2640650
| Question | Answer |
| macroeconomics | the study of a nation's economy as a whole; focuses on the issues of inflation, unemployment, and economic growth |
| GDP | the total market value of final goods and services produced within an economy in a given year |
| nominal GDP | the value of GDP in current dollars |
| real GDP | a measure of GDP that controls for changes in prices |
| economic growth | sustained increases in the real GDP of an economy over a long period of time |
| consumption expenditures | purchases of newly produced goods and services by households |
| private investment expenditures | purchases of newly produced goods and services by firms |
| gross investment | total new investment expenditures |
| depreciation | reduction in the value of capital goods over a one-year period due to physical wear and tear and also to obsolescence |
| net investment | gross investment minus depreciation |
| goverment purchases | purchases of newly produced goods and services by local, state, and federal governments |
| transfer payments | payments from governments to individuals that do not correspond to the production of goods and services |
| net exports | exports minus imports |
| export | a good or service produced in the home country and sold in another country |
| import | a good or service produced in a foreign country and purchased by residents of the home country |
| trade deficit | the excess of imports over exports |
| trade surplus | the excess of exports over imports |
| employed | individuals who do not currently have a job but are actively looking for work |
| labor force | total number of workers, both the employed and unemployed |
| unemployment rate | percentage of the labor force that is unemployed |
| unemployment rate | percentage of the labor force that is unemployed |
| labor force participation rate | the percentage of the population over 16 yrs of age that is in the labor force |
| discouraged workers | workers who left the labor force because they could not find jobs |
| cyclical unemployment | unemployment that occurs during fluctuations in real GDP |
| frictional unemployment | unemployment that occurs with the natural workings of the economy, such as workers taking time to search for suitable jobs and firms taking time to search for qualified employees |
| structural unemployment | unemployment that occurs when there is a mismatch of skills and jobs |
| natural rate of unemployment | the level of unemployment at which there is no cyclical unemployment, only frictional and structural |
| full employment | the level of unemployment that occurs when the unemployment rate is at the natural rate |
| unemployment insurance | payments unemployed people receive from the government |
| consumer price index | a price that measures the cost of a fixed basket of goods chosen to represent the consumption pattern of a typical consumer |
| cost-of-living adjustments | automatic increases in wages or other payments that are tied to the CPI |
| inflation rate | the percentage rate of change in the price level |
| deflation | negative inflation or falling prices of goods and services |
| anticipated inflation | inflation that is expected |
| menu costs | a type of anticipated inflation that is the costs associated with changing prices and printing new price lists when there is inflation |
| shoe-leather costs | a type of anticipated inflation that is costs of inflation that arise from trying to reduce holdings of cash |
| unanticipated inflation | inflation that is unexpected |
| hyperinflation | unanticipated inflation that is an inflation rate exceeding 50% a month |
| real GDP per capita | GDP per person adjusted for changes in prices. It is the usual measure of living standards across time and between countries |
| growth rate | the percentage rate of change of a variable from one period to another |
| rule of 70 | output will double in 70/x years, where x=percentage growth |
| convergence | the process by which poorer countries close up the gap with richer countries in terms of real GDP per capita |
| capital deepening | increases in the stock of capital per worker |
| technological process | more efficient ways of organizing economic affairs that allow an economy to increase output without increasing inputs |
| human capital | the knowledge and skills acquired by a worker through education and experience and used to produce goods and services |
| saving | income that is not consumed |
| growth accounting | a method to determine the contribution to economic growth from increased capital, labor, and technological progress |
| creative destruction | the view that a firm will try to come up with new products and more efficient ways to produce products to earn monopoly profits |
| short run in macroeconomics | the period of time in which prices do not change or do not change very much |
| aggregate demand curve | a curve that shows the relationship between the level of prices and the quantity of real GDP demanded |
| real-nominal principle | what matters to people is the real value of money or income not the face value of money or income |
| wealth effect | the increase in spending that occurs because the real value of money increases when the price level falls |
| the interest rate effect | with a given supply of money in the economy, a lower price level will lead to lower interest rates |
| the international trade effect | in an open economy, a lower price level will mean that domestic goods become cheaper relative to foreign goods, so the demand for domestic goods will increase |
| changes in the supply of money | an increase in the supply of money in the economy will increase aggregate demand and shift the curve to the right |
| changes in taxes | a decrease in taxes will increase AD and shift the curve to the right |
| changes in government spending | At any given price level, an increase in government spending will increase AD and shift the curve to the right. |
| multiplier | the ratio of the total shift in aggregate demand to the initial shift in aggregate demand |
| consumption function | the relationship between the level of income and consumer spending |
| autonomous consumption spending | the part of consumption spending that does not depend on income |
| marginal propensity to conusmer | the fraction of additional income that is spent |
| marginal propensity to save | the fraction of additional income that is saved |
| aggregate supply curve | curve that shows the relationship between the level of prices and the quantity of output supplied |
| long-run aggregate supply curve | a vertical aggregate supply curve that represents the idea that in the long run, output is determined solely by the factors of production |
| short-run aggregate supply curve | a relatively flat aggregate supply curve that represents the idea that prices do not change very much in the short run and that firms adjust production to meet demand |
| supply shocks | external events that shift the aggregate supply curve |
| stagflation | a decrease in real output with increasing prices |
| fiscal policy | changes in government taxes and spending that affect the level of gdp |
| expansionary policies | government policy actions that lead to increases in aggregate demand |
| contractionary policies | government policy actions that lead to decreases in aggregate demand |
| stabilization policies | policy actions taken to move the economy closer to full employment or potential output |
| inside lags | the time it takes to formulate a policy |
| outside lags | the time it takes for a policy to actually work |
| discretionary spending | the spending that congress authorizes on an annual basis |
| entitlement and mandatory spending | spending that congress has authorized by prior law, primarily providing support for individuals |
| medicare | health program for the elderly (entitlement spending) |
| medicaid | health program for the poor (entitlement spending) |
| social security | provide retirement support and a host of other benefits |
| supply-side economics | a school of thought that emphasizes the role that taxes play in the supply of output in the economy |
| Laffer Curve | a relationship between the tax rates and tax revenues that illustrates that high tax rates could lead to lower tax revenues if economic activity is severely discouraged |
| budget deficit | the amount by which government spending exceeds revenues in a given year |
| budget surplus | the amount by which government revenues exceed government expenditures in a given year |
| automatic stabilizers | taxes + transfer payments that stabilize GDP without requiring policy makers to take explicit action |
| permanent income | estimate of a household's long-run average level of income |
| money | any items that are regularly used in economic transactions or exchanges and accepted by buyers and sellers |
| medium of exchange | any item that buyers give to sellers when they purchase goods and services |
| barter | the exchange of one good or service for another |
| double coincidince of wants | the problem in a system of barter that one person may not have what the other desires |
| principle of voluntary exchange | a voluntary exchange between two people makes both people better off |
| unit of account | a standard unit in which prices can be stated and the value of goods and services can be compared |
| store of value | the property of money that holds that money preserves value until it is used in an exchange |
| commodity money | a monetary system in which the actual money is a commodity, such as gold or silver |
| gold standard | a monetary system in which gold backs up paper money |
| fiat money | a monetary system in which money has no intrinsic value but is backed up by the government |
| M1 | the sum of currency in the hands of the public, demand deposits, other checkable deposits, and traveler's checks |
| M2 | M1 plus other assets, including deposits in savings and loans accounts and money market mutual funds |
| balance sheet | an account statement for a bank that shows the sources of its funds as well as the uses of its funds |
| owners equity | the funds provided to the bank by its owners |
| reserves | the portion of banks' deposits set aside in either vault cash or as deposits at the federal reserve |
| require reserves | the specific fraction of their deposits that banks are required by law to hold as reserves |
| excess reserves | any additional reserves that a bank holds above required reserves |
| reserve ratio | the ratio of reserves to deposits total increase in checking account balance throughout all banks |
| money multiplier | the ratio of the increase in total checking account deposits to an initial cash deposit |
| central bank | a banker's bank, an official bank that controls the supply of money in the country |
| lender of last resort | a central bank is the lender of last resort, the last place, all others having failed, from which banks in emergency situations can obtain loss |
| monetary policy | the range of actions taken by the federal reserve to influence the level of GDP or inflation |
| federal reserve bank | one of the 13 regional banks that are an official part of the federal reserve system |
| federal open market committee | the group that decides on monetary policy: it consists of the 7 members of the board of governors plus 5 of 12 regional bank presidents on a rotating basis |
| board of governers of the federal reserve | the seven person governing body of the federal reserve system in Washington D.C. |
| money market | the market for money in which the amount supplied and the amount demanded meet to determine the normal interest rate |
| transaction demand for money | the demand for money based on the desire to facilitate transactions |
| principle of opportunity cost | what you sacrifice to obtain something |
| open market operations | the purchase or sale of US government securities by the Fed |
| open market purchases | feds purchase of government bonds from the private sector |
| open market sales | feds sale of government bonds to the private sector |
| discount rate | interest rate at which banks can borrow from the fed |
| federal funds market | market in which banks borrow and lend reserves to and from one another |
| federal funds rate | interest rate on reserves that banks lend each other |
Want to create your own Flashcards for free with GoConqr? Learn more.