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Econ 104 flash cards
flash cards for final
42
Economics
Undergraduate 1
05/11/2010

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Term
Money
Definition
anything that is generally accepted in payments for goods and services and in the repayment of debts. It is considered a medium of exchange, store of value, unit of account, and a standard of deferred payment.
Term
Federal Reserve Bank
Definition
the Central Bank of the United States established in 1913. An independent agency of the government set up to control the money supply. Its main tools are altering reserve requirements, and conducting open-market purchases and sales of governmental securities.
Term
Reserve Requirement
Definition
in banking, the fraction of public deposits that a bank holds in reserves
Term
Discount Rate
Definition
interest rate charged on loans from the Federal Reserve Bank to its members. The rate is pegged to the fed funds rate.
Term
Open Market Operations
Definition
Reserve purchases and sales of government securities
Term
Federal Funds Rate
Definition
the interest rate that banks charge when the lend reserves to other banks for short periods of time
Term
Monetary Policy
Definition
policy that is focused on the supply of money and how the price of money (interest rate) affects the economy. Designed to promote full employment, stable prices, economic growth, stable exchange rates, or balance-of-payments equilibrium.
Term
Liquidity Trap
Definition
the point in the economy when all economic agents desire to keep additional dollar on hand. The demand for money is thus perfectly elastic or horizontal, and monetary policy is completely ineffective in stimulating aggregate expenditures.
Term
Paradox of Thrift
Definition
an increase in the desire to save decreases output, even though investment may also increase
Term
Monetarism
Definition
believes that control of the nation’s money supply is far more important than control of interest rates when it comes to monetary policy. They use the equation of exchange from the Quantity Theory of Money: MV=PQ.
Term
Aggregate Demand
Definition
the total quantity of goods and services demanded by household, businesses, government and the international sector at various prices
Term
Aggregate Supply
Definition
the total quantity of goods and services producers are willing to supply at varying price levels
Term
Aggregate Supply
Definition
the total quantity of goods and services producers are willing to supply at varying price levels
Term
Supply-Side Policy
Definition
policy that is focused on lowering taxes to increase tax revenues and output increases
Term
Productivity
Definition
the output produced per unit of input (output per hour of work)
Term
Stagflation
Definition
high unemployment and high inflation at the same time
Term
Deflation
Definition
a general fall in the average level of all prices in an economy, measured by an index such as the CPI
Term
Demand-Pull Inflation
Definition
a general increase in prices arising from the increasing excess demand for a given level of output
Term
Cost-Push Inflation
Definition
a general increase in prices associated with increase in the coast of production (supply inflation)
Term
Newly Industrialized Countries (NICs)
Definition
a group of countries (Hong Kong, Taiwan, Singapore, Malaysia, the Philippines, South Korea, Brazil, Mexico, and Argentina) that have allowed foreign firms to set up operations favorably and have generated sizable export capabilities
Term
Trade Deficit
Definition
when a country imports more than it exports. Imports>Exports
Term
Balance of Trade
Definition
the difference between the value of exports and the value of imports of visible items (goods and services)
Term
Multinational Companies (MNCs)
Definition
a corporation that operate within more than one nation
• Protectionism- putting up barriers on imports, which is usually a policy that institutes high tariffs on incoming goods, so as to preserve domestic industry
Term
Free Trade
Definition
all commodities can be freely imported or exported without special taxes or restrictions being levied because of their status as imports or exports
Term
Absolute Advantage
Definition
a condition in which one nation can produce more of a particular commodity with the same amount of resources as another nation uses for producing that commodity
Term
Comparative Advantage
Definition
a country’s productive advantage with respect to a particular commodity, based on its ability to give up fewer other commodities to produce a unit of the commodity than another country would have to give up. The relative cost of production is most significant in determining mutually beneficial patterns of trade among countries
Term
GATT
Definition
General Agreement on Tariffs and Trade is an association of countries that “sets and regulates the code of international trade conduct and promotes free trade.”
Term
NAFTA
Definition
North American Free Trade Agreement, allows free trade among United States, Mexico, and Canada
Term
WTO
Definition
World Trade Organization, establish economic, political framework for advancing free trade and settling trade disputes
Term
Quota
Definition
physical limits on imports
Term
Tariffs
Definition
taxes on imports
Term
Exchange Rate
Definition
the rate at which one country’s currency exchanges for another’s
Term
Supply of Dollars
Definition
supply of dollar=demand for other currency
Term
Demand for Dollars
Definition
demand for dollar=supple of other currency
Term
Value of the Dollar
Definition
high dollar value leads to large trade deficit and a lower GDP. Lower dollar value leads to a lower trade deficit and a higher GDP
Term
Depreciation
Definition
Any decrease in the demand for a nation’s currency will cause that currency to decrease
Term
Appreciation
Definition
when the price of a countries currency relative to other countries has increased
Term
Real vs. Nominal values
Definition
Nominal GDP is the total dollar value of all final goods and services produce in a year, in the current year’s dollars. Real GDP is adjusted for changes in prices, measuring GDP in the prices of a base year.
Term
Balance of Trade
Definition
the difference between the value of exports and the value of imports of visible items (goods and services)
Term
Consumption
Definition
expenditures by households and individuals on consumer goods
Term
Aggregate Expenditures
Definition
measure of nation income
Term
Laissez Faire
Definition
a doctrine that the state should largely leave the economy to its own devices
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