Term
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Definition
| an index that measures the prices of a fixed “market basket” of some 300 goods and services by a “typical” consumer |
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Definition
| the year with which other years are compared when an index is constructed, i.e. the base year for a price index |
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Definition
| a change in the quantity demanded of a product that results from the change in real income (purchasing power) cause by a change in the product’s price |
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Definition
| the amount of goods and services a worker can purchase with his or her nominal wage; the purchasing power of the nominal wage |
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Definition
| the interest rate expressed in terms of annual amounts currently charged for interest and not adjusted for inflation |
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Term
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Definition
| the interest rate expressed in dollars of constant value (adjusted for inflation) and equal to the nominal interest rate less the expected rate of inflation |
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Term
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Definition
| the interest rate banks and other depository institutions charge one another on overnight loans made out of their excess reserves |
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Term
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Definition
| the interest rate that the Federal Reserve Banks charge on the loans they make to commercial banks and thrift institutions |
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Term
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Definition
| the portion (expressed as a percent) of depositors' balances that banks must have on hand in cash |
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Term
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Definition
| the buying and selling of U.S. government securities by the Federal Reserve Banks for purposes of carrying out monetary policy |
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Term
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Definition
| a reserve requirement that is less than 100 percent of the checkable-deposit liabilities of a commercial bank or thrift institution |
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Term
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Definition
| the deposits of commercial banks and thrifts at Federal Reserve banks plus bank and thrift vault cash |
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Term
| Lending Potential of a Banking System |
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Definition
| the amount by which the banking system can increase the money supply by making new loans to (or buying securities from) the public; equal to the excess reserves of the banking system multiplied by the monetary multiplier |
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Term
| Lending Potential of an Individual Commercial Bank |
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Definition
| the amount by which a single bank can safely increase the money supply by making new loans to (or buying securities from) the public; equal to the bank’s excess reserves |
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Term
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Definition
| the benchmark interest rate that banks use as a reference point for a wide range of loans to businesses and individuals; the interest rate that commercial banks charge their most creditworthy borrowers, such as large corporations |
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Term
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Definition
| the percentage increase in the price of goods and services, usually annually |
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Term
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Definition
| a bank whose chief function in the control of the nation’s money supply; in the United States, the Federal Reserve System |
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Term
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Definition
| any deposit in a commercial bank or thrift institution against which a check may be written |
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Term
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Definition
| the process by which funds are transferred from the checking accounts of the writers of checks to the checking accounts of the recipients of the checks |
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Term
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Definition
| the multiple of its excess reserves by which the banking system can expand checkable deposits and thus the money supply by making new loans (or buying securities); equal to 1 divided by the reserve requirement |
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Term
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Definition
| an accounting item that increases the value of an asset (such as the foreign money owned by the residents of a nation) |
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Term
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Definition
| personal income less personal taxes; income available for personal consumption expenditures and personal saving |
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Term
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Definition
| Federal Reserve System actions to increase the money supply to low interest rates and expand real GDP |
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Term
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Definition
| Federal Reserve System actions that contract, or restrict, the growth of the nation’s money supply for the purpose of reducing or eliminating inflation |
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Term
| Federal Open Market Committee (FOMC) |
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Definition
| 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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Term
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Definition
| 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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Term
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Definition
| 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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Term
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Definition
| an interest-earning deposit in a commercial bank or thrift institution that the depositor can withdraw without penalty after the end of a specified period |
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Term
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Definition
| spending for the production and accumulation of capital and additions to inventories |
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Term
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Definition
| goods that have been produced but remain unsold |
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Term
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Definition
| the total amount of investment without taking account of the cost of depreciation |
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Term
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Definition
| anything of monetary value owned by a firm or individual |
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Term
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Definition
| the tendency for people to increase their consumption spending when the value of their financial and real assets rises and to decrease their consumption spending when the value of those assets falls |
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Term
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Definition
| human-made resources (buildings, machinery, and equipment) used to produce goods and services; goods that do not directly satisfy human wants; also called capital goods |
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Term
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Definition
| the total available capital in a nation |
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Term
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Definition
| MV=PQ, in which M is the supply of money, V is the velocity of money, P is the price level, and Q is the physical volume of final goods and services produced |
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Term
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Definition
| MV=PQ, in which M is the supply of money, V is the velocity of money, P is the price level, and Q is the physical volume of final goods and services produced |
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Term
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Definition
| factors other than price that determine the quantities of a good or service |
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Term
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Definition
| Such taxes as sales, excise, and business property taxes, license fees, and tariffs that firms treat as costs of producing a product and pass on ( in whole or in part) to buyers by charging higher prices |
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Term
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Definition
| the aggregate supply curve associated with a time period in which input prices (especially nominal wages) are fully responsive to changes in the price level |
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Term
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Definition
| a period in which normal wages and other input prices don’t change in response to a change in the price level |
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Term
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Definition
| the total market value of all final goods and services produced annually within the boundaries of the United States, whether by U.S. or foreign-supplied resources |
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Term
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Definition
| a payment of money (or goods and services) by a government to a household or firm for which the payer receives no good or service directly in return |
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Term
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Definition
| gross (or net) domestic product; the total output of final goods and services produced in the economy |
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Term
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Definition
| the total amount spent for final goods and services in an economy |
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Term
| Contractionary Fiscal Policy |
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Definition
| a decrease in government purchases for 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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Term
| Expansionary Fiscal Policy |
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Definition
| an increase in government purchases for goods and services, a decrease in net taxes, or some combination of the two for the purpose of increasing aggregate demand and expanding real output |
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Term
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Definition
| increases in the price level (inflation) resulting from an increase in resource costs (i.e. raw-material prices) and hence in per-unit production costs; inflation caused by reductions in aggregate supply |
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Term
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Definition
| increases in the price level (inflation) resulting from an excess of demand over output at the existing price level, caused by an increase in aggregate demand |
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Term
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Definition
| the price in a competitive market at which the quantity demanded and the quantity supplied are equal, there is neither a shortage nor a surplus, and there is no tendency for price to rise or fall |
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Term
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Definition
| the amount by which the aggregate expenditures schedule must shift downward to decrease the nominal GDP to its full-employment noninflationary level |
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