Term
| The slope of the production function is... |
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Definition
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Term
| When the economy begins above the Golden Rule, reaching the Golden Rule produces... |
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Definition
| higher consumption at all points in time. When the economy begins below the Golden Rule, reaching the Golden Rule requires initially reducing consumption to increase consumption in the future. |
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Term
| According to the Solow model, an economy's rate of saving determines... |
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Definition
| its level of capital and its level of production. |
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Term
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Definition
| produce persistent economic growth. You'll just reach a new steady state. |
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Term
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Definition
| Larger population would result in mankind living forever in poverty. |
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Term
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Definition
| Saw the greater population as a means for having more geniuses and more technological growth. |
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Term
Steady State Growth Rate:
Capital per effective worker |
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Definition
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Term
Steady State Growth Rate:
Output per effective worker |
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Definition
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Term
Steady State Growth Rate:
Output per worker |
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Definition
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Term
Steady State Growth Rate:
Total Output |
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Definition
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Term
| Steady State consumption is maximized if... |
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Definition
| MPK - depreciation = n + g |
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Term
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Definition
| New producers driving out incumbent producers. |
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Term
Okun's Law
with specific formula |
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Definition
negative relationship between unemployment and GDP.
Percent Change in real GDP =
3% - 2 * Change in Unemployment Rate. |
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Term
| Quantity Theory of Money: |
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Definition
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Term
| The aggregate demand curve AD is drawn for a given... |
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Definition
| value of the Money Supply M. |
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Term
An adverse supply shock...
(Stagflation) |
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Definition
| pushes SRAS up. So in the short run, output falls, and in the long run, output stays the same. Prices go up in the SR and LR. |
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Term
| Reduction in aggregate demand... |
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Definition
| shifts output down in the short run but it goes back up in the long run. Prices are permanently lower. |
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Term
| Government Purchases Multiplier: |
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Definition
| Change in Y/Change in G = 1/(1-MPC) |
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Term
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Definition
Change in Y/Change in T = -MPC/(1-MPC)
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Term
| The IS curve is drawn for a given fiscal policy. Changes in fiscal policy that raise the demand for goods and services shift the IS curve to the... |
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Definition
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Term
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Definition
| interest rate adjusts to balance the supply and demand for money. |
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Term
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Definition
| One party might act in a way that harms the other party. |
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Term
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Definition
| People most eager to make a transaction are the least desirable. |
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Term
| Centrally Planned Economy |
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Definition
| There are no private firms, everyone works for the government. |
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Term
| Future Value of $1 today = |
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Definition
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Term
| Present Value of $1 in n years = |
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Definition
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Term
| Classical Theory of Asset Prices |
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Definition
| the price of an asset equals the present value of the income that people expect to receive from the asset. |
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Term
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Definition
| A risk premium is a payment on an asset that compensates the owner for taking on risk. |
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Term
| Risk Adjusted interest rate: |
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Definition
| is equal to the safe interest rate plus the risk premium. |
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Term
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Definition
| Asset prices will rise simply because people expect it to rise. |
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Term
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Definition
| the price of stock divided by earnings per share. |
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Term
| Crash prevention Methods: |
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Definition
1. Margin Requirements
2. Circuit Breakers which shut trading down
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Term
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Definition
| Calculated by dividing the return by the initial price |
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Term
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Definition
| The interest rate is the bond's yield to maturity, the rate that makes the present value of the bond's payment equal to its price. |
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Term
| Expectations theory of the term structure: |
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Definition
| Predicting interest rates rationally. |
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Term
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Definition
| breakdown of stocks and bonds. |
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Term
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Definition
| raise pools of money to purchase securities. |
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Term
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Definition
| funds borrow money from banks and use it to increase their security holdings. |
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Term
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Definition
| a person who buys and sells securities on behalf of others. |
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Term
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Definition
| buys securities for itself, not others, and earns profits by reselling them at higher prices. |
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Term
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Definition
| does not accept deposits. |
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Term
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Definition
| as an underwriter, an investment bank helps companies issue new stocks and bonds. |
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Term
| primary and secondary markets |
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Definition
primary: new securities are issued.
secondary: existing securities are traded. |
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Term
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Definition
| a firm that issues stocks and bonds that are traded in financial markets. |
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Term
| initial public offering, IPO |
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Definition
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Term
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Definition
| a physical location where brokers and dealers meet. |
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Term
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Definition
| The NYSE choses one securities firm to provide a specialist for each stock. The specialist manages the trading of that stock. |
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Term
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Definition
| a secondary market with no physical location |
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Term
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Definition
| all trades are made with the dealers |
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Term
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Definition
| the gap between the prices at which they buy and sell a security. |
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Term
| electronic communications network (ECN) |
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Definition
| A process that doesn't require dealers. |
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Term
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Definition
| averages for the prices for a group of stocks. |
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Term
| the Modigliani-Miller theorem |
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Definition
| Capital structure doesn't matter, stocks and bonds are equally good ways for firms to raise funds. |
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Term
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Definition
| these funds buy and sell stocks frequently based on the analyst's recommendations |
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Term
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Definition
| doesn't try to pick stocks. Instead, it buys all the stocks in a broad market index, such as the S&P 500. |
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Term
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Definition
| futures, options, credit default swaps,... |
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Term
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Definition
| call and put, buy and sell |
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Term
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Definition
| an insurance policy on a bond or mortgage-backed securities. |
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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
| make loans but do not accept deposits |
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Term
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Definition
| small banks with less than $1 billion in assets |
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Term
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Definition
| companies that specialize in high-risk loans |
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Term
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Definition
| companies that make small loans to people who need cash urgently. |
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Term
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Definition
| people who illegally charge incredibly high interest rates. |
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Term
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Definition
| when banks sell many of the loans they make rather than holding them as assets. |
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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
| determining the tradeoff between how much to loan out and how much to keep for withdrawal. |
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Term
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Definition
| Equity Ratio = Capital/Assets |
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Term
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Definition
| government's promise to compensate depositors for their losses when a bank fails. |
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Term
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Definition
| a sharp decrease in bank lending. |
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Term
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Definition
| The Central bank can act as one in desperate situations |
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Term
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Definition
| a loan from the fed to a bank |
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Term
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Definition
| purchases of stock by the government |
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Term
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Definition
| also known as a liquidity trap, prevents the fed from stimulating the economy |
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Term
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Definition
| a sharp increase in net capital outflow that occurs when asset holders lose confidence in an economy. |
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Term
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Definition
| the spread of capital flight. |
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Term
| the International Monetary Fund |
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Definition
| an international institution that lends to countries experiencing financial crises. |
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