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Lessons for the Young Economist
Face value of a bond: The amount of money the bond issuer promises to pay to the holder of the bond at the maturity date. (Lesson 22) Fascism: An economic and political ideology that also seeks extensive government regulation of all resources in the service of the collective good, though fascism (unlike communism) allows private individuals to officially retain ownership of the factories and other capital goods. (Lesson 16) Federal Reserve: The central bank of the United States, founded in 1913. The “Fed” is responsible for U.S. monetary policy, and has the dual mandate of providing stable economic growth (which implies full employment) and low price inflation. (Lesson 21) Fiat money: Paper money that is not “backed” by anything. The only reason people accept fiat money in trade, is that they expect it to have purchasing power in the future. (Lesson 21) Fixed costs: Monetary expenses that do not increase when a business expands output. For example, a barber shop’s monthly water bill will be roughly the same whether it provides 1 haircut or 100 haircuts per day, and so this is a fixed cost. (Lesson 20) Flow variable: A concept that is measured over a period of time. For example, the flow rate of an irrigation pipe could be 100 gallons per minute. This measurement wouldn’t refer to the total amount of gallons contained in the entire pipe, but instead would refer to how many gallons passed through a particular section of the pipe every 60 seconds. (Lesson 22) Fractional Reserve Banking: The typical practice where banks do not keep all of their customers' deposits in the vault. In other words, all of the bank's customers have more money on deposit, than the bank has cash in the vault. (Lesson 12)