Econ Test 2

Front 1

finance

Back 1

field that studies how people make decisions regarding the allocation of resources over time and the handling of risk

Front 2

present value

Back 2

`the amount of money today that would be needed, using prevailing interest rates to produce a given future amount of money

Front 3

future value

Back 3

amoutn of money in future that an amount of money today will yield, giving prevailing interest rates

Front 4

compounding

Back 4

accumulation of a sum of money where the interest earned remains in the account to earn additional interest in the future

Front 5

risk aversion

Back 5

a dislike of uncertainty

Front 6

diversification

Back 6

reduction of risk achieved by replacing a single risk with a large number of smaller unrelated risks

Front 7

firm-specific risk

Back 7

risk that affects only a single company

Front 8

market risk

Back 8

risk that affects all companies in the stock market

Front 9

fundamental analysis

Back 9

the study of a company's accounting statements and future prospects to determine its value

Front 10

efficient markets hypothesis

Back 10

the theory that asset prices reflect all publicly availble information about the value of an asset

Front 11

informational efficiency

Back 11

the description of asset prices that rationally reflect all available information

Front 12

random walk

Back 12

the path of a variable whose changes are impossible to predict

Front 13

labor force

Back 13

the total number of workers, including both the employed and the unemployed

Front 14

unemployment rate

Back 14

the percentage of the labor force that is unemployed

Front 15

labor-force participation rate

Back 15

the percentage of the adult population that is in the labor force

Front 16

natural rate of unemployment

Back 16

the normal rate of unemployment around which the unemployment rate fluctuates

Front 17

cyclical unemployment

Back 17

the deviation of unemployment from its natural rate

Front 18

discouraged workers

Back 18

individuals who would like to work but have given up looking for a job

Front 19

frictional unemployment

Back 19

unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills

Front 20

structural unemployment

Back 20

unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one

Front 21

job search

Back 21

the process by which workers find appropriate jobs given their tastes and skills

Front 22

unemployment insurance

Back 22

a government program that partially protects workers' incomes when they become unemployed

Front 23

union

Back 23

a worker association that bargains with employers over wages, benefits, and working conditions

Front 24

collective bargaining

Back 24

the process by which unions and firms agree on the terms of employment

Front 25

strike

Back 25

the organized withdrawal of labor from a firm by a union

Front 26

efficiency wages

Back 26

above-equilibrium wages paid by firms to increase worker productivity

Front 27

money

Back 27

the set of assets in an economy that people regularly use to buy goods and services form other people

Front 28

medium of exchange

Back 28

an item that buyers give to sellers when they want to purchase goods and services

Front 29

unit of account

Back 29

the yardstick people use to post prices and record debts

Front 30

store of value

Back 30

an item that people can use to transfer purchasing power from the present to the future

Front 31

liquidity

Back 31

the ease with which an asset can be converted into the economy's medium of exchange

Front 32

commodity money

Back 32

money that takes the form of a commodity with intrinsic value

Front 33

flat money

Back 33

money without intrinsic value that is used as money because of government decree

Front 34

currency

Back 34

the paper bills and coins in the hands of the public

Front 35

demand deposits

Back 35

balances in bank accounts that depositors can access on demand by writing a check

Front 36

federal reserve

Back 36

the central bank of the united states

Front 37

central bank

Back 37

an institution designed to oversee the banking system and regulate the quantity of money in the economy

Front 38

money supply

Back 38

the quantity of money available in the economy

Front 39

monetary policy

Back 39

the setting of the money supply by policymakers in the central bank

Front 40

reserves

Back 40

deposits that banks have received but have not loaned out

Front 41

fractional-reserve banking

Back 41

a banking system in which banks hold only a fraction of deposits as reserves

Front 42

reserve ratio

Back 42

the fraction of deposits that banks hold as reserves

Front 43

money multiplier

Back 43

the amount of money the banking system generates with each dollar of reserves

Front 44

open-market operations

Back 44

the purchase and sale of US government bonds by the fed

Front 45

reserve requirements

Back 45

regulations on the minimum amount of reserves that banks must hold against deposits

Front 46

discount rate

Back 46

the interest rate on the loans that the Fed makes to banks

Front 47

closed economy

Back 47

an economy that does not interact with other economies in the world

Front 48

exports

Back 48

goods and services that are produced domestically

Front 49

imports

Back 49

goods and services that are produced abroad and sold domestically

Front 50

net exports

Back 50

the value of a nation's exports minus the value of its imports; also called the trade balance

Front 51

trade balance

Back 51

the value of a nation's exports minus the value of its imports; also called net exports

Front 52

trade surplus

Back 52

an excess of exports over imports

Front 53

trade deficit

Back 53

an excess of imports over exports

Front 54

balanced trade

Back 54

a situation in which exports equal imports

Front 55

net capital outflow

Back 55

the purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners

Front 56

nominal exchange rate

Back 56

the rate at which a person can trade the currency of one country for the currency of another

Front 57

appreciation

Back 57

an increase in the value of a currency as measured by the amount of foreign currency it can buy

Front 58

depreciation

Back 58

a decrease in the value of a currency as measured by the amount of foreign currency it can buy

Front 59

real exchange rate

Back 59

the rate at which a person can trade the goods and services of one country for the goods and services of another

Front 60

purchasing power parity

Back 60

a theory of exchange rates whereby a unit of any given currency should be able to buy the same quantity of goods in all countries