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MacroEconomics > Final Study Guide > Flashcards

Final Study Guide Flashcards

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
Q

internal debt

A
  • Federal Agencies= 36%
  • State and Local= 3%
  • Private Sector= 32%
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26
Q

external debt

A

Foreigners= 29%

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27
Q

refinancing

A

the issuance of new debt to pay off debt issued earlier.

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28
Q

debt service

A

the interest required to be paid each year on outstanding debt.

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29
Q

deficit ceiling

A

an explicit, legislated limit on size of the budget deficit, the only way to stop debt growth

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30
Q

debt ceiling

A

An explicit, legislated limit on the amount of outstanding national debt.

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31
Q

barter

A

the direct exchange of one good for another, without the use of money.

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32
Q

money

A

anything generally accepted as a medium of exchange.

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33
Q

money supply (M1)

A

Cash and Transactions Accounts

34
Q

transactions account

A

include checking accounts and travelers checks.

35
Q

money supply (M2)

A

M1 plus balances in most savings accounts and money market mutual funds.

36
Q

deposit creation

A

The creation of transaction deposits by bank lending.

37
Q

T-accounts

A

The accounting ledgers used by banks to track assets and liabilities.

38
Q

bank reserves

A

assets held by a bank to fulfill its deposit obligations.

39
Q

reserves ratio

A

the ratio of a bank’s required reserves to its total deposits.

40
Q

required reserves

A

the minimum amount of reserves a bank is required to hold (and not loan out).

41
Q

excess reserves

A

bank reserves in excess of required reserves.

42
Q

money multiplier

A

the amount of deposit dollars that the banking system can create from $1 of excess reserves.

43
Q

monetary policy

A

the use of money and credit controls to influence macroeconomic outcomes.

44
Q

federal funds rate

A

the interest rate paid to borrow.

45
Q

discount rate

A

borrow reserves overnight from the Fed and pay interest

46
Q

portfolio decision

A

the choice of how and where to hold idle funds: cash, savings account, or interest-generating bonds.

47
Q

bond

A

a certificate acknowledging a debt and the amount of interest to be paid each year until repayment, an IOU.

48
Q

yield

A

the rate of return on a bond.

49
Q

open market operations

A

alter the price of bonds, raising or lowering their yields, to make them more or less attractive as investments.

50
Q

crowdfunding

A

the financing of a project through individual contributions from a large number of people, typically via an internet platform.

51
Q

interest rate

A

the “price” of money

52
Q

demand for money

A

quantities of money the public wants to hold at alternative interest rates.

53
Q

transactions demand for money

A

Money held for the purpose of making everyday market purchases.

54
Q

precautionary demand for money

A

Money held for unexpected market transactions or for emergencies.

55
Q

speculative demand for money

A

Money held for speculative purposes, for later financial opportunities.

56
Q

equilibrium rate of interest

A

The intersection of money demand and money supply

57
Q

liquidity trap

A

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
Q

equation of exchange

A

MV = PQ
M= money supply
V= Velocity
P= Price Level
Q= Quantity

59
Q

velocity of money (v)

A

the number of times per year, on average, that a dollar is used to purchase final goods and services.

60
Q

natural rate of unemployment

A

the long-term rate of unemployment is determined by structural forces in labor and product markets.

61
Q

real interest rate

A

the nominal rate minus the anticipated inflation rate.

62
Q

imports

A

goods and services purchased from international sources.

63
Q

exports

A

goods and services sold to foreign buyers.

64
Q

trade deficit

A

a negative trade balance.

65
Q

trade surplus

A

a positive trade balance.

66
Q

closed economy

A

No international trade. Each country produces for its own consumption.

67
Q

consumption possibilities

A

in each country must equal its production possibilities.

68
Q

open economy

A

International trade exists. Each country produces according to its comparative advantage and trades with others.

69
Q

Comparative Advantage

A

the ability to produce a good at a lower opportunity cost than others.

70
Q

terms of trade

A

the rate at which goods are exchanged. The amount of good A given up to get good B in trade.

71
Q

dumping

A

Importers are selling goods at prices below what they charge at home. So we get them cheap.

72
Q

embargo

A

a prohibition on imported goods.

73
Q

tariff

A

A tax imposed on imported goods.

74
Q

quota

A

A limit on the quantity of a good allowed to be imported.

75
Q

Voluntary Restraint Agreement (VRA)

A

the two countries agree to reduce the volume of trade.

76
Q

exchange rate

A

the price of one country’s currency in terms of another’s; the domestic price of a foreign currency.

77
Q

balance of payments

A

a summary record of a country’s international economic transactions in a given period of time.

78
Q

depreciation

A

a fall in the price of one currency relative to another.

79
Q

appreciation

A

a rise in the price of one currency relative to another.

80
Q

gold standard

A

an agreement by countries to fix the price of their currencies in terms of gold.

81
Q

flexible exchange rates

A

A system where exchange rates are permitted to vary with market supply and demand conditions

MacroEconomics (3 decks)

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