No Free Lunch: Economics for a Fallen World: Third Edition, Revised

Appendix A Definition Index 478 Fiscal policy: the taxing and spending decisions of the government. (Chapter 18— Introduction) Fisher equation: i = r + πe (Chapter 12—Real vs. Nominal Interest Rates) Fixed costs: any cost incurred by a firm that does not vary with additional output, such as insurance for a facility. (Chapter 7—Short Run Costs) Fixed exchange rate: Under a fixed exchange rate currency regime, a country stands ready to redeem its currency at a fixed rate in some other currency (such as gold, dollars, or Euros). (Chapter 15—Exchange Rate Regimes) Flexible exchange rates: Under a flexible exchange rate regime, currencies are trades on open market exchanges, and the value is set by markets. (Chapter 15—Exchange Rate Regimes) Foreign exchange: foreign currencies used by private market participants to purchase foreign goods. Foreign exchange also refers to the markets where currencies are exchanged. (Chapter 15—Purchasing Power Parity) Free market: an economic system where decisions on resource allocation are made by individuals (as contrasted with government collective planning) and characterized by private property rights—in both consumer as well as capital goods—and the freedom to exchange. (Chapter 1—Economic Systems) Free rider: someone who can benefit from another’s purchase of a product; the product once produced cannot be excluded from those who do not pay. (Chapter 13—Public Goods) Frictional unemployment: the level of unemployment as people lose jobs from dying firms and industries. (Chapter 18—Application: Employment Post the 2007-08 Financial Crisis) Fundamental value: the present discounted value of an asset’s future cash flows. (Chapter 16—Valuing the Future—Concepts in Capital and Finance) G Gains from specialization: As workers specialize in a few tasks, they can become very efficient. This typically results in increased output per worker in addition to higher quality. (Chapter 2—Increased Production from the Division of Labor) Good of the first order: a consumer good. The end goal of all production is for goods and services that serve immediate wants. (Chapter 7—Structure of Production: Stages of Capital)