Chapter 1 Flashcards
What is a bond?
security debt that promises to make payments periodically for a specified period of time
What is an interest rate?
cost of borrowing or price paid for rental of funds
What is a common stock?
represents a share of ownership in a corporation.
A share of a stock is a claim on the earnings and assets in a corporation.
Firms issue stocks to the public to raise funds to finance their business plans.
What are financial intermediaries?
Institutions which borrow funds from people who have saved and in turn make loans to people who need funds.
What do changes in value of a country’s home currency affect consumers and firms?
cost of imports and exports
demand for foreign and home produced goods
what is monetary policy?
the management of money supply and interest rates
What is fiscal policy?
the management of government spending and taxation
What is the budget deficit?
the excess of the governments expenditures (G) over revenues (T) in a given year
What is the budget surplus?
the excess of the governments revenues (T) over expenditures (G) in a given year
What is aggregate output?
Gross Domestic Product (GDP) = market value of all final goods and services
produced in the domestic economy during a single year.
What is aggregate income?
Total income of the factors of production (land, capital, labour) from producing
goods and services in the economy during a single year.
What is the distinction between nominal and real GDP?
Nominal GDP = values measured using current prices
Real GDP = quantities measured with constant prices.
why does nominal GDP increase?
production of good increase. Prices of most goods also increase
What is the Growth Rate of GDP equation?
gy = (Yt - Yt-1)/(Yt-1) * 100
