Term
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Definition
| the study of how households and firms make decisions and how they interact in markets |
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Term
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Definition
| the study of economy-wide phenomena, including inflation, unemployment, and economic growth |
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Term
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Definition
| gross domestic product- the market value of all final goods and services produced within a country in a given time period |
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Definition
| spending by households on goods and services, with the exception of purchasing of new housing |
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Definition
| spending on capital equipment, inventories, and structures, including household purchasing of new housing |
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Definition
| spending on goods and services by local, state, and federal governments |
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Definition
| spending on domestically produced goods by foreigners (exports) minus spending on foreign goods by domestic residents (imports) |
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Definition
| the production of goods and services valued at current prices |
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Term
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Definition
| the production of goods and services valued at constant prices |
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Term
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Definition
| a measure of the price level calculated as the ratio of nominal GDP to real GDP times 100 |
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Term
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Definition
| consumer price index- a measure of the overall cost of the goods and services bought by a typical consumer |
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Term
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Definition
| the percentage change in the price index from the preceding period |
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Term
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Definition
| a measure of the cost of a basket of goods and services bought by firms |
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Term
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Definition
| the automatic correction by law or contract of a dollar amount for the effects of inflation |
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Term
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Definition
| the interest rate as usually reported without a correction for the effects of inflation |
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Term
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Definition
| the interest rate corrected for the effects of inflation |
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Definition
| the quantity of goods and services produced from each unit of labor input |
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Definition
| the stock of equipment and structure that are used to produce goods and services |
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Definition
| the knowledge and sills that workers acquire through education, training, and experience |
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Definition
| the inputs into the production of goods and services that are provided by nature, such as land, rivers, and mineral deposits |
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Definition
| society's understanding of the best ways to produce goods and services |
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Term
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Definition
| the property whereby the benefit from an extra unit of an input declines as the quantity of the input increases |
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Term
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Definition
| the property whereby countries that start off poor tend to grow more rapidly than countries that start off rich |
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Term
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Definition
| the group of institutions in the economy that help to match one person's saving with another person's investment |
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Term
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Definition
| financial institutions though which savers can directly provide funds for borrowers |
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Term
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Definition
| a certificate of indebtedness |
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Term
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Definition
| a claim to partial ownership in a firm |
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Term
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Definition
| financial institutions through which savers can indirectly provide funds to borrowers |
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Term
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Definition
| an institution that sells shares to the public and uses the proceeds to buy a portfolio of stocks and bonds |
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Term
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Definition
| the total income in the economy that remains after paying for consumption and government purchases |
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Term
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Definition
| the income that households have left after paying for taxes and consumption |
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Term
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Definition
| the tax revenue that the government has left after paying for its spending |
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Term
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Definition
| an excess of tax revenue over government spending |
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Term
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Definition
| a shortfall of tax revenue from government spending |
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Term
| market for loanable funds |
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Definition
| the market in which those who want to save supply funds and those who want to borrow to invest demand funds |
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Term
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Definition
| a decrease in investment that results from government borrowing |
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Term
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Definition
| the field of studies that shows how people make decisions regarding the allocation of resources over time and the handling of risk |
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Term
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Definition
| the amount of money today that would be needed, using prevailing interest rates, to produce a given future amount of money |
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Term
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Definition
| the amount of money in the future than an amount of money today will yield, given prevailing interest rates |
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Term
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Definition
| the accumulation of a sum of money in, say, a bank account, where the interest earned remains in the account to earn additional interest in the future |
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Term
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Definition
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Term
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Definition
| the reduction of risk achieved by replacing a single risk with a number of smaller, unrelated risks |
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Definition
| risk that affects only a single company |
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Definition
| risk that affects all companies in the stock market |
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Term
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Definition
| the study of a company's accounting statements and future prospects to determine its value |
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Term
| efficient markets hypothesis |
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Definition
| the theory that asset prices reflect all publicly available information about the value of an asset |
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Term
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Definition
| the description of asset prices that rationally reflect all available information |
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Term
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Definition
| the path of a variable whose changes are impossible to predict |
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Term
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Definition
| the total number of workers, including both the employed and unemployed |
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Term
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Definition
| the percentage of the labor force that is unemployed |
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Term
| labor-force participation rate |
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Definition
| the percentage of the adult population that is in the labor force |
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Term
| natural rate of unemployment |
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Definition
| the normal rate of unemployment around which the unemployment rate fluctuates |
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Term
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Definition
| the deviation of unemployment from its natural rate |
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Term
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Definition
| individuals who would like to work but have given up looking for a job |
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Term
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Definition
| unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills |
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Term
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Definition
| unemployment that results because the number of jobs available is insufficient to provide a job for everyone who wants one |
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Term
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Definition
| the process by which workers find appropriate jobs given their tastes and skills |
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Term
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Definition
| a government program that partially protects workers' incomes when they become unemployed |
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Term
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Definition
| a worker association that bargains with employers over wages, benefits, and working conditions |
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Term
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Definition
| the process by which unions and firms agree on the terms of employment |
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Term
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Definition
| the organized withdrawal of labor from a firm by a union |
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Term
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Definition
| above-equilibrium wages paid by firms to increase worker productivity |
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Term
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Definition
| the set of assets in an economy that people regularly use to buy goods and services from other people |
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Term
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Definition
| an item that buyers give to sellers when they want to purchase goods and services |
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Term
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Definition
| the yardstick people use to post prices and record debts |
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Term
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Definition
| an item that people can use to transfer purchasing power from the present to the future |
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Term
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Definition
| the ease with which an asset can be converted into the economy's medium of exchange |
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Term
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Definition
| money that takes the form of a commodity with intrinsic value (eg. gold) |
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Term
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Definition
| money without intrinsic value that is used as money because of government decree |
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Term
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Definition
| the paper bills and coins in the hands of the public |
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Term
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Definition
| balances in bank accounts that depositors can access on demand by writing a check |
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Term
| Federal Reserve (the Fed) |
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Definition
| the central bank of the US |
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Term
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Definition
| an institution designed to oversee the banking system and regulate the quantity of money in the economy |
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Term
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Definition
| the quantity of money available in the economy |
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Term
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Definition
| the setting of the money supply by policymakers in the central bank |
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Term
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Definition
| deposits that banks have received but have not loaned out |
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Term
| fractional-reserve banking |
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Definition
| a banking system in which banks hold only a fraction of deposits as reserves |
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Term
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Definition
| the fraction of deposits that banks hold as reserves |
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Term
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Definition
| the amount of money the banking system generates with each dollar of reserves |
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Term
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Definition
| the purchase and sale of US government bonds by the Fed |
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Term
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Definition
| regulations on the minimum amount of reserves that banks must hold against deposits |
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Term
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Definition
| the interest rate on the loans that the Fed makes to banks |
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Term
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Definition
| the interest rate at which banks make overnight loans to one another |
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Term
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Definition
| a theory asserting that the quantity of money available determines the price level and that the growth rate in the quantity of money available determines the inflation rate |
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Term
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Definition
| variables measured in monetary units |
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Term
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Definition
| variables measured in physical units |
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Term
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Definition
| the theoretical separation of nominal and real variables |
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Term
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Definition
| the proposition that changes in the money supply do not affect real variables |
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Term
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Definition
| the rate at which money changes hands |
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Term
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Definition
| the equation M*V=P*Y relates the quantity of money, the velocity of money, and the dollar value of the economy's output of goods and services |
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Term
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Definition
| the revenue the government raises by creating money |
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Term
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Definition
| the one-for-one adjustment of the nominal interest rate to the inflation rate |
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Term
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Definition
| the resources wasted when inflation encourages people to reduce their money holdings |
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Term
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Definition
| the costs of changing prices |
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Term
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Definition
| an economy that does not interact with other economies in the world |
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Term
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Definition
| an economy that interacts freely with other economies around the world |
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Term
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Definition
| goods and services that are produced domestically and sold abroad |
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Term
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Definition
| goods and services that are produced abroad and sold domestically |
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Term
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Definition
| the value of a nation's exports minus the value of its imports; also called the trade balance |
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Term
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Definition
| the value of a nation's exports minus the value of its imports; also called net exports |
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Term
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Definition
| an excess of exports over imports |
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Term
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Definition
| an excess of imports over exports |
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Term
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Definition
| a situation in which exports equal imports |
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Term
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Definition
| the purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners |
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Term
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Definition
| the rate at which a person can trade the currency of one country for the currency of another |
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Term
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Definition
| an increase in the value of a currency as measured by the amount of foreign currency it can buy |
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Term
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Definition
| a decrease in the value of a currency as measured by the amount of foreign currency it can buy |
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Term
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Definition
| the rate at which a person can trade the goods and services of one country for the goods and services of another |
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Term
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Definition
| a theory of exchange rates whereby a unit of any given currency should be able to buy the same quantity of goods in all countries |
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Term
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Definition
| a government policy that directly influences the quantity of goods and services that a country imports or exports |
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Term
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Definition
| a large and sudden reduction in the demand for assets located in a country |
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Term
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Definition
| a period of declining real incomes and rising unemployment |
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Term
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Definition
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Term
| model of aggregate demand and aggregate supply |
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Definition
| the model that most economists use to explain short-run fluctuations in economic activity around its long-run trend |
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Term
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Definition
| a curve that shows the quantity of goods and services that households, firms, the government, and customers abroad want to buy at each price level |
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Term
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Definition
| a curve that shows the quantity of goods and services that firms choose to produce and sell at each price level |
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Term
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Definition
| a period of falling output and rising prices |
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Term
| theory of liquidity preference |
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Definition
| Keynes's theory that the inerest rate adjusts to bring money supply and money demand into balance |
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Term
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Definition
| the setting of the level of government spending and taxation by government policymakers |
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Term
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Definition
| the additional shifts in aggregate demand that result when expansionary fiscal policy increases income and thereby increases consumer spending |
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Term
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Definition
| the offset in aggregate demand that results when expansionary fiscal policy raises the interest rate and thereby reduces investment spending |
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Term
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Definition
| changes in fiscal policy that stimulate aggregate demand when the economy goes into a recession without policymakers having to take any deliberate action |
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Term
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Definition
| a curve that shows the short-run trade-off between inflation and unemployment |
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Term
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Definition
| the claim that unemployment eventually returns to its normal, or natural, rate, regardless of the rate of inflation |
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Term
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Definition
| an event that directly alters firms' costs and prices, shifting the economy's aggregate supply curve and thus the Phillips curve |
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Term
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Definition
| the number of percentage points of annual output lost in the process of reducing inflation by one percent |
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Term
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Definition
| the theory that people optimally use all the information they have, including information about government policies, when forecasting the future |
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