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Exam #3
N/A
56
Economics
Not Applicable
04/29/2012

Additional Economics Flashcards

 


 

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Term
Fiscal Policy
Definition
use of government purchases, taxes, and transfer payments to alter equilibrium output and prices.
Term
Budget deficit
Definition
occurs when government spending excceds tax revenues for a given fiscal year.
Term
Budget surplus
Definition
occurs when tax revenues are greater than government expenditures for a given fiscal year.
Term
Expansionary fiscal policy
Definition
use of fiscal policy tools to reduce output by decreasing government purchases, increasing taxes, and/or reducing transfer payments.
Term
Contractionary fiscal policy
Definition
Use of fiscal policy tools to reduce output by decreasing government purchases, increasing taxes, and/or reducing transfer payments.
Term
Multiplier effect
Definition
a chain raction of additional income and purchases that results in total purchases that are greater than the initial increase in purchases.
Term
Marginal propensity to consume
Definition
the additional consumption resulting from an additional dollar of disposable income.
Term
Marginal propensity to save
Definition
the change in savings divided by the change in disposable income.
Term
Multiplier equation
Definition
1/(1-MPC)
Term
Crowding-out effect
Definition
theory that government borrowing drives up the interest rate, lowering consumption by households and investment spending by firms.
Term
Automatic Stabilizers
Definition
changes in government transfer payments or tax collections that automatically help counter business cycle fluctuations.
Term
Budget deficit
Definition
Government Spending>Tax Revenues
Term
Budget Surplus
Definition
Tax Revenues>Government Spending
Term
Money
Definition
Anything generally accepted in exchange for goods and services
Term
Medium of Exchange
Definition
the primary function of money, which is to facilitate transactions and lower transaction costs
Term
Barter
Definition
direct exchange of goods and services without the use of money.
Term
Means of deferred payment
Definition
the attricute of money that makes it easier to borrow and to repay loans.
Term
Currency
Definition
coins and/or paper created to facilitate the trade of goods and services and the payment of debts.
Term
Legal Tender
Definition
coins and paper officially declared to be acceptable for the settlement of financial debts.
Term
Fiat Money
Definition
a means of exchange established by government declaration.
Term
Demand Deposits
Definition
balances in bank accounts that depositors can access on demand.
Term
Transaction Deposits
Definition
deposits that can be easily converted to currency or used to buy goods and services directly.
Term
Traveler's Checks
Definition
transaction instruments easily convertible into currency.
Term
Nontransaction Deposits
Definition
funds that cannot be used for payment directly but must be converted into currency for general use.
Term
Near Money
Definition
nontransaction deposits that are not money but can be quickly converted into money.
Term
Money Market mutual funds
Definition
interest-earning accounts provided by brokers that pool funds into such investments as Treasury bills.
Term
Liquidity
Definition
the ease with which one asset can be converted into another asset or into goods and services
Term
M1
Definition
the narrowest definition of money; includes currency, checkable deposits, and traveler's checks.
Term
M2
Definition
a broader definition of money that includes M1 plus savings deposits, time deposits, and noninstitutional money market mutual fund shares.
Term
Gold Standard
Definition
defining the dollar as equivalent to a set value of a quantity of gold, allowing direct converitibility from currency to gold.
Term
Gresham's Law
Definition
the principle that "cheap money drives out dear money"; given an alternative, people prefer to spend less valuable money.
Term
Commerical Banks
Definition
financial insitutions organized to handle everyday financial transactions of businesses and households through demand deposit accounts and savings accounts and by making short-term commercial and consumer loans.
Term
Savings and loan associations
Definition
financial institutions organized as cooperative associations that hold demand deposits and savings of members in the form of dividend-bearing shares and make loans, especially home mortgage loans.
Term
Credit Unions
Definition
financial cooperatives made up of depositors with common affiliation.
Term
reserve requirements
Definition
holdings of assets at the bank or at the Federal Reserve Bank as mandated by the Fed.
Term
fractional reserve system
Definition
a system that requires banks to hold reserves equal to some fraction of their checkable deposits.
Term
Secondary Reserves
Definition
highly liquid, interest-paying assets held by the bank.
Term
Balance Sheet
Definition
a financial record that indicates the balance between a bank's assets and its liabilities plus capital.
Term
Required Reserve Ratio
Definition
the percentage of deposits that a bank must hold at the Federal Reserve Bank or in bank vaults.
Term
Excess Reserves
Definition
reserve levels held above that required by the Fed
Term
Money Multiplier
Definition
measures the potential amount of money that the banking system generates with each dollar of reserves.
Term
Open market operations
Definition
purchase and sale of government securities by the Federal Reserve System.
Term
Discount Rate
Definition
interest rate that the Fed charges commercial banks for the loans it extends to them.
Term
Federal Funds Market
Definition
market in which banks provide short-term loans to other banks that need cash to meet reserve requirements.
Term
Money Market
Definition
Market in which money demand and money supply determine the equilibrium interest rate.
Term
Velocity of Money
Definition
a measure of how frequentily money is turned over.
Term
Quanitity theory of money and prices
Definition
a theory of the connection between the money supply and the price level when the velocity of money is constant.
Term
Comparative Advantage
Definition
occurs when a person or country can produce a good or service at a lower opportunity cost than others.
Term
Import quota
Definition
a legal limit on the imported quantity of a good that is produced abroad and cna be sold in domestic markets.
Term
Rent Seeking
Definition
efforts by producers to gain profits from government protections such as tariffs and import quotas
Term
Balance of payments
Definition
the record of international transactions in which a nation has engaged over a year
Term
Current Account
Definition
a record of a country's imports and exports of goods and services, net investment income, and net transfers.
Term
Capital Account
Definition
records the foreign purchases or assets in the domestic economey and domestic purchases of assets abroad.
Term
Exchange Rate
Definition
The price of oue unit of a country's currency in terms on another country's currency.
Term
Derived Demand
Definition
the demand for an input derived from consumers' demand for the good or service produced with that input.
Term
Dirty Float System
Definition
a description of the exchange rate system that means that fluctuations in currency values are partly determined by government intervention.
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