| Term | Definition |
| Ability to pay principal | States that citizens who can most afford them should pay taxes. |
| Bank | A financial organization that receives deposits, creates loans, and directly controls a significant part of the nation's money supply. |
| Capitalism | An economic system based on the private ownership of the means of production. |
| Choices | The decision to begin a business is yours alone to make, as long as some basic federal guidelines are met, i.e., health and safety. Freedom of choice is one of the main principles of the free enterprise system. |
| Command Economy | An economy based on the dictates of a central authority rather than individual choice. |
| Commercial Bank | A financial institution that accepts demand deposits and makes loans and provides other services for the public. |
| Competition | The rivalry between sellers in the same field. The competition is for customers and profit. Because of competition, businesses must provide the best product and best service the lowest price. |
| Consumer | A person who buys and uses goods and services. |
| Continuous Improvement | An important foundation of successful businesses. The company that continues to evaluate it’s product, either good or service, to improve it’s quality, performance, availability or price will be able to keep pace or even lead the competition. |
| Contract | A legally binding agreement between parties. |
| Contraction | The downward movement of the business cycle marked by decreased investment, profits, and consumer demand. |
| Copyright | The legal right to be the only publisher, producer, or seller of a particular piece of writing, art, or music. |
| Corporation | A form of business, requiring a government charter, that acts with specific powers separate from the people who own it, such as to sell stock in the company. |
| Cost of Living | The quantity of currency needed for a given standard of living. |
| Credit Union | A non-profit depository institution founded by the National Credit Union Association that was established to grant members of specific group, such as personnel of a company, with low-cost banking services. However, credit unions have increased their activities and now provide a majority of the services of traditional banks, including checkable deposits. |
| Customer | Someone who buys a good or service. |
| Debt | Total amount of money a party owes. |
| Defecit | When spending exceeds revenues. |
| Deficit Spending | A strategy of fiscal policy in which government spending exceeds receipts. The government then borrows enough money to make up the difference. |
| Demand | The amount of an item that buyers are willing and able to purchase at any and all prices. Normally, demand is greater at a lower price than at a higher price. |
| Demand Curve | A graph of the number of products wanted in association with price. Demand moves in the opposite direction of price. |
| Determinants | Things that cause supply and/or demand to change: such as, income, price, market, consumer preference, and availability to name a few. |
| Discount Rate | The interest rate charged by the Federal reserve on loans to banks and other financial institutions. |
| Excise Tax | A tax levied on the manufacture of a specific item (passed on to consumers usually in the form of a sales tax). |
| Expansion | The upward movement of the business cycle marked by increased investment, profits and consumer demand. |
| Expenditure | Money that we spend. |
| Factors of Production | Anything used in the production process, including land (natural resources), labor, capital and entrepreneurship; resources used to produce goods and services to satisfy consumer wants. |
| Federal Reserve System | An institution that serves as the central bank of the United States. |
| Fiscal Policy | The deliberate use of taxes and government spending to regulate economic activity. |
| Free Enterprise | An economic system based on the right of individuals and private companies to go into business for themselves with a minimum of government regulations. |
| GNP | (Gross Nation Product) is equal to the total amount spent by consumers, business investment, and the government- GNP = C+ I+ G. |
| Income Tax | A tax that is based one the amount of money earned by an individual. |
| Inflation | A persistent increase in the price of goods and services. |
| Interest Rate | The percentage or payment for using someone else’s money. |
| Law of Demand | The quantity of items demanded increases and decreases in the opposite direction from changes in price. At a lower price, people can afford to buy more of an item (and more frequently) than they can at a higher price. At lower prices, people tend to buy things as a substitute for something more expensive. |
| Law of Supply | The supply increases as prices increase and decreases as prices decrease. Those already in a business will try to increase production as a way of increasing their profits. The reason why quantity offered at a higher price will be greater is that other people will be attracted to the business. |
| Market | A condition which the forces of demand and supply interact to set the price at which transactions take place; location where goods and services are exchanged freely. |
| Market Economy | An economy based on free choice by consumers and producers. |
| Market Price | The price at which supply and demand are equal. The market price will remain unchanged as long as supply and demand remains unchanged. If there is an increase in demand or a decrease in supply, the market price will increase. If the opposite occurs, that is, if demand decreases and supply increases, the market price will decrease. |
| Mixed Economy | An economic system based on the principals of both free enterprise and government control. |
| Monetary Policy | A policy that attempts to regulate or control the supply of money and interest rates to stabilize the economy. |
| National Debt | The total amount of money that the federal government owes to its creditors. |
| Natural Resources | A factor of production that has not been changed or altered by people, such as soil, air, water, trees, animals, plants, sunlight, and minerals. Some are renewable such as trees and some are nonrenewable such as metals, oil, and coal. |
| Open-Market Operations | The buying and selling of government securities (i.e. bonds) by the Federal Open Market Committee. |
| Partnership | Businesses that are owned by more than one person. |
| Patent | The legal right to be the only person to make a new invention or use a method for a certain number of years. |
| Poll Tax | Fee paid by a voter in order to vote. |
| Price | Prices determine which goods and services will be produced and which will not. Prices also determine who will be able to enjoy goods and services, because only those who can afford to pay will be able to buy them. |
| Private Goods and Services | Owned and provided by individuals or small groups. These owners have the right to limit distribution and to prevent people from using them. |
| Private Property | Anything owned by an individual i.e. land, objects, and ideas. |
| Progressive Tax | A tax based on the ability to pay. |
| Proportional Tax | A tax that imposes the same rate of taxation on all incomes, regardless of income levels. |
| Public Goods and Services | Goods or services that the government provides for the well being of everyone because private production cannot meet the public demand. Most public goods and services can be used on an equal basis. Examples are national defense, federal highways, and public education. |
| Ratio | The relationship between two or more things in quantity, amount, or size. |
| Recession | The bottom of the business cycle marked by a period of low business activity and high unemployment. |
| Regressive Tax | A tax that takes a larger percentage from lower incomes than from higher incomes. |
| Reserve Requirement | A percentage of deposits that banks keep on hand or in the Federal Reserve Bank. |
| Retail | The sale of small quantities of goods to consumers for personal or household consumption. |
| Retail Business | A place of business for the purpose of marketing goods. |
| Sales Tax | A tax imposed on the purchase of certain items. |
| Savings and Loan Association | A depository organization set up by the Federal Home Loan Bank that was established to aid homeowners with low-cost mortgage loans using savings deposits. However, Savings and Loan Associations have expanded their activities and now provide most of the services of traditional banks, including checkable deposits. |
| Savings Bank | A bank in which savings or earnings are deposited and put at interest. |
| Savings Bond | A written promise by the government to repay borrowed money and at a future date. |
| Scarcity | The condition in the economy where wants are greater than the resources to satisfy them; the limits may be in number, variety, color, or size. |
| Sole Proprietorship | A business owned and controlled by a single individual. |
| Sovereignty | The consumer has the power or freedom to have the final say about which product to purchase and thus determine whether businesses succeed or fails. |
| Spreadsheet | A screen-oriented interactive application program which can process numerical data quickly and easily. |
| Status Quo | The existing state of affairs; satisfied with the current situation. |
| Supply | The quantity of a good or service that is offered for sale at all prices. More of an item will be offered for sale at a higher price than at a lower price. |
| Supply and Demand Schedule | A graph showing both the supply curve and the demand curve and their relationship to price. |
| Supply Curve | A graph of the number of products for sale in association with price. Supply moves in the same direction of price. |
| Trade-offs | Sacrifice made when resources used to produce one item cannot be used to produce another; choosing among alternative uses for available resources. |
| Trademark |