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| 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. |
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| 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. |
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| in banking, the fraction of public deposits that a bank holds in reserves |
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| interest rate charged on loans from the Federal Reserve Bank to its members. The rate is pegged to the fed funds rate. |
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| Reserve purchases and sales of government securities |
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| the interest rate that banks charge when the lend reserves to other banks for short periods of time |
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| 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. |
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| 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. |
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| an increase in the desire to save decreases output, even though investment may also increase |
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| 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. |
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| the total quantity of goods and services demanded by household, businesses, government and the international sector at various prices |
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| the total quantity of goods and services producers are willing to supply at varying price levels |
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| the total quantity of goods and services producers are willing to supply at varying price levels |
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| policy that is focused on lowering taxes to increase tax revenues and output increases |
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| the output produced per unit of input (output per hour of work) |
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| high unemployment and high inflation at the same time |
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| a general fall in the average level of all prices in an economy, measured by an index such as the CPI |
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| a general increase in prices arising from the increasing excess demand for a given level of output |
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| a general increase in prices associated with increase in the coast of production (supply inflation) |
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| Newly Industrialized Countries (NICs) |
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| 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 |
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| when a country imports more than it exports. Imports>Exports |
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| the difference between the value of exports and the value of imports of visible items (goods and services) |
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| Multinational Companies (MNCs) |
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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 |
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| all commodities can be freely imported or exported without special taxes or restrictions being levied because of their status as imports or exports |
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| 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 |
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| 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 |
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| 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.” |
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| North American Free Trade Agreement, allows free trade among United States, Mexico, and Canada |
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| World Trade Organization, establish economic, political framework for advancing free trade and settling trade disputes |
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| physical limits on imports |
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| the rate at which one country’s currency exchanges for another’s |
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| supply of dollar=demand for other currency |
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| demand for dollar=supple of other currency |
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| 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 |
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| Any decrease in the demand for a nation’s currency will cause that currency to decrease |
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| when the price of a countries currency relative to other countries has increased |
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| 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. |
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| the difference between the value of exports and the value of imports of visible items (goods and services) |
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| expenditures by households and individuals on consumer goods |
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| a doctrine that the state should largely leave the economy to its own devices |
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