Macroeconomics Chapters 13-19

Front 1

Balance of Payments Accounts

Back 1

The accounts in which a nation records it's international trading, borrowing, and lending

Front 2

Current Account

Back 2

Record receipts from the sale of goods and services to other countries (exports), minus payments for goods and services bought from other countries (imports), plus the net amount of interest and transfers received from and paid to other countries

Front 3

Capital and Financial Account

Back 3

Record of foreign investment in the United States minus U.S. investment abroad

Front 4

Official Settlements Account

Back 4

Record of the change in U.S. official reserves

Front 5

U.S. Official Reserves

Back 5

The government's holdings of foreign currency

Front 6

Net Borrower

Back 6

A country that is borrowing more from the rest of the world than it is lending to the rest of the world

Front 7

Net Lender

Back 7

A country that is lending more to the rest of the world than it is borrowing from the rest of the world

Front 8

Debtor Nation

Back 8

A country that during its entire history has borrowed more from the rest of the world than it has lent to the rest of the world

Front 9

Creditor Nation

Back 9

A country that during its entire history has invested more.in the rest of the world than other countries has invested in it

Front 10

Private Sector Balance

Back 10

Saving minus investment

Front 11

Government Sector Balance

Back 11

The sum of the budget balances of the federal, state, and local governments - net taxes minus government expenditure on goods and services

Front 12

Foreign Exchange Market

Back 12

The market in which the currency of one country is exchanged for the currency of another

Front 13

Foreign Exchange Rate

Back 13

The price at which one currency exchanges for another

Front 14

Currency Appreciation

Back 14

The rise in the value of one currency in terms of another currency

Front 15

Currency Depreciation

Back 15

The fall in the value of one currency in terms of another currency

Front 16

U.S. Interest Rate Differential

Back 16

The U.S. interest rate minus the foreign interest rate

Front 17

Purchasing Power Parity

Back 17

Equal value of money - a situation in which money buys the same amount of goods and services in different currencies

Front 18

Interest Rate Parity

Back 18

Equal interest rate - a situation in which the interest rate in one currency equals the interest rate in another currency when the exchange rate changes are taken into account

Front 19

Aggregate Supply

Back 19

The relationship between the quantity of real GDP supplied and the price level when all other influences on production plans remain the same.

Front 20

Aggregate Demand

Back 20

The relationship between the quantity of real GDP demanded and the price level when all other influences on expenditure plans remain the same.

Front 21

Fiscal Policy

Back 21

Changing taxes, transfer payments, and government expenditure on goods and services

Front 22

Monetary Policy

Back 22

Changing the quantity of money and the interest rate

Front 23

Macroeconomic Equilibrium

Back 23

When the quantity of real GDP demanded equals the quantity of real GDP supplied at the point of intersection of the AD curve and the AS curve.

Front 24

Full-employment Equilibrium

Back 24

When equilibrium real GDP equals potential GDP

Front 25

Recessionary Gap

Back 25

A gap that exists when potential GDP exceeds real GDP and that brings a falling price level.

Front 26

Inflationary Gap

Back 26

A gap that exists when real GDP exceeds potential GDP and that brings a rising price level.

Front 27

Real Business Cycle

Back 27

A cycle that results from fluctuations in the pace of growth of labor productivity and potential GDP

Front 28

Demand-Pull Inflation

Back 28

Inflation that starts because aggregate demand increases.

Front 29

Cost-Push Inflation

Back 29

An inflation that begins with an increase in cost.

Front 30

Stagflation

Back 30

The combination of recession (decreasing real GDP) and inflation (rising price level)

Front 31

Aggregate Planned Expenditure

Back 31

Planned consumption expenditure plus planned investment, plus planned government expenditure, plus planned exports minus planned imports

Front 32

Consumption Function

Back 32

The relationship between consumption expenditure and disposable income, other things remaining the same

Front 33

Marginal Propensity to Consume

Back 33

The traction of a change in disposable income that is spent on consumption - the change in consumption expenditure divided by the change in disposable income that brought it about

Front 34

Equilibrium Expenditure

Back 34

The level of aggregate expenditure that occurs when aggregate planned expenditure equals real GDP.

Front 35

Multiplier

Back 35

The amount by which a change in any component of autonomous expenditure is magnified or multiplied to determine the change in equilibrium expenditure and real GDP that it generates.

Front 36

Marginal Tax Rate

Back 36

The fraction of a change in real GDP that is paid in income taxes - the change in tax payments divided by the change in real GDP.

Front 37

Short-Run Phillips Curve

Back 37

The relationship between the inflation rate and the unemployment rate when the natural unemployment rate and the expected inflation rate remain constant

Front 38

Okun's Law

Back 38

For each percentage point that the unemployment rate is above (below the natural unemployment rate, real GDP is 2 percent below (above) potential GDP

Front 39

Long-Run Phillips Curve

Back 39

The relationship between inflation and unemployment when the economy is at full employment. The long-run Phillips curve is a vertical line at the natural unemployment rate

Front 40

Expected Inflation Rate

Back 40

The inflation rate that people forecast and use to set the money wage rate and other money prices

Front 41

Natural Rate Hypothesis

Back 41

The proposition that when the inflation rate changes, the unemployment rate changes temporarily and eventually returns to the natural unemployment rate

Front 42

Rational Expectation

Back 42

The forecast that results from the use of all the relevant data and economic science

Front 43

Fiscal Policy

Back 43

The use of the federal budget to achieve the macroeconomic objectives of high and sustained economic growth and full employment

Front 44

Budget Balance

Back 44

Tax revenues minus outlays

Front 45

National Debt

Back 45

The amount of government debt outstanding - debt that has arisen from past budget deficits

Front 46

Transfer Payments

Back 46

Social Security benefits. Medicare and Medicaid benefits, unemployment benefits, and other cash benefits

Front 47

Fiscal Imbalance

Back 47

The present value of the government's commitments to pay future benefits minus the present value of its future tax revenues

Front 48

Generational Imbalance

Back 48

The division of the fiscal imbalance between the current and future generations

Front 49

Automatic Fiscal Policy

Back 49

A fiscal policy action that is triggered by the state of the economy

Front 50

Discretionary Fiscal Policy

Back 50

A fiscal policy action that is initiated by an act of Congress

Front 51

Automatic Stabilizers

Back 51

Features of fiscal policy that stabilize real GDP without explicit action by the government

Front 52

Induced taxes

Back 52

Taxes vary with real GDP

Front 53

Structural Surplus or Deficit

Back 53

The budget balance that would occur if the economy were at full employment

Front 54

Cyclical Surplus or Deficit

Back 54

The budget balance that arises because tax revenue and outlays are not at their full-employment levels

Front 55

Government Expenditure Multiplier

Back 55

The effect of a change in government expenditure on goods and services on aggregate demand

Front 56

Tax Multiplier

Back 56

The effect of a change in taxes on aggregate demand

Front 57

Transfer Payments Multiplier

Back 57

The effect of a change in transfer payments on aggregate demand

Front 58

Balanced Budget Multiplier

Back 58

The effect on aggregate demand of a simultaneous change in government expenditure and taxes that leaves the budget balance unchanged

Front 59

Supply - Side Effects

Back 59

The effects of fiscal policy on potential GDP and the economic growth rate

Front 60

Tax Wedge

Back 60

The gap created by a tax between what a buyer pays and what a seller receives. In the labor market, it is the gap between the before-tax wage rate and the after-tax wage rate

Front 61

Financial Stability

Back 61

A situation in which financial markets and institutions function normally to allocate capital resources and risk

Front 62

Monetary Policy Instrument

Back 62

A variable that the Fed can directly control or closely target and that influences the economy in desirable ways

Front 63

Federal Funds Rate

Back 63

The interest rate at which banks can borrow and lend reserves in the federal funds market

Front 64

Discretionary Monetary Policy

Back 64

A monetary policy that sets a central bank's policy instrument at the level it believes will best achieve its mandated policy goals

Front 65

Rule-Based Monetary Policy

Back 65

A monetary policy that is based on a rule for setting the policy instrument

Front 66

Inflation Targeting

Back 66

A monetary policy strategy in which the central bank makes a public agreement with the government to achieve an explicit inflation target and to explain how its policy actions will achieve that target

Front 67

K-percent Rule

Back 67

A monetary policy rule that makes the quantity of money grow at k percent per year, where k equals the growth rate of potential GDP

Front 68

Imports

Back 68

The goods and services that people and firms in one country buy from firms in other countries

Front 69

Exports

Back 69

The goods and services that firms in one country sell to people and firms in other countries

Front 70

Tariff

Back 70

A tax imposed on a good when it is imported

Front 71

Import Quota

Back 71

A quantitative restriction on the import of a good that limits the maximum quantity of a good that may be imported in a given period

Front 72

Infant Industry Argument

Back 72

The argument that it is necessary to protect a new industry to enable it to grow into a mature industry that can compete in world markets

Front 73

Dumping

Back 73

When a foreign firm sells it's exports at a lower price than its cost of production

Front 74

Rent Seeking

Back 74

Lobbying and other political activity that aims to capture the gains from trade