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MacroEconomics > Final Study Guide > Flashcards

Final Study Guide Flashcards

(81 cards)

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1
Q

Aggregate Demand

A

a measurement of the total amount of demand for all finished goods and services produced in an economy.

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2
Q

Income Transfers

A

The rest are payments to individuals for which no current goods or services are exchanged.

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3
Q

Fiscal Policy

A

the use of government taxes and spending to alter macroeconomic outcomes.

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4
Q

Macro Equilibrium

A

a condition in the economy in which the quantity of aggregate demand equals the quantity of aggregate supply.

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5
Q

recessionary GDP Gap

A

occurs when a country’s real GDP is lower than its GDP at full employment.

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6
Q

Fiscal Stimulus

A

Tax cuts or spending hikes intended to increase AD

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7
Q

Aggregate Supply

A

the total supply of goods and services available to a particular market

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8
Q

AD shortfall

A

The amount of additional AD needed to achieve full employment after allowing for price level changes.

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9
Q

Disposable Income

A

the amount of money that a person or family has left after paying their taxes.

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10
Q

Fiscal Restraint

A

Tax hikes or spending cuts intended to decrease AD

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11
Q

AD excess

A

The amount by which AD must be reduced to achieve full employment after allowing for price level changes

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12
Q

crowding out

A

A reduction in private sector borrowing (and spending) caused by increased government borrowing.

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13
Q

Deficit Spending

A

changes the mix of output in the direction of more public sector goods, i.e., increasing government power while decreasing private sector power.

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14
Q

budget deficit

A

the amount by which government spending(G) exceeds government tax revenue(T) in a given time period.

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15
Q

budget surplus

A

revenues exceed outlays

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16
Q

discretionary fiscal spending

A

those elements of the budget not determined by past legislative or executive commitments. About 20% of budget.

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17
Q

automatic stabilizer

A

federal expenditure or revenue item that automatically respond counter-cyclically to changes in national income (GDP).

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18
Q

cyclical deficit

A

that portion of the budget deficit attributable to short-run changes in economic conditions.

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19
Q

structural deficit

A

federal revenues at full employment minus expenditures at full employment under prevailing fiscal policy.

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20
Q

opportunity cost

A

Opportunity cost are incurred when real resources are used.

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21
Q

crowding in

A

occurs when government spending leads to more private investment.

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22
Q

national debt

A

the total amount of money that a country’s government has borrowed

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23
Q

Treasury bonds

A

a government bond issued by the US Treasury.

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24
Q

liability

A

The national debt creates wealth for bondholders equal to the liabilities it creates for the U.S. Treasury.

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25
internal debt
- Federal Agencies= 36% - State and Local= 3% - Private Sector= 32%
26
external debt
Foreigners= 29%
27
refinancing
the issuance of new debt to pay off debt issued earlier.
28
debt service
the interest required to be paid each year on outstanding debt.
29
deficit ceiling
an explicit, legislated limit on size of the budget deficit, the only way to stop debt growth
30
debt ceiling
An explicit, legislated limit on the amount of outstanding national debt.
31
barter
the direct exchange of one good for another, without the use of money.
32
money
anything generally accepted as a medium of exchange.
33
money supply (M1)
Cash and Transactions Accounts
34
transactions account
include checking accounts and travelers checks.
35
money supply (M2)
M1 plus balances in most savings accounts and money market mutual funds.
36
deposit creation
The creation of transaction deposits by bank lending.
37
T-accounts
The accounting ledgers used by banks to track assets and liabilities.
38
bank reserves
assets held by a bank to fulfill its deposit obligations.
39
reserves ratio
the ratio of a bank’s required reserves to its total deposits.
40
required reserves
the minimum amount of reserves a bank is required to hold (and not loan out).
41
excess reserves
bank reserves in excess of required reserves.
42
money multiplier
the amount of deposit dollars that the banking system can create from $1 of excess reserves.
43
monetary policy
the use of money and credit controls to influence macroeconomic outcomes.
44
federal funds rate
the interest rate paid to borrow.
45
discount rate
borrow reserves overnight from the Fed and pay interest
46
portfolio decision
the choice of how and where to hold idle funds: cash, savings account, or interest-generating bonds.
47
bond
a certificate acknowledging a debt and the amount of interest to be paid each year until repayment, an IOU.
48
yield
the rate of return on a bond.
49
open market operations
alter the price of bonds, raising or lowering their yields, to make them more or less attractive as investments.
50
crowdfunding
the financing of a project through individual contributions from a large number of people, typically via an internet platform.
51
interest rate
the “price” of money
52
demand for money
quantities of money the public wants to hold at alternative interest rates.
53
transactions demand for money
Money held for the purpose of making everyday market purchases.
54
precautionary demand for money
Money held for unexpected market transactions or for emergencies.
55
speculative demand for money
Money held for speculative purposes, for later financial opportunities.
56
equilibrium rate of interest
The intersection of money demand and money supply
57
liquidity trap
The portion of the money demand curve that is horizontal; people are willing to hold unlimited amounts of money at some low interest rate.
58
equation of exchange
MV = PQ M= money supply V= Velocity P= Price Level Q= Quantity
59
velocity of money (v)
the number of times per year, on average, that a dollar is used to purchase final goods and services.
60
natural rate of unemployment
the long-term rate of unemployment is determined by structural forces in labor and product markets.
61
real interest rate
the nominal rate minus the anticipated inflation rate.
62
imports
goods and services purchased from international sources.
63
exports
goods and services sold to foreign buyers.
64
trade deficit
a negative trade balance.
65
trade surplus
a positive trade balance.
66
closed economy
No international trade. Each country produces for its own consumption.
67
consumption possibilities
in each country must equal its production possibilities.
68
open economy
International trade exists. Each country produces according to its comparative advantage and trades with others.
69
Comparative Advantage
the ability to produce a good at a lower opportunity cost than others.
70
terms of trade
the rate at which goods are exchanged. The amount of good A given up to get good B in trade.
71
dumping
Importers are selling goods at prices below what they charge at home. So we get them cheap.
72
embargo
a prohibition on imported goods.
73
tariff
A tax imposed on imported goods.
74
quota
A limit on the quantity of a good allowed to be imported.
75
Voluntary Restraint Agreement (VRA)
the two countries agree to reduce the volume of trade.
76
exchange rate
the price of one country's currency in terms of another’s; the domestic price of a foreign currency.
77
balance of payments
a summary record of a country’s international economic transactions in a given period of time.
78
depreciation
a fall in the price of one currency relative to another.
79
appreciation
a rise in the price of one currency relative to another.
80
gold standard
an agreement by countries to fix the price of their currencies in terms of gold.
81
flexible exchange rates
A system where exchange rates are permitted to vary with market supply and demand conditions

MacroEconomics (3 decks)

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