amount by which production would decrease if one unit of the resource was withdrawn from production.
Marginal Revenue (MR)
The addition to a producer's total revenue resulting from the addition of one unit to total output.
The extra value or satisfaction that a consumer obtains from consuming one additional unit of output.
An economy that relies on a system of interdependent market prices to allocate goods, services and productive resources and to coordinate the diverse plans of consumers and producers, all of them acting according their self-interest. (Compare Command economy.)
The systematic overproduction or underproduction of some goods and services that occurs when producers or consumers do not have to bear the full costs of transactions they undertake. Usually related to externalities or the need for public goods.
Market Price Risk
The chance that the value of an investment will go down because of a change in supply and demand.
The degree of competition in a market, ranging from many buyers and sellers to few or even single buyers or sellers.
Places, institutions or technological arrangements where or by means of which goods or services are exchanged. Also, the set of all sale and purchase transactions that affect the price of some good or service.
Markets and Prices
Reaching a conclusion after considering alternatives and their results.
A federal health-care program that pays for certain medical and hospital costs for people aged 65 and older (and for some people who are under the age of 65 and disabled). Part of Social Security.
Something a person or organization plans to achieve from one to five years in the future.
The study of economics concerned with individual units of the economy such as households, firms and markets; with how prices and outputs are determined in those markets; and with how the price mechanism allocates resources and distributes income.
In a credit arrangement, the lowest amount that a borrower must pay toward a credit balance each month in order to avoid a penalty.
A school of thought that emphasizes the role changes in the money supply play in determining national income and price level. Monetarists argue that in the long run only changes in the money supply change the price level.
Changes in the supply of money and the availability of credit, initiated by a nation’s central bank (in the United States, by the Fed) to promote price stability, full employment and economic growth. (See also Federal Reserve.)
Monetary Policy and the Federal Reserve
A nation's central bank that is established to regulate the money supply and oversee the nation's banks. In the United States the Federal Reserve is the central bank.
Anything that serves as a medium of exchange, a standard of value, and a store of value.
Productive resources; what is required to produce the goods and services that people want; natural resources, human resources, capital goods and entrepreneurship.
Money Market Mutual Fund (MMMF)
A fund restricted by law to investing in the short-term money market. MMMFs provide low risk and low returns, but they maintain their investment value.
Narrowly defined by economists as currency in the hands of the public plus checking-type deposits; also called M1. Other definitions of the money supply (M2, M3) include various savings deposits, money market deposits and money market mutual fund balances.
Exclusive privilege or control over a service/commodity in a specific market.
A market structure in which slightly differentiated products are sold by a large number of relatively small producers, and in which the barriers to new firms entering the market are low.
A market structure in which there is a single supplier of a good or service. Also, a firm that is the single supplier of a good or service for which there are no close substitutes; also known as a monopolist.
A market situation in which there is only one buyer of a resource. Also, a firm that is the only buyer of a resource; also known as a monopsonist.
A special type of loan for the purchase of a house or other real estate.
The idea that a small increase in spending by consumers, businesses or government can cause large changes in economic production. The multiplier also works in reverse when spending decreases.
A pool of money used by a company to purchase a variety of stocks, bonds, or money market instruments. Provides diversification and professional management for investors.