Economic Stablization Act a $700 billion bailout plan created to stabilize the nation's economy and restore confidence in the banking and financial industries Free Enterprise the system of business in which individuals are free to decide what to produce, how to produce it, and at what price to sell it Cultural (or workplace) Diversity differences among people in a work force owing to race, ethnicity, and gender Business the organized effort of individuals to produce and sell, for a profit, the products and services that satisfy society's needs Profit what remains after all business expenses have been deducted from sales revenue Stockholders all the different people or groups of people who are affected by the policies and decisions made by an organization Economic the study of how wealth is created and distributed Microeconomics the study of the decisions made by individuals and businesses Macroeconomics the study of the national economy and the global economy Economy the way in which people deal with the creation and distribution of wealth Factors of Productions resources used to produce goods and services Entrepreneur a person who risks time, effort, and money to start and operate a business Capitalism an economic system in which individuals own and operate the majority of businesses that provide goods and services Invisible Hand a term created by Adam Smith to describe how an individual's own personal gain benifits others and a nation's economy Market Economy an economic system in which businesses and individuals decide what to produce and buy, and the market determines quantities sold and prices Mixed Economy an economy that exhibits elements of both capitalism and socialism Consumer Products goods and services purchased by individuals for personal consumption Command Economy an economic system in which the government decides what goods and services will be produced, how they will be produced, for whom available goods and services will be produced, and who owns and controls the major factors of production Productivity the average level of output per worker per hour Gross Domestic Product (GDP) the total dollar value of all goods and services produced by all people within the boundaries of a country during a one-year period Inflation a general rise in the level of prices Deflation a general decrease in the level of prices Consumer Price Index (CPI) a monthly index that measures the changes in prices of a fixed basket of goods purchased by a typical consumer in an urban area Producer Price Index (PPI) an index that measures prices at the wholesale level Business Cycle the recurrence of periods of growth and recession in a nation's economic activity Recession two or more consecutive three-month periods of decline in a country's GDP Depression a severe recession that lasts longer than a recession Monetary Policies federal reserve decisions that determine the size of the supply of money in the nation and the level of interest rates Fiscal Policy government influence on the amount of savings and expenditures; accomplished by altering the tax structure and by changing the levels of government spending Federal Deficit a shortfall created when the federal government spends more in a fiscal year than it receives National Debt the total of all federal deficits Competition rivalry among businesses for sales to potential customers Perfect (or pure) Competition the market situation in which there are many buyers and sellers of a product, and no single buyer or seller is powerful enough to affect the price of that product Supply the quantity of a product that producers are willing to sell at each of various prices Demand the quantity of a product that buyers are willing to purchase at each of various prices Market Price the price at which that quantity demanded is exactly equal to the quantity supplied Monopolistic Competition a market situation in which there are many buyers along with a relatively large number of sellers who differentiate their products from the products of competitors Product Differentiation the process of developing and promoting differences between one's products and all similar products Oligopoly a market (or industry) in which there are few sellers Monopoly a market (or industry) with only one seller Natural Monopoly an industry requiring huge investments in captial and within which any duplication of facilities would be wasteful and thus not in the public interest Standard of Living a loose, subjective measure of how well off an indivdual or a society is mainly in terms of want satisfaction through goods and services Barter a system of exchange in which goods or services are traded directly for other goods and/or services without using money Domestic System a method of manufacturing in which an entrepreneur distriburtes raw materials to various homes, where families process them into finished goods to be offered for sale by the merchant entrepreneur Factory System a system of manufacturing in which all the materials, machinery, and workers reuiqred to manufacture a product are assembled in one place Specialization the separation of a manufacturing process into distinct tasks and the assignment of the different tasks to different individuals E-Business the organized effort of individuals to produc and sell through the internet, for a profit, the products and services that satisfy society's needs Sustainability meeting the needs of the present without comproming the ability of future generations to meet their own needs