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Definition
| (1) Money defined in terms of gold (2) International transactions settled in gold |
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| Price of one currency (ie $) in terms of another (i.e. the Euro) |
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| A rate determined by government and then maintained through the process of buying and selling of quantities of its own currency on the foreign exchange markets. |
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| Floating (or Flexible) Exchange Rate |
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Definition
| An exchange rate determined strictly by the demands and supplies for a nation's currency. |
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| International trade that is not encumbered bu protectionist government policies such as tariffs and quotas. |
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| A limit on the quantity of a specific goods that can be imported. |
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| A country's ability to produce a good using fewer resources than the country it trades with. |
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| A country's ability to produce a good at a lower opportunity cost than the country it trades with. |
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| Goods and services bought by people in one country that are produced in another country. |
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| Goods and service produced by people in one country that are sold to other countries. |
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| National Security Argument |
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Definition
| Pro: We would want to protect military technology and manufacturing. Con: Over used |
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Definition
| Pro: Justifiable for a country to protect industries that are getting started and other countries are already strong. Con: After reaching maturity, companies don't want to drop the tariffs. |
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| Cheap Foreign Labor Argument |
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Definition
| Pros: Domestic businesses can't compete with the cheap labor prices. Cons: Benefits the consumers |
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Definition
| If one country places a high tariff on goods, a country could (A)also place high tariff on the 1st country out of retaliation or (B)not put any tariffs on the 1st country and hope that after awhile they will remove them. |
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| (very difficult to prove)Pro: Foreign competitors dump goods on the market, priced below cost, to knock domestic companies out of the game. This results in a monopolies. Con: Comparison are sometimes rigged to support inefficient producers in the United States |
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Term
| Arguments for Protectionism: |
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Definition
1 - National Secutity
2 - Infant Industries
3 - Cheap Foreign Labor
4 - Retaliation
5 - Dumping |
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Term
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Definition
| North American Free Trade Agreement; A free trade area consisting of US, Canada, and Mexico. |
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| European Union; an example of a customs union |
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Definition
| A set of countries that agree to free trade among themselves and a common policy with all other countries. |
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| A set countries that agree to free trade among themselves but are free to pursue independent trade policies with other countries. |
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| The school of thought that emphasizes the natural tendency for an economy to move toward equilibrium at full employment without inflation. It argues that governments should keep their hands off. |
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Term
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Definition
| (1)M (money) is the dominant explanatory variable in the economy (2)The original classical economist were correct if you thought in long term. In the long run money stock is growing and P(rices) are rising substantially. (3) Fiscal policy has no effect on the economy (4) gov't should keep hands off the economy. |
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Definition
| Wanted to reassert the importance of the money stock (M); Believed in the importance of a monetary rule vs. monetary policy. Velocity could change. Oppose monetary policy (lags could make things worse than before). |
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Term
| Friedman-Phelps Fooling Model |
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Definition
| Assume that employment and output is at the natural level; W(age) - increase lag behind, workers suffer from money illusion. Profits increase. Firms expand output, GDP increases. Employment increases. Later, workers realize that the real wage has gone down and demand a higher wages. Profits fall; employment falls (back to natural level); GDP falls back to natural level. |
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Definition
| All economic agents will take all information into account in forming their expectations (workers not fooled) |
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Term
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Definition
| School of thought that emphasizes the possibility that an economy can be in equilibrium at less tahn full employment (or without inflation). It argues that with government intervention, equilibrium at full employment without inflation can be achieved by managing aggregate demand. |
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Definition
| Set out to prove that prices and wages have rigidity rather than just assume like early Keynesians had. |
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Term
| Private Advantage of Price and Wage Contracts Theory |
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Definition
| Argued that it is in the interest of large corportations to have long-term price and wage contracts. Rigidity then results because of the rational choices by the business executives. Rigidity results from preset prices. |
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Definition
| A business pays higher-than-market wages because: (1) Minimizes labor turnover (2) Employees moral is higher (3) Employee absenteeism and tardiness are likely to be minimized; causes wages to become more rigid. |
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Definition
| Refers to the concept that there are cost related to changing prices; named after one example, the cost of printing new menus. |
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| In the fooling model: business owners know that inflation is increasing but workers do not notice. |
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Term
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Definition
| Named after A.W. Phillips who said that there was a "trade-off" between unemployment and inflation. (Inverse relationship b/t inflation and unemployment) |
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Definition
| Decrease in private spending caused by an increase in public spending |
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Term
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Definition
| The buying and selling of government bonds by FOMC. |
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Term
| Reserve Requirement Ratio |
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Definition
| Ratio of required reserves to deposits. |
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Term
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Definition
| The interest rate the Fed charges banks that borrow reserves from it. |
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Term
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Definition
| The interest rate that large banks charge large accounts. |
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Term
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Definition
| (the FED) the Central Bank of the United States of America |
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Term
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Definition
| Same percentage (3%) increase of M,no matter what |
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Term
| Discretionary Monetary Policy |
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Definition
| Percentage can increase or decrease depending on present economy. |
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Term
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Definition
| Currency + Demand Deposits + Travelers Checks |
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Term
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Definition
| [AKA Monetary Base] Currency plus (commercial bank) reserves |
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Term
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Definition
| [High-powered Money] Currency + Reserves |
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Term
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Definition
| Government Spending = Tax Revenue (G=T) |
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Term
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Definition
| Gov't Spending > Tax Revenue (G > T) |
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Term
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Definition
| Gov't Spending < Tax Revenue |
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| 3 Tools of Monetary Policy |
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Definition
1 - Open Market Operations
2 - Reserve Requirement Ratio
3 - Discount Rate |
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Definition
| The exchange of one good for another, without the use of money. |
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Definition
| Money that has value only by government decree, no intrinsic value |
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Definition
| The DEGREE AND SPEED at which an asset can be converted into money without significant loss in value. |
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| Potential Money Multiplier |
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Definition
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Definition
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Term
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Definition
| The quantity of reserves held by a bank is in excess of the legally required amount. |
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Term
| What is the Central Bank of America? |
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Definition
| The Federal Bank of the United States of America |
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Term
| What is the Central Bank of Japan? |
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Definition
| The Central Bank of Japan |
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Term
| What is England's Central Bank? |
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Definition
| The Central Bank of England |
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Term
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Definition
| Federal Open Market Committee |
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Term
| Who are the members of the FOMC? |
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Definition
(1-7)The Board of Governors
(8) NY Fed Bank President
(9) Chicago or Cleveland Fed Bank President
(10-12) 3 of the 9 remaining Federal Reserve Bank Presidents [rotate] |
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Term
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Definition
| Money that has value in something in addition to being money. |
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Term
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Definition
| The ratio of the increase in output to the increase in some component of output. |
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Definition
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| The number of times a $ changes hands or turns over on average in a year. |
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Definition
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Term
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Definition
| *P = MV/Q* (The equation specifying the direct relationship between the money supply and prices. |
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Definition
| Government policy that lowers the nation's exchange rate; its currency instantly is worth less in the foreign exchange markets. |
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Term
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Definition
| To increase the exchange value of a nation's currency. |
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Definition
| International Monetary Fund |
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Term
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Definition
| A bank that provided financial and technical assistance to developing countries |
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Term
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Definition
| World Trade Organization; only global international organization dealing with the rules of trade between nations. |
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Definition
| A 18th century economist that came up with the idea of the "invisible hand" |
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Term
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Definition
| The market guides firms that seek only to satisfy their own self-interest to produce precisely those goods and services that consumers want. |
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Term
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Definition
| The study of how we work together to transform scarce resources into good and services to satisfy the most pressing of our infinite wants and how we distribute these goods and services amongst ourselves. |
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Definition
| A subarea of economics that analyzes the behavior of the economy as a whole |
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Definition
| A subarea of economics that analyzes individuals as consumers and producers and specific firms and industries. It focuses especially on the market behavior of firms and households. |
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Definition
| Latin for "everything else being equal." |
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Definition
| The quantity of other goods that must be given up to obtain a good. |
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| A subset of economics that analyzes the way the economy actually operates. |
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Definition
| A subset of economics founded on the value of judgments and leading to assertions of what ought to be |
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Term
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Definition
| An abstraction from an economic reality which one concentrates on key values |
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Definition
| A model where time is NOT a variable |
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Definition
| A model where time IS a variable |
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Term
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Definition
| A variable measured at a point in time |
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Term
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Definition
| A variable measured over a duration of time. |
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Term
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Definition
| The total of all good and services, valued at current market prices, produced during a year, and produced within the geographical boundaries of the country. |
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Term
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Definition
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Term
| 4 Expenditure Items that make up GDP |
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Definition
| Cunsumption (C), Investments (I), Government purchases of goods and services (G), and exports minus imports (X-Z). |
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Term
| How is unemployment measured? |
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Definition
| Unemployment Ratio & Current Population Survey |
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Term
| How is inflation measured? |
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Definition
| Consumer Price Index (CPI), Producer Price Index (PPI), and Implicit GDP Deflator |
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Term
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Definition
| (CPI) Thousands or products, 250 prices collectors, 18000 stores, 56 cities, 125000 price/month. Prices of good typical of middle-income, middle-class family |
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Term
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Definition
| (PPI) Prices of goods used by producers to produce other goods. (Figured out because if the price of goods used by the producers goes up then the CPI will rise in a month or 2; used as a warning system) |
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Definition
| A measure comparing the prices of all goods and services produced in the economy a given year to the prices of those goods and services produced in the base year. |
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Definition
| the sum of all budget deficits since the country began; the total indebtedness of the federal government (Deficit is flow; Debt is stock) |
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Definition
| Due to the fact that people in a free society are free to change jobs (ppl b/t jobs) |
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Definition
| Exists when the skills of the unemployed do not match the skills that employers needs. |
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Definition
| Unemployment due to the business cycle (recession). This is the type that macroeconomic policy-makers are worried about. |
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Term
| Natural Rate of Unemployment |
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Definition
| The rate of unemployment that is consistent with a constant rate of inflation |
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Term
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Definition
| A falling level of inflation |
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Definition
| Negative inflation; a continuously falling P(rice) level |
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Definition
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Definition
| Independent of any other variable in the model |
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Definition
| As income rises, consumption rises but not by as much as income. |
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Term
| Marginal Propensity to Consume |
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Definition
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Definition
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Definition
| GDP when economy is operating at full capacity and full employment. (he sometimes calls it full-capacity, full-employment output.) (New Classicals calls this the natural rate of output) |
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Definition
| Federal budget deficit and trade deficit |
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Definition
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Definition
| Trying to influence the economy through G and T |
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Term
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Definition
| Wage corrected for inflation |
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Definition
| Wage not corrected for inflation |
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Definition
| Combination of stagnation and inflation. |
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Term
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Definition
| A period of little or no growth in the economy. |
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Term
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Definition
Interest rate corrected for the rate of inflation. rr≈ rn - π |
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Term
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Definition
| 1/RRa (RRa - actual reserve ratio) |
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Term
| Opportunity Cost of Money |
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Definition
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Term
| Recognition, Action (Implementation) and Transmission (Impact) Lags |
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Definition
| relation to monetary and fiscal policy: Time from problem to recognition, Time from recognition to action, and Time from action to its effect of the economy |
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Definition
| Someone who believes M(money stock) has the dominant effect on the economy but who also believes that there should be a monetary rule rather than (discretionary) monetary policy. |
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Definition
| the people's control over what is produced because of the people's control over what goods and services they buy. |
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| Equation for APC (Average Propensity to Consume) |
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