Macro Final (Chapters 15, 16, And 17)

Front 1

Discouraged Workers

Back 1

people with no jobs, available for a job but have given up looking for jobs for the last 4 weeks because they feel they don't have enough skills or the market is not good/healthy enough to absorb them

Front 2

Total Population

Back 2

Labor Force (employed + unemployed) + Outside the Labor Force

Front 3

"Outside the Labor Forces"

Back 3

homemakers, students, retires

Front 4

Unemployment Rate

Back 4

((# of unemployed) / labor force) x 100

Front 5

Labor Force Participation Rate

Back 5

((labor force) / adult population) x 100

Front 6

Frictional Unemployment

Back 6

due to mismatch of jobs with the skills and tastes of workers (short term unemployment)

Front 7

Structural Unemployment

Back 7

demand for labor < supply for labor; creates excess supply of labor (long term unemployment)

Front 8

Cyclical Unemployment

Back 8

unemployment due to short term fluctuations in real GDP (short term unemployment)

Front 9

Natural Rate of Unemployment

Back 9

normal unemployment rate around which the actual unemployment rate fluctuates

Front 10

Labor Unions

Back 10

go on for collective bargaining with the employers for raising wages, improving working conditions etc.

Front 11

Efficiency Theory of Wages

Back 11

employer himself chooses to pay higher than market rate to attract better quality workers and to retain them and get more work from them

Front 12

Barter System

Back 12

we exchange what we have for what we want; creates double coincidence of wants (this is a problem)

Front 13

Monetary System

Back 13

goods and services are exchanged for money, with the money earned, you can buy goods and services you want

Front 14

Medium of Exchange

Back 14

an item used to exchange goods and services between buyers and sellers

Front 15

Standard of Account

Back 15

yardstick to post prices and record debt

Front 16

Store of Value

Back 16

the item in terms of which the purchasing power of wealth is transferred from today to tomorrow

Front 17

Commodity Money

Back 17

commodities with intrinsic worth that are also used as money (gold, silver, metals etc.)

Front 18

Fiat Money

Back 18

prevailing currency (notes and coins); money by government decree

Front 19

M1

Back 19

currency + demand deposits + other checkable deposits + travelers checks

Front 20

M2

Back 20

(broad money) M1 + savings deposits + other small time deposits + money market mutual funds + a few minor categories

Front 21

Liquidity

Back 21

the ease in which as asset can be used as a medium of exchange

Front 22

Federal Reserve System

Back 22

monitors the health of the banking system and regulates money supply

Front 23

Federal Reserve Board

Back 23

7 members/governors selected by Congress, confirmed by the President for a period of 14 years so that they don't give in to short term political pressures

Front 24

Fed Chairmen

Back 24

presides over board meetings, leads the fed staff, and testifies about monetary policy in front of Congressional committees

Front 25

T-Account

Back 25

simplified statement of changes in assets and liabilities in a bank

Front 26

Reserve Requirement

Back 26

minimum percentage of deposits that the banks must hold as reserves

Front 27

Reserve Ratio

Back 27

total amount of reserves eventually held by the bank as a percentage of deposits

Front 28

Money Multiplier

Back 28

how much does 1 dollar of original deposits multiply into? (dependent on the lending)

Front 29

Open Market Operations

Back 29

(most popularly used) when there is too much money supply, Fed sells bonds and takes away money from the public (when there is not enough money this switches)

Front 30

Varying Minimum Reserve Requirement

Back 30

when there is too much money, Fed will increase reserve requirement to decrease lending by banks and vice versa

Front 31

Deposit Rate

Back 31

rate at which banks can borrow from Fed

Front 32

Varying Deposit Rate

Back 32

when there is too much money, Fed will increase deposit rate so the banks will borrow less from the Fed, have lesser money to lend out and less money will be created

Front 33

Federal Funds Rate

Back 33

rate at which banks take overnight loans from each other

Front 34

Bank Run

Back 34

when news of some bank specific crisis is known, people run to banks to withdraw their savings (to prevent this Federal Deposit Insurance Corporation is created FDIC)

Front 35

Inflation

Back 35

rise in the overall price level of a country

Front 36

Inflation Rate

Back 36

rate of rise in price level in 2 consecutive periods; calculated on the basis of CPI, GDP deflator, or PPI

Front 37

Quantity Theory of Money

Back 37

price changes when growth rate of money supply changes

Front 38

Classical Dichotomy

Back 38

economic environment divided into nominal and real worlds

Front 39

Monetary Neutrality

Back 39

money is neutral, irrelevant in the creation/explanation of real variables

Front 40

Fisher Effect

Back 40

nominal rate of interest = real rate of interest + rate of inflation

Front 41

Inflation Tax

Back 41

revenue raised by the government by creating money (in terms of declining the dollar value of the money held in our wallets)

Front 42

Shoe Leather Cost

Back 42

resources wasted because of the need for more frequent transactions with the bank

Front 43

Menu Costs

Back 43

costs of reporting price change

Front 44

Relative Price

Back 44

guides the economic agents in their resource allocation decisions

Front 45

Inflation Fallacy Hypothesis

Back 45

when price increases, purchasing power decreases

Front 46

Inflation Fallacy

Back 46

purchasing power does not fall significantly because when price rises all wages rise including your salary so that their price rise is absorbed by your higher wage

Front 47

Real Rate of Interest

Back 47

rate at which money is transferred from today to tomorrow in terms of goods and services/purchasing power of money

Front 48

Real Wage Rate

Back 48

amount of goods and services that one dollar of money wage can buy