Term
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Definition
| The advantage an individual, business, or country has over another when its product can be produced using fewer resources than would be used by another individual, business, or country. |
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Term
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Definition
| The total amount (aggregate quantity demanded) of spending on goods and services that consumers, businesses, government, and other countries want to do at each overall level of prices |
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Term
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Definition
| The total amount of production (aggregate quantity supplied) of goods and services that businesses and governments are willing and able to produce at each overall level of prices, given the labor force, the stock of productive capital, and technology. |
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Term
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Definition
| Allocating our resources to produce the combinations of goods and services we want the most |
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Term
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Definition
| Our system of income taxes and government transfer payments functions in a manner that reduces the effects on total spending of changes in consumption, investment, government spending on goods and services, and net exports |
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Term
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Definition
| The portion of consumption that is independent of changes in disposable income |
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Term
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Definition
| The accounting records for a country's transactions between its residents and businesses and those of all other countries. |
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Definition
| The difference between the value of our exports and the value of our imports. |
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Term
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Definition
| Pieces of paper issued by a government or corporation promising to repay the amount borrowed plus make interest payments throughout the term of the bond |
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Term
| Capital and financial account balance |
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Definition
| The balance on that part of the balance of payments accounts that includes flows of funds for real and financial investments |
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Term
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Definition
| An increase in the value of an asset |
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Term
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Definition
| The advantage an individual, business, or country has over another when its product can be produced at a lower opportunity cost (the other goods given up) than if it were produced by another individual, business, or country. |
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Term
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Definition
| Goods that are used together. When the prices of one increases, the demand for the complementary good decreases. |
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Term
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Definition
| A price index that measures changes in average prices of goods and services purchased by a typical consumer. |
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Term
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Definition
| The balance of trade plus the net flow of income earned on investments and unilateral transfers |
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Term
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Definition
| Unemployment caused by recessions or slowing growth in total spending in the economy. |
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Term
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Definition
| The quantity of money individuals and business want to hold at each interest rate |
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Term
| Diminishing marginal returns |
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Definition
| Increasing one input, while holding all other inputs constant, will eventually result in smaller and smaller additions to output. |
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Term
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Definition
| The interest rate the Federal Reserve charges commercial banks when they borrow reserves from the Federal Reserve |
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Term
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Definition
| Personal income after taxes are paid |
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Term
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Definition
| A condition where we are satisfying as many of our wants as we can given our limited resources. We are using all of our resources to produce the goods and services we technically and allocatively efficient manner. |
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Term
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Definition
| Economists use the term to refer to continual increases in potential real GDP or full-employment real GDP or aggregate supply. (often used to mean increases in total spending) |
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Term
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Definition
| Demand is elastic when the percentage change in the quantity demanded is greater than the percentage change in the price of the good or service. The price elasticity of demand is greater than one. |
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Term
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Definition
| The price at which quantity supplied is equal to quantity demanded. The market is in equilibrium, that is, equilibrium price will not change until something else changes. |
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Term
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Definition
| The quantity of a good bought and sold when quantity supplied equals quantity demanded. The equilibrium quantity will not change until something else changes. |
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Term
| Federal budget deficits (surpluses) |
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Definition
| Government spending on goods and services plus transfer payments minus tax receipts. A surplus is experienced when tax receipts are greater than spending and transfer payments. |
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Term
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Definition
| A semi-independent arm of government created by Congress. It is responsible for controlling the money supply and the availability of credit and regulating the banking system; acts as the central bank. |
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Term
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Definition
| Policies that affect the level of federal government spending on goods and services, taxes, and transfer payments. |
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Term
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Definition
| Exchange rates are set at a given level and government policy is aimed at maintaining that fixed level |
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Term
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Definition
| Unemployment caused by workers entering the labor force, voluntarily changing jobs or being temporarily laid off or fired. |
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Term
| Full employment level of real GDP |
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Definition
| The amount of output that would be produced if the labor force is at full employment |
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Term
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Definition
| The highest employment can be at any one time without causing an acceleration of inflation. Also, the level of unemployment when there is no cyclical unemployment. |
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Term
| Full-employment level of real GDP |
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Definition
| The amount of output that can be produced if we are at a level of full employment. Sometimes also called the potential level of real GDP |
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Term
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Definition
| A price index for all goods and services included in GDP. The measure compares the cost of the present basket of goods and services relative to the cost of that basket in a base year. |
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Term
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Definition
| A price index for all goods and services included in GDP. The measure compares the cost of the present basket of goods and services relative to the cost of that basket in a base year. Formerly called the GDP implicit deflator. |
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Term
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Definition
| The market value of all of the final goods and services produced annually within a nation |
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Term
| Government budget deficit and surplus |
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Definition
| Subtract spending on goods and services and transfer payments from revenues. If the result is a negative number, the government has a budget deficit. If positive, the government has a surplus. |
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Term
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Definition
| The skills and education that make workers more productive |
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Term
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Definition
| Demand is inelastic when the percentage change in the quantity demanded is less than the percentage change in the price of the good or service. The price elasticity of demand is less than one. |
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Term
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Definition
| A good the demand for which decreases when income increases |
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Term
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Definition
| An increase in the overall level of prices of goods and services in the economy. |
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Term
| International demand for the dollar |
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Definition
| The international demand for U.S. exports, international demand for U.S. financial assets, and international demand for U.S. investment. |
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Term
| International supply of the dollar |
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Definition
| The U.S. demand for imports into the U.S., for international financial assets, and for international investment. |
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Term
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Definition
| Spending that represents an increase in capacity to produce future output (new buildings, machines, tools, etc.) |
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Term
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Definition
| The number of individuals who have jobs plus the number who are actively looking for work |
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Term
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Definition
| The principle that price and quantity demanded are inversely related. |
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Term
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Definition
| Aggregate quantity demanded equals aggregate quantity supplied at the full-employment level of output. |
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Term
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Definition
| Policies, normally of the Federal Reserve System, that affect the supply of money and credit. |
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Term
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Definition
| Money can be created through the process of banks making loans. |
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Term
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Definition
| The amount by which the money supply will eventually change as a result of each dollar of reserves that is added to or subtracted form the banking system. |
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Term
| Movements along demand curve |
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Definition
| A change in quantity demanded caused by a change in a good's price. |
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Term
| Movements along the supply curve |
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Definition
| A change in quantity supplied caused by a change in a good's price. |
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Term
| Natural rate of unemployment |
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Definition
| The economy will "naturally" return to this level of unemployment, given sufficient time. Same as full-employment level of unemployment. |
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Term
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Definition
| A negative supply shock is a reduction in aggregate supply caused by an increase in prices of inputs or a decrease in productivity. |
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Term
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Definition
| A good the demand for which increases when income increases |
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Term
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Definition
| The purchases or sales of the United States government securities by the Federal Reserve System for the purpose of increasing or decreasing the money supply and changing credit conditions. |
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Term
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Definition
| The true cost of making a choice is the value of what is given up as a result of that choice; it is the value of the next best alternative. |
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Term
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Definition
| REAL GDP; Total production of all final goods and services in an economy in a year. |
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Term
| Potential level of real GDP |
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Definition
| The real GDP that can be produced when we are at the full-employment level of output. |
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Term
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Definition
| The legal maximum price for which a good or service can be sold. |
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Term
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Definition
| The legal minimum price at which a good or service can be sold. |
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Term
| Principle of increasing costs |
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Definition
| As we increase the production of a good, the opportunity cost eventually increases. |
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Term
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Definition
| A legal limit on the amount of a good or service that can be imported |
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Term
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Definition
| The income tax reductions that were intended to increase productivity and investment, while at the same time not increasing the federal budget deficit. |
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Term
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Definition
| Includes a significant decline in production and employment; the decline is widespread and last for more than a few months |
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Term
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Definition
| The percentage of bank deposits that the Federal Reserve System requires banks to keep as reserves |
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Term
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Definition
| Banks are required to hold a percentage of their deposits on reserve as currency in their vaults or in deposits with a Federal Reserve Bank. |
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Term
| Restrictive fiscal policy |
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Definition
| A fiscal policy meant to reduce inflationary pressures. Normally an increase in taxes or a reduction in spending and transfer payments |
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Term
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Definition
| Our wants seem to be greater than our abilities to satisfy them. This leads to the necessity for making decisions about how we use our resources. |
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Term
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Definition
| Aggregate quantity demanded equals aggregate quantity supplied; does not necessarily occur at full employment. |
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Term
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Definition
| The change in total spending that will result from a change of a dollar of consumption, investment, government, or net export spending |
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Term
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Definition
| Conditions under which both inflation and unemployment are rising |
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Term
| Stimulative fiscal policy |
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Definition
| A fiscal policy meant to reduce unemployment. Normally a decrease in taxes or an increase in spending and transfer payments. |
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Term
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Definition
| Unemployment resulting from workers skills not matching job openings. |
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Term
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Definition
| An increase in the costs of producing goods and services in the economy, resulting in increasing unemployment and rising inflation |
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Term
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Definition
| Tax cuts that are intended to increase aggregate supply by increasing work effort, saving, and investment |
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Term
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Definition
| A tax on an imported good |
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Term
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Definition
| Exports minus imports. If the result is a negative number, it is a trade deficit. If positive, then it is a trade surplus. |
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Term
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Definition
| Government payments to individuals. Social security, unemployment compensation, and welfare payments (transfer of incomes to recipients) |
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Term
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Definition
| The connection between changes in the level of the federal budget deficit and the level of the trade deficit |
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