Macro Econ 2

Front 1

Labor force

Back 1

those of 16 years of age and older who are either working or looking for work.

Front 2

Discouraged workers

Back 2

Those who drop out of the labor force in frustration because they can’t find work.

Front 3

Labor force participation rate

Back 3

labor force as a percentage of the adult population.

Front 4

Frictional unemployment

Back 4

unemployment that occurs because job seekers and employers need time to find each other.

Front 5

Seasonal unemployment

Back 5

unemployment caused by seasonal changes in the demand for certain kinds of labor.

Front 6

Structural unemployment

Back 6

unemployment because 1) the skills in demand do not match those of the unemployed, or 2) the unemployed do not live where the jobs are

Front 7

Full employment

Back 7

employment level when there is no cyclical unemployment.

Front 8

Hyperinflation

Back 8

a very high rate of inflation

Front 9

Deflation

Back 9

a sustained decrease in the price level

Front 10

Disinflation

Back 10

a reduction in the rate of inflation.

Front 11

Rule of 70

Back 11

Some variable rose at a rate of X percent per year, and that variable doubles in approximately 70/x years

Front 12

Demand-pull inflation

Back 12

a sustained rise in the price level caused by a rightward shift of the aggregate demand curve.

Front 13

Cost-push Inflation

Back 13

a sustained rise in the price level caused by a leftward shift of the aggregate supply curve.

Front 14

Interest

Back 14

the dollar amount paid by borrowers to lenders

Front 15

Interest Rate

Back 15

interest per year as a percentage of the amount loaned.

Front 16

Nominal interest rate

Back 16

the interest rate expressed in current dollars as a percentage of the mount loaned; the interest rate on the loan agreement

Front 17

Real Interest Rate

Back 17

The interest rate expressed in dollars of constant purchasing power as a percentage of the amount loaned; the nominal interest rate minus the inflation rate.

Front 18

COLA (cost of living adjustments

Back 18

the increase in a transfer payment or wage that reflects the increase in the price level.

Front 19

Double coincidence of wants

Back 19

two traders are willing to exchange their products directly

Front 20

Medium of Exchange

Back 20

Anything that facilitates trade by being generally accepted by all parties in payment for goods or services

Front 21

Commodity Money

Back 21

Anything that serves both as money and as a commodity; money that has intrinsic value.

Front 22

Unit of account

Back 22

a common unit for measuring the value of each good or service.

Front 23

Store of value

Back 23

Anything that retains its purchasing power over time.

Front 24

Gresham’s law

Back 24

People tend to trade away inferior money and hoard the best. [bad money drives out good—debasing the coinage]

Front 25

Seigniorage

Back 25

The difference between the face value of money and the cost of supplying it: the “profit” from issuing money.

Front 26

Token money

Back 26

Money whose face value exceeds its cost of production

Front 27

Check

Back 27

a written order instructing the bank to pay someone from an amount deposited

Front 28

Fractional Reserve Banking System

Back 28

Only a portion of bank deposits is back by reserves

Front 29

Representative Money

Back 29

bank notes that exchange for a specific commodity, such as gold.

Front 30

Fiat Money

Back 30

Money not redeemable for any commodity; its status as money is conferred initially by the government but eventually by common experience.

Front 31

Legal Tender

Back 31

US currency that constitutes a valid and legal offer of payment of debt.

Front 32

Financial intermediaries

Back 32

Institutions that serve as go-betweens, accepting funds from savers and lending them to borrowers

Front 33

State banks

Back 33

Before 1863, banks were charters by the states in which they operated, thus known as “State banks”.

Front 34

National Banks

Back 34

The National banking act of 1863 and later amendments created a new system of federally chartered banks called National Banks.

Front 35

Federal Reserve System

Back 35

Federal reserve system (the FED): the central bank and monetary authority of the US. made in 1913.

Front 36

Bank Branches

Back 36

A bank’s additional offices that carry out banking operations.

Front 37

Bank Holding Company

Back 37

A corporation that owns banks.

Front 38

Checking Deposits

Back 38

deposits in financial institution against which checks which checks can be written and ATM or debit cards can be applied.

Front 39

Money Aggregates

Back 39

Measures of the economy’s money supply.

Front 40

M1

Back 40

The narrowest measure of the money supply, consisting of currency and coins held by the non—banking public, checkable deposits, and traveler’s checks.

Front 41

Savings Deposits

Back 41

deposits that earn interest but have no specific maturity date.

Front 42

Time Deposits

Back 42

Deposits that earn a fixed rate of interest if held for the specified period, which can range from several months to several years; also called certified months to several years; also called certificates of deposits (CD’s

Front 43

M 2

Back 43

A money aggregate consisting of M1 plus saving deposits, small denomination time deposits, and money market mutual funds.

Front 44

M 3

Back 44

A money aggregate consisting of M2 plus large-denomination time deposits.

Front 45

Debit Card

Back 45

Cards that tap directly into the depositor’s bank account to fund purchases; also called a check card, and usually doubles as an ATM card.

Front 46

Asymmetric Information

Back 46

A situation in which one side of the market has more reliable information than the other side.

Front 47

Net Worth

Back 47

Assets minus liabilities.

Front 48

Balance Sheet

Back 48

A financial statement that shows assets, liabilities, and net worth as a given point in time; all these are stick measures; because assets must equal liabilities plus net worth, the statement is in balance.

Front 49

Required Reserves

Back 49

dollar amount of reserves a bank is obligated by regulation to hold.

Front 50

Required Reserve Ratio

Back 50

The ratio of reserves to deposits that banks are obligated by regulation to hold.

Front 51

Excess Reserves

Back 51

Bank reserves exceeding required reserves

Front 52

Liquidity

Back 52

a measure of the ease with which an asset can be converted into money without a significant loss of value.

Front 53

Federal Funds market

Back 53

A market for overnight lending and borrowing of reserves among banks; the market for reserves on account at the FED.

Front 54

Federal Funds Rate

Back 54

The interest rate charged in the federal funds market; the interest rate banks charge one another for overnight borrowing; the FED’s target interest rate

Front 55

Money Multiplier

Back 55

The multiple by which the money supply increases as a result of an increase in fresh reserves in the banking system.

Front 56

discount rate

Back 56

Reserve banks were also authorized to lend to banks in need of reserves; the interest rate changed is called this

Front 57

Federal Open Market Committee (FOMC)

Back 57

the 12-member group that makes decisions about the open-market operations – purchases and sales of U.S. government securities by the FED that affect the money supply and interest rates; consists of the 7 Board governors plus 5 of the 12 Presidents of the reserve banks

Front 58

Open-Market Operations

Back 58

purchases sales of government securities by the Federal Reserve in an effort to influence the money supply

Front 59

Money Market Mutual Fund

Back 59

a collection of short-term interest-earning assets purchased with funds collected from many shareholders (limited check writing privileges/competition for banks)