O circular flow model an economic model showing the

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o Circular Flow Model: An economic model showing the interaction of market participants, and the flow of resources and their impact on supply and demand in the factor and product markets. o Classical Growth Theory: A perspective in economics that highlights the importance of saving and investing in plants and equipment as the way to economic progress. o Classical Theory of Economics: A macroeconomic perspective in which a market economy is perceived as self-regulating and efficient. Intervention is not required for controlling inflation, unemployment, or growth; the market can stabilize itself.
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o Commercial paper: A short-term promissory note issued by a large finance corporation indicating that a certain amount of money plus interest will be paid back on demand. o Comparative advantage: A country's ability to produce a good or service at a lower opportunity cost than other market participants. o Consumer price index (CPI): A way of measuring the changes that occur in the average price of goods and services. o Consumption: The amount spent by consumers on final goods and services. o Consumption function: A math equation representing the rate of desired consumer spending at different levels, involving current consumption, non income consumption, the marginal propensity to consume, and disposable income. o Contractionary fiscal policy: Government strategy that is used to shift the aggregate demand curve leftward. It reduces government spending and/or increases taxes. The purpose is to stop demand-pull inflation. o Corporation: A state-chartered legal entity, in which the assets and liabilities remain separate from its owners. o Cost-push inflation: An increase in the general price level due to higher costs for factors of production, such as labor or raw materials, resulting in higher per-unit costs for goods and services. o Council of Economic Advisers (CEA): A group of three economic advisory members appointed by the President to provide economic analysis and advice on economic policy issues. o Currency: Coins and paper money that represent a financial asset to the bearer and for which, in the U.S., the Federal Reserve is liable. o Cyclical deficit: The part of the budget shortfall that exists because the economy is operating below its potential level of output. Also called passive deficit. o Cyclical surplus: The part of the budget excess (over expenditures) that exists because the economy is operating below its potential level of output. o Cyclical unemployment: Joblessness resulting from not enough jobs; it is also called deficient-demand joblessness. This is caused by a decline in the total spending, usually occurring during periods of economic recession. D o Deflation: A general decline in a nation's price level. o Demand: The ability and willingness to buy a specific amount of a product at different prices during a certain time period.
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