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Details Title: Economics Final Description: Ch 9 - 16, omit 12 Total Flash Cards: 127 Created: 11/23/2005 11:04:29	To study from this set of flash cards, or to create your own your own study flash cards, register HERE. If you are already a registered user, CLICK HERE.
Cards Term household Definition one or more persons who occupy a unit of housing Term consumption Definition household spending Term multinational business Definition a firm that owns and operates producing units in foreign countries Term investment Definition spending on capital goods to be used in producing goods and services Term imports Definition products that a country buys from other countries Term exports Definition products that a country sells to other countries Term trade surplus Definition the situation that exists when imports are less than exports Term trade deficit Definition The situation that exists when imports exceed exports Term net exports Definition The difference between the value of exports and the value of imports Term monetary policy Definition policy directed toward the control ofmoney and credit Term Federal Reserve Definition the central bank of the United States Term fiscal policy Definition policy directed toward government spending and taxation Term transfer payments Definition income transferred from one citizen who is earning income to another citizen who may not be Term budget surplus Definition the excess that results when government spending is less than revenue Term budget deficit Definition the shortage that results when government spening is greater than revenue Term private sector Definition households, businesses, and the international sector Term public sector Definition the government Term circular flow diagram Definition a model showing the flow of output and income from one sector of the economy to another Term gross domestic product (GDP) Definition the market value of all final goods and services produced in a year within the country Term national income accounting Definition the framework that summarizes and categories productive activity in an economy over a specific period of time, typically a year Term intermediate goods Definition goods that are used as inputs in the production of final goods and services Term value added Definition the difference between the value of the output and the value of the intermediate goods used in the production of that output Term inventory Definition the stock of unsold goods held by a firm Term capital consumption allowance Definition the estimated value of depreciation plus the value of accidental damage to capital stock Term depreciation Definition a reduction in value of capital goods over time due to their use in production Term indirect business taxes Definition taxes that are collected by businesses for a government agency Term net national product (NNP) Definition gross national product minus capital consumption allowance Term gross investment Definition total investment, including investment expenditures required to replace capital goods consumed in current production Term net investment Definition gross investment minus capital consumption allowance Term national income (NI) Definition net national product minus indirect business taxes Term personal income (PI) Definition national income plus income currently received but not earned, minus income currently earned but not received Term disposable personal income (DPI) Definition personal income minus personal taxes Term nominal GDP Definition a measure of national output based on the current prices of goods and services Term real GDP Definition a measure of the quantity of final goods and services produced, obtained by eliminatinf the influences of price changes from the nominal GDP statistics Term price index Definition a measure of the average price level in an economy Term GDP price index (GDPPI) Definition a broad measure of the prices of goods and services included in the gross domestic product. Term consumer price index (CPI) Definition a measure of the average price of goods and services purchased by the typical household Term cost of living adjustment (COLA) Definition an increase in wages that is designed to match increases in the prices of items purchased by the typical household. Term producer price index (PPI) Definition a measure of average prices received by producers Term foreign exchange Definition currency and bank deposits that are denominated in foreign money Term foreign exchange market Definition a global market in which people trade one currency for another Term balance of payments Definition a record of a country's trade in goods, services, and financial assets with the rest of the world Term double-entry bookkeeping Definition a system of accounting in which every transaction is recorded in at least two accounts and in which the debit total must equal the credit total for the transaction as a whole Term current account Definition the sum of the merchandise, services, investment income, and unilateral transfers accounts in the balance of payments Term balance of trade Definition the balance on the merchandise account in a nation's balance of payments Term capital account Definition the record in the balance of payments of the flow of financial assets into and out of a country Term business cycle Definition pattern of rising real GDP followed by falling real GDP Term recession Definition a period in which real GPD falls Term depression Definition a sever, prolonged economic retraction Term leading indicator Definition a variable that changes before real output changes Term coincident indicator Definition a variable that changes at the same time that real output changes Term lagging indicator Definition a variable that changes after real output changes Term unemployment rate Definition the percentage of the labor force that is not working Term discouraged workers Definition workers who have stopped looking for work because they believe no one will offer a job Term underemployment Definition the employment of workers in jobs that do not utilize their productive potential Term potential real GDP Definition the output produced at the natural rate of unemployment Term natural rate of unemployment Definition the unemployment rate that would exist in the absence of cyclical unemployment Term inflation Definition a sustained rise in the average level of prices Term nominal interest rate Definition the observed interest rate in the market Term demand-pull inflation Definition inflation caused by increasing demand for output Term cost-push inflation Definition inflation caused by rising costs of production Term real interest rate Definition the nominal interest rate minus the rate of inflation Term hyperinflation Definition an extremely high rate of inflation Term crowding out Definition a drop in consumption or investment spending caused by government spending Term discretionary fiscal policy Definition changes in government spending and taxation aimed at achieving a policy goal Term automatic stabilizer Definition an element of fiscal policy that changes automatically as income changes Term progressive tax Definition a tax whose rate rises as income rises Term regressive tax Definition a tax whose rate falls as income rises Term proportional tax Definition a tax whose rate is constant as income rises Term value-added tax (VAT) Definition a general sales tax collected at each stage of production Term money Definition anything that is generally acceptable to sellers in exchange for goods and services Term liquid asset Definition an asset that can easily be exchanged for goods and services Term currency substitution Definition the use of foreign money as a substitute for domestic money when the domestic economy has a high rate of inflation Term M1 money supply Definition financial assets that are the most liquid Term international reserve asset Definition an asset used to settle debts between governments Term international reserve currency Definition a currency held by a government to settle international debts Term Federal Deposit Insurance Corporation (FDIC) Definition a federal agency that insures deposits in commercial debts Term Eurocurrency market (offshore banking) Definition the market for deposits and loans generally denominated in a currency other than the currency of the country in which the transaction occurs Term international banking facility (IBF) Definition a division of a U.S. bank that is allowed to receive deposits from and make loans to nonresidents of the United States without the restrictions that apply to domestic U.S. banks Term ROSCAS Definition rotating savings and credit associations Term hawala Definition a network for transferring money, popular in Muslim countries Term fractional reserve banking system Definition a system in which banks keep less than 100 percent of the deposits available for withdrawal Term required reserves Definition the cash reserves (a percentage of deposits) a bank must keep on hand Term excess reserves Definition the cash reserves beyond those required, which can be loaned Term deposit expansion multiplier Definition the reciprocal of the reserve requirement Term credit Definition available savings that are lent to borrowers to spend Term transactions account Definition a checking account at a bank or other financial institution that can be drawn on to make payments Term Federal Open Market Committee (FOMC) Definition the official policymaking body of the Federal Reserve System Term intermediate target Definition an objective used to achieve some ultimate policy goal Term equation of exchange Definition an equation that relates the quantity of money to nominal GDP Term velocity of money Definition the average number of times each dollar is spent on final goods and services in a year Term quantity theory of money Definition with constant velocity, changes in the quantity of money change nominal GDP Term FOMC directive Definition instructions issued by the FOMC to the Federal Reserve Bank of New York to implement monetary policy Term legal reserves Definition the cash a bank holds in its vault plus its deposit in the Fed Term federal funds rate Definition the interest rate a bank charges when it lends excess reserves to another bank Term discount rate Definition the interest rate a bank charges when it lends excess reserves to another bank Term open market operations Definition the buying and selling of government bonds by the Fed to control bank reserves, the federal funds rate, and the money supply Term foreign exchange market intervention Definition the buying and selling of foreign exchange by a central bank to move exchange rates up and down to a targeted level Term sterilization Definition the use of domestic open market operations to offset the effects of a foreign exchange market intervention on the domestic money supply Term transactions demand for money Definition the demand to hold money to buy goods and sevices Term precautionary demand for money Definition the demand for money to cover unplanned transactions or emergencies Term speculative demand for money Definition the demand for money created by uncertainty about the value of other assets Term Phillips curve Definition a graph that illustrates the relationship between inflation and the unemployment rate Term reservation wage Definition the minimum wage a worker is willing to accept Term adaptive expectation Definition an expectation formed on the basis of information collected in the past Term rational expectation Definition an expectation that is formed using all available relevant information Term shock Definition an unexpected change in a variable Term technology Definition ways of combining resources to produce output Term total factor productivity (TFP) Definition the ratio of the economy's output to its stock of labor and capital Term An apartment or house is rented by a ______. Definition householder Term What age group of householders has the highest median incomes? Definition 45 - 54 Term business firm Definition a business organization controlled by a single management Term Have US investment expenditures been dramatically rising or decreasing since the past half century? Definition RISING... business spending fluctuates over time Term What are the three types of business organizations? Definition sole proprietorships, partnerships, or corporations Term What type of business firm accounts for the largest fraction of total business revenue? Definition large corporations Term exports - imports = Definition net exports (pos = trade surplus, neg = trade deficit) Term The microeconomic functions of gov't focus on... Definition issues aimed at providing public goods like police and military protection and correcting problems like pollution Term Macroeconomic policy attempts to... Definition control the economy through monetary and fiscal policies Term The Federal Reserve conducts _____ policy, the Congress and the president forumalate ____ policy. Definition monetary, fiscal Term The circular flow diagram shows that the value of output is ____ to income. Definition equal Term GDP = C + I + G + X Definition GDP as expenditures (GDP = consumption + investment + government spending + net exports) Term Two income categories included in GDP that are not payments to a factor of production: Definition capital consumption allowance and indirect business taxes Term GNP - capital consumption allowance = Definition net national product (NNP) Term gross invesment - capital consumption allowance Definition net investment Term labor force Definition all US residents - residents under 16 yrs of age - institutionalized adults - adults not looking for work Term The higher the price level, the ____ the real value (purchasing power) of money. Definition lower Term Four stages of business cycle: Definition expansion (boom), peak, contraction(recession), trough