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43 Cards in this Set
- Front
- Back
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Aggregate Demand Curve
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The various levels of spending that occur at various price levels
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Purchasing Power Effect
or Wealth Effect |
▲P
▼Value of money ▼Value of wealth in money form |
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Interest Rate Effect
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▲P
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International Trade Effect
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▲P
▼Competition of Domestic Goods ▼exports ▲Imports ▼Net Exports |
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Long-run Aggregate Supply Curve
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The aggregate supply when all wages and prices are perfectly flexible
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Short-run Aggregate Supply Curve
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The various levels of output producers will supply for 1 period
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Self Adjustment Mechanism
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The process by which wage negotiation leads to price level changes and shift in short run aggregate supply
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Aggregate Demand Shock
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Anything that causes spending levels to change except for those caused by ΔP
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Aggregate Supply Shock
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Anything that causes prices to producers to change, including a change in input costs
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Stagflation
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simultaneous rise in inflation and unemployment
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Full-employment Output
or Potential Output or Potential GDP |
The level of output when the economy is at the natural rate of unemployment
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Natural Rate of Unemployment
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The rate of unemployment when there is no cyclical unemployment
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Barter
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Exchange of one good for another
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Double coincidence of Wants
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Each party in the exchange must want the good the other party is trying to exchange
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Unit of Account
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The thing(money) that is used to quote the value of other things
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Deflation
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Decrease in the average level of prices
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Gresham's Law
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If money has multiple purposes it will tend to be used in the area where it has the highest value, which may not be as money
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Coin Clipping
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Form of counterfeiting, where a small piece of many coins to be create additional coins
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Run on a Bank
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When all depositers at a bank seek to withdraw their money
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Fractional Reserve Banking System
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A banking system where banks are legally required to keep a fraction of deposits on hand, they cannot be lent out.
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M1
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Currency in checking deposits owned by the public
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Required Reserves
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the amount of deposits banks are legally required to keep on hand
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Excess Reserves
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The amount of deposits banks are allowed to lend out
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The Federal Reserve
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the central monetary authority of the US
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The federal Open Market Committee
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The committee that controls monetary policy in the US
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Required Reserve Ratio
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Fraction of deposits are legally required to keep on hand
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Discount Rate
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The interest rate that the fed charges banks when it lends them money
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Federal Funds Rate
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The interest rate banks charge each other on overnight loans
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Open Market Purchase
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When the fed buys a US government security to ▲MS(money supply)
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Open Market Sale
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When the fed sells a US government security to ▼MS
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US Government Security
or T-Bill |
I owe you issued by the federal government
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Liquidity
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How easily one asset can be translated into another
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Primary Bond Market
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the market where the seller is the issuer of a bond
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Secondary Bond Market
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The market where the seller is not the issuer of the bond
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Monetary Policy
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The government control of the money supply
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Liquidity Preference
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Demand for money
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Crowding Out
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an ▲ public spending causes a decrease in private spending
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Activist Policy
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Allowing policy makers the discretion of doing policy to counter economic fluctuations
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Fixed Rule Policy
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A set of policy rules that are rarely broken
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Inside Lag
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The time period between when a problem is observed and policy is enacted to encounter it
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Time Inconsistency
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In order to be effective, policy must be consistent; yet in some cases it may be ideal to alter policy
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Automatic Stabilizer
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Function built in to fiscal policy which reduce fluctuations in economic activity
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Balanced Budget Amendment
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Requiring the federal government to have revenue equal to expenditures
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