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24 Cards in this Set
- Front
- Back
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What is economic growth? |
Long-run process in which economic potential output increases. |
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Economic growth on a graph |
Shift to the right of the long-run aggregate supply curve |
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rule of 72 |
doubling time equals 72/growth rate |
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output per capita |
real GDP/population |
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How to assess changes in average standard of living |
percentage rate of growth of output - percentage rate of growth of population |
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aggregate production function |
employment (x), real GDP (y) |
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economy operating on production function |
producing potential level of output |
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diminishing marginal returns |
additional units of a variable factor less and less to output |
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Determination of real wage and natural level of employment |
intersection of supply and demand curves for labor |
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M1 |
Currency in circulation, checkable deposits, traveler's checks |
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M2 |
M1, small savings accounts, money market mutual funds. |
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Commodity money |
Money that is also something else. ie mackeral in prison |
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loaned up |
excess reserves equal zero |
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The fed |
Central bank, regulates banks, sets monetary policy, maintains stability of financial system. |
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interest rate |
(face value - bond price)/bond price *100 |
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price falls |
interest rate rises |
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increase in interest rate |
decrease quantity of investment demanded. increase demand for dollars |
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Motives for holding money |
transactions, precautionary, speculative |
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Transaction motive |
hold to buy something |
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precautionary motive |
hold for possible home-repair or health-care needs |
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speculative motive |
hold on concern prices may change |
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demand curve for money |
money demanded at each interest rate |
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change demand of money |
real GDP, price level, transfer costs, expectations, or preferences |
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money market equilibrium |
point at which quantity of money demanded equals quantity of money supplied |
