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104 Cards in this Set
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- Back
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Real
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In economics, a term that refers to data that have been adjusted for the effects of inflation.
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Nominal
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In economics, a term that refers to data that have not been adjusted for the effects of inflation.
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Real output
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A synonym for real gross domestic product.
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Total factor productivity
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A measurement of improvements in technology and organization that allow increase in the output produced by given quantities of labor capital.
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Natural level of real output
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The trend of real GDP growth over time, also know as potential real output.
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Output gap
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The economy's current level of real output minus its natural level of real output.
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Business cycle
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A pattern of irregular buy repeated expansion and contraction of aggregate economic activity.
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Recession
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A cyclical economic contraction that lasts six months or more.
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unemployed rate
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the percentage of the labor force that is unemployed
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Employed
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A term used to refer to a person who is working at least 1 hour a week for pay or at least 15 hours per week as an unpaid worker in a family business.
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Unemployed
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A term used to refer to a person who is not employed but is actively looking for work.
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Labor force
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The sum of all individuals who are employed and all individuals who are unemployed.
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Discouraged workers
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A person who would work if a suitable job were available but has given up looking for such a job.
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Natural rate of unemployment
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The sum of frictional and structural unemployment; the rate of unemployment that persists when the economy is experiencing neither accelerating nor decelerating inflation.
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Employment-population ratio
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The percentage of noninstitutional adult population that is employed.
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Frictional unemployment
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The portion of unemployment that is accounted for by the short periods of unemployment needed for matching jobs with job seekers.
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Structural unemployment
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The portion of unemployment that is accounted for by people who are out of work for long periods because their skills do not match those required for available jobs.
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Cyclical unemployment
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The difference between the observed rate of unemployment at a given point in the business cycle and the natural rate of unemployment.
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Inflation
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A sustained increase in the average level of prices of all goods and services.
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Price stability
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A situation in which the rate of inflation is low enough so that it is not a significant factor in business and individual decision making.
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Transfer payments
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Payments to individuals that are not made in return for work they currently perform.
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Indexation
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A policy of automatically adjusting a value or payment in proportion to changes in the average price level.
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Normal interest rate
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The interest rate expressed in the usual way: in terms of current dollars without adjustment for inflation.
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Real interest rate
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The nominal interest rate minus the rate of inflation.
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Circular flow of income and product
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The flow of goods and services between households and firms, balanced by the flow of payments made in exchange for goods and services.
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Consumption
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All purchases of goods and services by households for the purpose of immediate use.
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Investment
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The sum of fixed investment and inventory investment.
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Fixed investment
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Purchases of newly produced capital goods.
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Inventory investment
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Changes in stocks of finished goods ready for sale, raw materials, and partially completed goods in profess of production.
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Government purchases of goods and services (government purchases)
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Purchases of goods by all levels of government plus purchases of services from contractors and wages of government employees.
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Government expenditures
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Government purchases of goods and services plus transfer payments.
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Transfer payments
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Payments by government to individuals not made in return for services currently performed, for example, unemployment compensation and pensions.
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Tax revenue
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The total value of all taxes collected by government.
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Net taxes
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Tax revenue minus transfer payments.
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Net exports
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Exports minus imports of goods and services.
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Injections
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The government purchase, investment, and net export components of the circular flow.
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Leakages
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The saving, net tax, and import components of the circular flow.
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Saving
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The part of household income that is not used to buy goods and services or to pay taxes.
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Planned inventory investment
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Changes in the level of inventory made on purpose, as part of a firm's business plan.
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Unplanned inventory investment
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Changes in the level of inventory arising from a difference between planned and actual sales.
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Planned investment
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The sum of fixed investment and planned inventory investmen.
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Planned expenditure
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The sum of consumption, government purchases, net exports, and planned investment.
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Marginal propensity to consume
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The proportion of each added dollar of real disposable income that households devote to consumption.
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Disposable income
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Income minus taxes
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Exogenous
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Term applied to any variable that is determined by noneconomic considerations, or by economic considerations that lie outside the scope of a given model.
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Endogenous
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Term applied to any variable that is determined by other variables included in an economic model.
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Multiplier effect
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The tendency of a given exogenous change in planned expenditure to increase equilibrium GDP by a greater amount.
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National income accounts
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A set of official government statistics on aggregate economic activity.
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Gross domestic product (GDP)
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The value at current market prices of all final goods and services produced annually in a given country.
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Final goods and services
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Goods and services that are sold to or ready for sale to parties that will use them for consumption, investment, government purchases, or export.
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Value added
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The dollar value of an industry's sales less the value of intermediate goods purchased for the use in production.
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Net domestic production (NDP)
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Gross domestic product minus an allowance (called the capital consumption allowance) that represents the value of capital equipment used up in the production process.
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National income
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The total income earned by a country's residences, including wages, rents, interest payments, and profits.
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Current account
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The section of a country's international accounts that consists of imports and exports of goods and services and unilateral transfers.
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Merchandise balance
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The value of a country's merchandise exports minus the value of its merchandise imports.
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Current account balance
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The value of a country's exports of goods and services minus the value of its imports of goods and services plus its net transfer receipts form foreign sources.
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Financial inflow
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Purchases of domestic assets by foreign buyers and borrowing from foreign lenders; also often called capital inflows.
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Financial outflow
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Purchases of foreign assets by domestic residents or loans by domestic lenders to foreign borrowers; also often called capital outflows.
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GDP deflator
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A weighted average of the prices of all final goods and services produced in the economy.
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Base year
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The year that is chosen as a basis for comparison in calculating a price index for price level.
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Price level
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A weighed average of the prices of goods and services expressed in relation to a base year value of 1.0.
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Price index
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A weighed average of the prices of goods and services expressed in relation to a base year value of 100.
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Consumer price index (CPI)
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A price index based on the market basket of goods and services purchased by a typical urban household.
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Producer price index (PPI)
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A price index based on a sample of goods and services bought by business firms.
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Money
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An asset that serves as means of payment, a store of purchasing power, and a unit of account.
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Liquidity
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An asset's ability to be used directly as a means of payment, or to be readily converted into one, while retaining a fixed nominal value.
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Currency
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Coins and paper money
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Transaction deposit
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A deposit from which funds can be freely withdrawn by a check or electronic transfer to make payments to third paries.
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M1
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A measure of the money supply that includes currency and transaction deposits.
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Savings deposit
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A deposit at a bank that can be fully redeemed at any time, but from which checks cannot be written.
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Time deposit
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A deposit at a bank or thrift institution from which funds can be withdrawn without payment of a penalty only at the end of an agreed-upon period.
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M2
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A measure of the money supply that includes M1 plus retail money market mutual fund shares, money market deposit accounts, and savings deposits.
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Equation of exchange
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An equation that shows the relationship among the money stock (M), the income velocity of money (V), the prices level (P), and real domestic product (Q); written as MV=PQ
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Velocity (income velocity of money)
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The ratio of nominal domestic income to the money stock; a measure of the average number of times each dollar of the money stock is used each year for income-producing purposes.
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Depository institutions
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Financial intermediaries, including commercial banks and thrift institutions, that accept deposits from the public.
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Commercial banks
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Financial intermediaries that provide a broad range of banking services, including accepting demand deposits and making commercial loans.
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Thrift institutions (thrifts)
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A group of financial intermediaries that operate much like commercial banks; they include savings and loans associations, savings banks, and credit unions.
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Balance sheet
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A financial statement showing what a firm or household owns and what it owes.
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Assets
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All the things that the firm or household owns or to which it holds a legal claim.
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Liabilities
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All the legal claims against a firm by nonowners or against a household by nonmembers.
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Net worth
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The firm's or household's assets minus its liabilities.
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Reserves
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Cash in bank vaults and banks' noninterest-bearing deposits with the Federal Reserve System
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Central bank
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A government agency responsible for regulating a country's banking system and carrying out monetary policy.
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Monetary base
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The sum of currency and reserve deposits, the monetary liabilites of the central bank.
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Reserve ratio
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The ratio of a bank's reserves (reserve deposits at the central bank plus vault cash) to its own deposits liabilities.
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Target reserve ratio
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The minimum amount of reserves a bank needs to hold that is consistent with regulations and safe banking practices.
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Excess reserves
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The difference between the amount of reserve a bank actually holds and the minimum required by regulations.
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T-account
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A simplified version of a balance sheet that shows only items that chance as a result of a given set of transactions.
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Deposit multiplier
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The quantity of total deposits that can be created for each dollar of total reserves in a simple banking system where deposits are the only form of money, equal to 1/Reserve ratio.
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Money multiplier
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The total quantity of money that can be created for each dollar of the monetary base.
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Federal funds market
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A market in which banks lend reserves to one another for periods as short as 24 hours.
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Federal funds rate
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The interest rate on overnight loans of reserves from one bank to another.
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Discount window
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The department through which the Federal Reserve lends reserves to banks.
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Discount rate
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The interest rate charged by the Fed on loans of reserves to banks.
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Foreign-exchange market
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A market in which the currency of one country is traded for that of another.
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Appreciate
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A currency is said to appreciate if its value increases relative to the currency of another country.
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Depreciate
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A currency is said to depreciate if its value decreases relative to the currency of another country.
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Transmission mechanism
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The set of channels through which monetary policy affects planned expenditure.
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Operating target
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A financial variable for which the Fed sets a short-term target, which it then uses as a guide in the day-to-day conduct of open market operations.
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Aggregate demand
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Total real planned expenditure.
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Aggregate supply
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Total real output of final goods and services (real GDP)
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Aggregate demand curve
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A graph showing the relationship between aggregate demand and the aggregate price level.
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Aggregate supply curve
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A graph showing the relationship between real output (real domestic product) and the average price level of final goods.
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Input prices
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A measure of the average prices of lab, or raw materials, and other inputs that firms use to produce goods and services.
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