Glossary
A
absolute advantage:When one entity has a lower production cost (monetary) than another entity in the production of a
certain good or service.accounting profit:Total revenue minus total cost, not counting opportunity costs or the use of capital.adaptive expectations:Expectations or ideas formed that are based on information in the recent past.adding/added value:Creating output that is more valuable than the resources used to make the output.aggregate demand curve:A graphic illustrating the relationship between an economy’s output and the price level.aggregate expenditures:The sum total of government, household, business, and foreign spending. Consumption,
government, investment, and net exports expenditures make up aggregate expenditures.aggregate supply curve:A graphic illustrating the relationship between the price level and output for an economy.allocative efficiency:A condition in which firms are producing and distributing the exact amount of goods and services
that consumers are willing and able to purchase.annual return:The dividend plus any capital gained in a given year.antitrust policy:Government policies designed to promote competition and limit monopoly control to develop efficiency.appreciate:The increase in value of a currency, entity, or product due to the forces of supply and demand.arbitrage:Buying in a market in which the price is low and then selling in the market in which the price is higher. The
main idea is to profit from the price difference.asset:A good or service that is owned by a business, household, or government, such as machines, education, or loans
made to individuals.automatic stabilizer:An element of fiscal policy that changes automatically as income changes.autonomous consumption:Expenditures of households, regardless of the level of income households earn; consump-
tion that is independent of income.average fixed costs:Total fixed costs divided by the quantity produced.average product:Total product divided by the quantity of a specific input.average propensity to consume:The proportion of disposable income spent for consumption.average propensity to save:The proportion of disposable income saved.average revenue:Total revenue divided by output.average total cost: Total cost divided by the total output.average variable cost:Total variable cost divided by the quantity produced.23 53999X Gloss.qxd 1/23/04 10:31 AM Page 243