Term
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Definition
Tax Collections - Government Spending
(OR) inflows - outflows |
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Term
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Definition
(1) Reduce marginal tax rates
(2) Reduce regulatory burden
(3) decrease government spending
(4) increase money supply steadily |
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Term
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Definition
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Term
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Definition
| The largest and most stable component of total spending in the economy. |
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Term
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Definition
(1) financial wealth - stocks, bonds, etc.
(2) durable goods |
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Term
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Definition
| unemployment that results from leaving one job to join another that results from increased education |
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Term
| How does the Fed change the Money Supply? |
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Definition
(1) Changing the legal reserve requirements
(2) changing discount rates
(3) open market operations |
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Term
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Definition
-emphasizes the physical production capacity of the economy
-deregulated markets are most productive
-emphasizes the role of incentives, especially lowering marginal tax rates |
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Term
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Definition
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Term
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Definition
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Term
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Definition
| The reduction in investment spending caused by a deficit-financed increase in government expenditure |
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Term
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Definition
| Non-inflationary full-employment GDP |
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Term
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Definition
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Term
| Money supply expansion multiplier |
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Definition
(change in) Money Supply
=
(change in) Total Reserves x (1 / RRR) |
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Term
| 3 things that influence consumption function |
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Definition
-expectations of future prices
-credit conditions
-existing stock of consumer goods |
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Term
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Definition
Paper dollars can be exchanged for gold.
(limits overall MS to some multiple of the amount of gold in the hands of the US Treasury) |
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Term
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Definition
| A situation where the economy is simultaneously experiencing inflation and unemployment. |
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Term
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Definition
| Y = P (price component) * Q (quantity component) |
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Term
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Definition
Bear - pessimistic - downward MEI shift
Bull - optimistic - upward MEI shift |
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Term
| Why are there so many different interest rates? |
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Definition
(1) term to maturity:
-long term: higher i
(2) default risk
-0 default risk: lower i
(3) tax treatment
-tax free: lower i |
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Term
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Definition
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Term
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Definition
T < G = budget deficit
Financaed by the treasury by borrowing money in the bond market. |
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Term
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Definition
The stock of assets used to carry out transactions.
Money = currency + demand deposits |
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Term
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Definition
| The $-value of all goods and services valued at constant (base year) prices |
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Term
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Definition
| The $-value of all goods and services valued at current market price |
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Term
| Marginal propensity to consume (MPC) |
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Definition
| measured by how much C changes when there is a change in disposable income |
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Term
| Average propensity to consume (APC) |
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Definition
| The fraction of disposable income devoted to C |
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Term
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Definition
| land, labor, capital, entrepreneurship |
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Term
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Definition
| increase in the overall price level measured by a price index such as CPI |
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Term
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Definition
%change in MS + %change in V
=
%change in P + %change in Q |
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Term
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Definition
| The tax rates which apply to incremental income |
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Term
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Definition
-medium of exchange
-unit of account
-store of value |
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Term
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Definition
| Full-employment *real* GDP |
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Term
| Price elasticity of demand |
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Definition
| measure of how responsive buyers are to changes in prices of goods and services |
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Term
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Definition
(1) economy is unstable
(2) changes in MS have little effect on economy so fiscal policy should be used
(3) MD is elastic
(4) MEI is inelastic
(5) emphasize speculative and precautionary motives
(6) velocity is unstable |
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Term
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Definition
| the average number of times the money supply is spent. |
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Term
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Definition
(1) economy is stable
(2) changes in MS have large effects on Y in short run, but in long run have no effects on Q
(3) MD is interest-inelastic
(4) MEI is interest-elastic
(5) velocity is stable |
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Term
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Definition
| changes in government spending or tax spending made by the government |
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Term
| Long run effects of deficit financing |
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Definition
(1) fewer capital goods - slower economic growth
(2) more resources in public sector and less in private sector |
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Term
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Definition
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Term
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Definition
-motivated by self-interest (maximize profits)
-bear risk |
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Term
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Definition
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Term
| Motives for Holding or Demanding Money |
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Definition
1) transactions motive
2) speculative motive
3) precautionary motive |
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Term
| assumptions of fractional reserve banking |
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Definition
To meet full potential expansion...
1) no cash drain on economy
2) no excess reserves |
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Term
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Definition
| Decrease in the overall price level |
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Term
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Definition
| changes in T and/or G with no changes in MS. |
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