3/30/12

Economics Glossary: F



Factor endowments – The initial quality and quantity of the land, labor, and natural capital of a given country.

Factor markets – Markets where factors of production are bought and sold (land, labor, capital, etc.)

Factors of production – The productive resources that are used as inputs in the production of goods and services.  The four factors of production are land, labor, capital and entrepreneurship.

Favored customers – Customers who receive special treatment from firms during situations of excess demand or a shortage.

Federal Budget – A yearly statement of the revenues and expenses of the federal government.  The document will show the surplus or deficit of the budget if one exists.

Federal debt – The total amount owed by the federal government.

Federal deficit – Federal government receipts minus expenditures (if negative).

Federal funds rate – The interest rate at which banks can borrow and lend reserves to each other.

Federal open market committee – The Federal Reserve’s main policy making committee responsible for the open market operations.

Federal Reserve System (Bank) – Commonly referred to as the FED, it is essentially the central bank for the United States.

Federal surplus – Federal government receipts minus expenditures (if positive).

Fertility rate – The birth rate.

Fiat money – Objects that are money because of laws enforced by governments that make them money.

Final good or service – A good or service that is produced for its final user and is not an intermediate good in the production of another good or service.

Financial intermediaries – Banks and other institutions that act as a link between those who lend and want to borrow money.

Fine-tuning – A Keynesian style belief that the government is able to control inflation and unemployment.

Firms – Commonly called businesses, these are institutions that organize the production of goods and services.

Fiscal drag – The negative effect on the economy that occurs when tax rates increase because people have moved into a higher tax bracket when earning more money.

Fiscal policy – Policies used by the federal government to stimulate or slow down the economy.  Includes the changing of taxes, transfer payments, and government expenditures on goods and services produced in the economy.  The goal of fiscal policy is usually to spur economy growth during a downturn (shift AD right), or slow down the economy during high inflation (shit AD left).

Fiscal stimulus – An increase in government spending or a decrease in tax revenues with the goal to increase real GDP (shift AD right).

Fixed-weight procedure – A procedure that uses weights from a given base year.

Floating exchange rates (also called market exchange rates) – When exchange rates are determined by the forces of supply and demand and are free from fixing or regulation.

Foreign direct investment – Investment in firms in a particular country by individuals who are citizens of another country.

Foreign exchange – All currencies other than the domestic currency for a particular country.

Four-firm concentration ratio – The percentage of the total revenue in an industry accounted for by the four largest firms within that industry.

Free enterprise – The freedom of individuals to start and operate a private business with the intent of earning a profit.

Frictional unemployment – The unemployment that occurs from people leaving and joining jobs and the labor force.  Frictional unemployment exists because it is impossible to instantly begin a job when you do not have one.  For example, if you graduate or quit a job to find a better job, you are frictionally unemployed.  Things like increased labor mobility (people moving) or assistance in finding jobs (like the internet or unemployment offices) can decrease frictional unemployment.

Full employment – When there is no cyclical unemployment or all unemployment is caused by frictional, seasonal and structural unemployment.

Full-employment equilibrium – When equilibrium real GDP is equal to potential GDP.

Full-time workers – The people who work 35 or more hours per week.

Functional distribution of income – The distribution of income among the factors of production (land, labor, capital and entrepreneurship).

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