Macro Economics 2

Front 1

The amount by which the expenditures of foreigners exceed the foreign expenditures of domestic agents; also called the current account balance.

Back 1

Net Exports (X-M)

Front 2

Money that the government gives to someone without buying anything from them.

Back 2

TR Transfer Payments

Front 3

Anything that has value because it will bring some benefits to its owner in the future.

Back 3

Asset

Front 4

The sum of all planned purchases of goods produced in a country.

Back 4

Aggregate Demand

Front 5

Planned expenditures by firms.

Back 5

Investment Spending

Front 6

Situation in which there are no unplanned changes in inventories.

Back 6

Goods Market Equilibrium

Front 7

The total value of a household’s assets.

Back 7

Total Wealth

Front 8

The amount of money that is left over after subtracting taxes from, and adding transfer payments to, total factor income.

Back 8

Disposable Income

Front 9

Expenditures by households.

Back 9

Consumption Spending

Front 10

The mechanism by which a change in aggregate demand results in an even larger change in equilibrium GDP

Back 10

Multiplier Process

Front 11

Government spending that is financed by an equal amount of taxes.

Back 11

Balanced Budget Spending

Front 12

The fraction of any increase in disposable income that is spent on goods and services.

Back 12

Marginal Propensity to Consume (MPC)

Front 13

The ratio of a change in equilibrium GDP to the initial change in aggregate demand by which it was caused.

Back 13

Expenditure Multiplier

Front 14

Term that describes the relative size of a balanced-budget spending increase’s effect on equilibrium GDP.

Back 14

Unit Multiplier

Front 15

Government spending that is financed by an equal amount of borrowing from the public.

Back 15

Deficit Spending

Front 16

Another term for printing money to finance government spending.

Back 16

Monetizing the Debt

Front 17

1 - MPC.

Back 17

Marginal Propensity to Save

Front 18

The fraction of any increase in disposable income that is not spent on goods and services.

Back 18

Marginal Propensity to Save

Front 19

MPC=

Back 19

(Change in C)/(Change in Yd)

Front 20

1. Medium of exchange (used to buy goods and services)
2. Standard of deferred payment (used to repay loans)
3.Unit of account (standard measure by which to express prices)
4.Store of value (the most liquid asset to serve this purpose)

Back 20

Money's Four Functions

Front 21

Has some intrinsic value as a useful commodity

Back 21

Commodity Money

Front 22

Accepted as money because the government mandates its acceptance; has no intrinsic value

Back 22

Fiat Money

Front 23

promise to pay a certain amount of money to the person who holds them at a specified future date; issued by those who want to borrow money.

Back 23

Bonds

Front 24

the amount that will be paid to the holder of the bond (also called final value or future value)

Back 24

Face Value

Front 25

the date on which the bond can be redeemed

Back 25

Maturity Date

Front 26

the buyer’s rate of return on bond

Back 26

Interest Rate

Front 27

(buying and selling government bonds).
a tool the Fed actually uses to change the money supply

Back 27

Open market operations

Front 28

interest rate charged on discount loans; affects the amount of discount loans taken out by banks

Back 28

Discount rate

Front 29

(determines the amount of required reserves)
• Dangerously powerful monetary policy tool, as it affects all the banks. So small changes can have huge effects on the money supply

Back 29

Required reserve ratio (rrr)

Front 30

1. Medium of exchange (used to buy goods and services)
2. Standard of deferred payment (used to repay loans)
3.Unit of account (standard measure by which to express prices)
4.Store of value (the most liquid asset to serve this purpose)

Back 30

Money's Four Functions

Front 31

Has some intrinsic value as a useful commodity

Back 31

Commodity Money

Front 32

Accepted as money because the government mandates its acceptance; has no intrinsic value

Back 32

Fiat Money

Front 33

promise to pay a certain amount of money to the person who holds them at a specified future date; issued by those who want to borrow money.

Back 33

Bonds

Front 34

the amount that will be paid to the holder of the bond (also called final value or future value)

Back 34

Face Value

Front 35

the date on which the bond can be redeemed

Back 35

Maturity Date

Front 36

the buyer’s rate of return on bond

Back 36

Interest Rate

Front 37

(buying and selling government bonds).
a tool the Fed actually uses to change the money supply

Back 37

Open market operations

Front 38

interest rate charged on discount loans; affects the amount of discount loans taken out by banks

Back 38

Discount rate

Front 39

(determines the amount of required reserves)
• Dangerously powerful monetary policy tool, as it affects all the banks. So small changes can have huge effects on the money supply

Back 39

Required reserve ratio (rrr)

Front 40

1. Ensure liquidity in the banking system
2. Control the money supply by conducting monetary policy

Back 40

Two Major Functions of Federal Reserve System

Front 41

Function of money that refers to money’s usefulness as an asset.

Back 41

Store of Value

Front 42

Function of money that allows prices to be easily expressed according to a standard measure.

Back 42

Unit of Account

Front 43

The amount of money for which a bond can be redeemed in the future.

Back 43

Future, Final, or Face Value

Front 44

The Fed’s purchases and sales of government bonds.

Back 44

Open Market Operations

Front 45

Function of money that facilitates the repayment of loans.

Back 45

Standard of Deferred Payments

Front 46

The minimum amount of deposits that banks must hold at all times.

Back 46

Required Reserves

Front 47

The ease with which an asset can be sold with minimal loss of value.

Back 47

Liquidity

Front 48

Price=(Face Value)/ ?

Back 48

1+r