Chapter 7-9 Vocab

Question 1

Refers to a governments approach toward its own spending and taxation

Answer 1

fiscal policy

Question 2

the difference between net tax revenues and government spending

Answer 2

Governments budget balance

Question 3

total tax revenue received by the government less transfer payments

Answer 3

net tax revenue

Question 4

net tax revenue in excess of government spending on goods and services (positive Balance)

Answer 4

Budget surplus

Question 5

government spending on goods and services in excess of net tax revenues (negative balance)

Answer 5

Budget deficit

Question 6

the sum of the federal governments budget deficit less its surplus (add up all deficit flows over the years then subtract the sum of all surplus over the same time)

Answer 6

national debt (public debt)

Question 7

net tax revenues equal government spending on goods and services

Answer 7

balanced budget

Question 8

when government borrows from its central bank to finance increased spending

Answer 8

monetizing the debt

Question 9

deliberate adjustments in the level of government spending and taxation in order to close recessionary or inflationary gaps

Answer 9

countercyclical fiscal policy

Question 10

the belief that a governments budget should be balanced in each period

Answer 10

balanced-budget fiscal policy

Question 11

provisions of tax laws and government spending programs that automatically take spending out of the economy when it is booming and put spending in when it is slowing down

Answer 11

automatic stabilizers

Question 12

action by gov that tends to push the economy in the same direction it is leaning in

Answer 12

procylical

Question 13

the use of countercyclical fiscal policy to balance the budget over the life of the business cycle

Answer 13

cyclically balanced budget fiscal policy

Question 14

something that is accepted as payment for goods and services

Answer 14

medium of exchange

Question 15

the function of money that allows people to hold and accumulate wealth

Answer 15

store of wealth

Question 16

the function of money that allows us to determine easily the relative value of goods

Answer 16

unit of account

Question 17

anything that is declared as money by gov order

Answer 17

fiat money

Question 18

a type of money that can also usefully function as a commodity

Answer 18

commodity money

Question 19

a banking system in which banks keep only a small fraction of their total deposits on reserve in the form of cash

Answer 19

fractional reserve system

Question 20

anything that is widely accepted as a medium of exchange and therefore can be used to buy goods or to settle debts

Answer 20

money

Question 21

currency in circulation plus demand deposits

Answer 21

M1

Question 22

money deposited in a chequing account which is available on demand

Answer 22

demand deposits

Question 23

money deposited in a saving account which is available only after notice is given

Answer 23

notice deposit

Question 24

all notice and personal term deposits

Answer 24

M2

Question 25

non-personal term deposits known as cerficates of deposit

Answer 25

M3

Question 26

financial institutions, such as credit unions or trust companies, that share many of the functions of commercial banks but are not defined as banks under the bank act (also known as nonbank financial intermediaries)

Answer 26

near-banks

Question 27

the difference between the rate of interest a bank charges borrowers and the rate it pays savers

Answer 27

spread

Question 28

the portion of deposits that a bank wants to hold in cash

Answer 28

target reserve ratio

Question 29

the part of a company s balance sheet that represents what it owns or what is owed to it

Answer 29

assets

Question 30

the part of a company's balance sheet that represents what is owes

Answer 30

liabilitis

Question 31

the total assets less total liabilities of a company (equity)

Answer 31

Net worth

Question 32

reserves in excess of what the bank wants to hols as its target reserve

Answer 32

excess reserve

Question 33

the increase in total deposits that occur in the whole banking system as a result of a new deposit in a single bank

Answer 33

money multiplier

Question 34

the rate of interest that the bank of canada chargers a commercial bank for a loan

Answer 34

bank rate

Question 35

the annual rate at which payment it made for the use of money(or borrowed funds) a % of the borrowed amount

Answer 35

interest rate

Question 36

the desire of people to hold money as a medium of exchange, that is, to effect traansaction

Answer 36

transactions demand for money

Question 37

the desire of people to use money as a store of wealth, that is, to hold money as an asset

Answer 37

asset demand for money

Question 38

policy designed to change the money supply, credit availability, and interest rates

Answer 38

monetary policy

Question 39

a(n) ______ in the interest rate is caused by either a rise in the demand for money or a fall in the supply of money

Answer 39

increase

Question 40

a(n) _______ in the interest rate is caused by either a fall in the demand for money or a rise in the supply of money

Answer 40

decrease

Question 41

a policy that aims to increase the amount of $ in the economy and make credit cheaper and more easily available

Answer 41

expansionary monetary policy

Question 42

a policy in which the amount of money in the economy is decreased and credit becomes harder to obtain and more expensive

Answer 42

contractionary monetary policy

Question 43

the buying and selling of securities by the bank of canada on the open (to public) market

Answer 43

open-market operations

Question 44

the keynesian view of how changes in money affect the real variables in the economy

Answer 44

transmission process

Question 45

an economic school of thought that believes that a cyclical fluctuations of GDP and inflation are usually caused by changes in the money supply

Answer 45

monetarism

Question 46

a formula that states that the quantity of money times the velocity of money is equal to nominal GDP (price x real GDP)

Answer 46

equation of exchange

Question 47

the number of times per year that the average unit of currency is spent (or turns over) buying final goods or services

Answer 47

velocity of money (or circulation)

Question 48

the interest rate that commercial banks charge one another on overnight loans

Answer 48

overnight interest rate

Question 49

the bank of canadas key policy interest rate: it is the midpoint of the banks 50-basis-point operating band

Answer 49

target for the overnight rate

Question 50

the rate of interest payable by the commercial banks on loans from the bank of canada

Answer 50

bank rate