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| Changes in government spending and tax collections designed to achieve a full-employment and noninflationary domestic output; also called discretionary fiscal policy. |
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| Council of Economic Advisers (CEA) |
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| A group of three persons that advises and assists the president of the United States on economic matters (including the preparation of the annual Economic Report of the President). |
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| expansionary fiscal policy |
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| Federal Reserve System actions to increase the money supply, lower interest rates, and expand real GDP; an easy money policy. |
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| The amount by which the expenditures of the Federal government exceed its revenues in any year. |
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| contractionary fiscal policy |
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| A decrease in government purchase of goods and services, an increase in net taxes, or some combination of the two, for the purpose of decreasing aggregate demand and thus controlling inflation |
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| The amount by which the revenues of the Federal government exceed its expenditures in any year. |
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| A mechanism that increases government's budget deficit (or reduces its surplus) during a recession and increases government's budget surplus (or reduces its deficit) during an expansion without any action by policymakers. The tax system is one such mechanism. |
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| A tax whose average tax rate increases as the taxpayer's income increases and decreases as the taxpayer's income decreases. |
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| A tax whose average tax rate remains constant as the taxpayer's income increases or decreases. |
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| A tax whose average tax rate decreases as the taxpayer's income increases and increases as the taxpayer's income decreases. |
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| cyclically adjusted budget |
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| A comparison of the government expenditures and tax collections that would occur if the economy operated at full employment throughout the year; the full employment budget. |
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| A Federal budget deficit that is caused by a recession and the consequent decline in tax revenues. |
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| Fluctuations in the economy caused by the alleged tendency of Congress to destabilize the economy by reducing taxes and increasing government expenditures before elections and to raise taxes and lower expenditures after elections. |
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| A rise in interest rates and a resulting decrease in planned investment caused by the Federal government's increased borrowing to finance budget deficits and refinance debt. |
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| The total amount owed by the Federal government to the owners of government securities; equal to the usm of past government budget deficits less government budget surpluses |
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| U.S. Treasury bills, notes, and bonds used to finance budget deficits; the components of the public debt. |
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| The portion of the public dept owed to foreign citizens, firms, and institutions. |
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| Government expenditures on public capital (such as roads, highways, bridges, mass-transit systems, and electric power facilities) and on human capital (such as education, training, and health(. |
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| Any item sellers generally accept and buyers generally use to pay for a good or service; money; a convenient means of exchanging goods and services without engaging in barter. |
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| The ease with which an asset can be converted quickly into cash with little or no loss of purchasing power. Money is said to be perfectly liquid, whereas other assets have a lesser degree of liquidity. |
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| The most narrowly defined money supply, equal to currency in the hands of the public and the checkable deposits of commercial banks and thrift institutions. |
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| Paper money issues by the Federal Reserve Banks. |
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| Any deposit in a commercial bank or thrift institution against which a check may be written. |
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| A firm that engages in the business of banking (accepts deposits, offers checking accounts, and makes loans). |
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| A more broadly defined money supply, equal to M1 plus noncheckable savings accounts (including money market deposit accounts), small time deposits (deposits of less than $100,000), and individual money market mutual fund balances. |
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| money market deposit account (MMDA) |
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| Bank- and thrift-provided interest-bearing accounts that contain a variety of short-term securities- such accounts have minimum balance requirements and limits on the frequency of withdrawals. |
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| money market mutual fund (MMMF) |
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| Interest-bearing accounts offered by investment companies, which pool depositors' funds for the purchase of short-term securities. Depositors can write checks in minimum amounts or more against their accounts. |
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| A nation's official currency (bills and coins). Payment of debts must be accepted in this monetary unit, but creditors can specify the form of payment, for example, "cash only" or "check or credit card only." |
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| The U.S. central bank, consisting of the Board of Governors of the Federal Reserve and the 12 Federal Reserve Banks, which controls the lending activity of the nation's banks and thrifts and thus the money supply; commonly referred to as the "Fed." |
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| The seven-member group that supervises and controls the money and banking system of the United States; the Board of Governors of the Federal Reserve System; the Federal Reserve Board. |
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| The 12 banks chartered by the U.S. government to control the money supply and perform other functions. (See central bank, quasi-public bank, and bankers' bank.) |
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| Federal Open Market Committee (FOMC) |
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| The 12-member group that determines the purchase and sale policies of the Federal Reserve Banks in the market for U.S. government securities. |
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| mortgage-backed securities |
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| Troubled Asset Relief Program (TARP) |
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| financial services industry |
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| The broad category of firms that provide financial products and services to help households and businesses earn interest, receive dividends, obtain capital gains, insure against losses, and plan for retirement. Includes commercial banks, thrifts, insurance companies, mutual fund companies, pension funds, investment banks, and securities firms. |
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| Wall Street Reform and Consumer Protection Act |
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Definition
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| fractional reserve banking system |
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Definition
| A system in which commercial banks and thrift institutions hold less that 100 percent of their checkable-deposit liabilities as required reserves. |
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| A statement of the assets, liabilities, and net worth of a firm or individual at some given time. |
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| transactions demand for money |
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| expansionary monetary policy |
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| restrictive monetary policy |
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