
YIELD: The rate of return on a financial asset. In some simple cases, the yield on a financial asset, like commercial paper, corporate bond, or government security, is the asset's interest rate. However, as a more general rule, the yield includes both the interest earned from an asset plus any changes in the asset's price. Suppose, for example, that a $100,000 bond has a 10 percent interest rate, such that the holder receives $10,000 interest per year. If the price of the bond increases over the course of the year from $100,000 to $105,000, then the bond's yield is greater than 10 percent. It includes the $10,000 interest plus the $5,000 bump in the price, giving a yield of 15 percent. Because bonds and similar financial assets often have fixed interest payments, their prices and subsequently yields move up and down as economic conditions change.
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Lesson 2: Economic Science  Unit 2: Theory

Page: 6 of 20

Economic theories are abstractions of the real world.
Three ways to abstract: Words. The earliest human method of abstraction was to represent objects with words. Words also represent ideas. But words can have different meanings.
 Graphs. Pictures, especially graphical pictures. Many economic theories are abstractly represented with graphs. A picture or graph can be less confusing that words.
 Equations. Graphs are twodimensional pictures of mathematical equations. Economic theories are often abstractly represented by equations. Equations can represent relationships between three or more things, like that for X, Y and Z:
Y = 3 + 2X  4Z






TOTAL PRODUCT AND MARGINAL PRODUCT A mathematical connection between marginal product and total product stating that marginal product IS the slope of the total product curve. If the total product curve has a positive slope (that is, is upward sloping), then marginal product is positive. If the total product curve has a negative slope (downward sloping), then marginal product is negative. If the total product curve has a zero slope (horizontal), then marginal product is zero.
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Approximately threefourths of the U.S. paper currency in circular contains traces of cocaine.


"If football taught me anything about business, it is that you win the game one play at a time."  Fran Tarkenton, Football Player


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