Macro

laissez faire

"leave it alone"

MZM

"money zero maturity" - contains money deposits >$100,000; measure monetary balances that are immediately available at no cost

banking multiplier

1 over reserve ratio

federal funds rate

The interest rate that U.S. banks charge each other for overnight loans.

exchange rate

The value of one nation's currency relative to the currencies of other countries

consumer price index

an index of the cost of all goods and services to a typical consumer; main measure of inflation

firm

an organization that uses resources to produce a product which it then sells

sole proprietorship

an unincorporated business owned by a single person who is responsible for its liabilities and entitled to its profits; accounts for the largest number of firms in the US

marginal analysis

analysis that involved comparing marginal benefits and marginal costs.

sole proprietorship

business owned and operated by one person

law of demand

ceteris paribus, when the price of a product falls, the quantity demanded of the product will increase, and when the price of a product rises, the quantity demanded of the product will decrease.

quantity demanded

change in ______ ______ is affected by change in buyers' tastes, number of buyers, income, prices of relative goods, and consumer expectations; movement along the curve

fiscal policy

change in government's spending and tax collections designed to achieve full employment and non inflationary domestic output

successful

characteristics of a __________ economy: full employment, economic growth, price stability, freedom of choice

taxation

charge against a citizen's person or property or activity for the support of government

labor force

consists of people who are willing and able to work and both those who are employed and unemployed

opportunity cost

cost of any good, service, or activity is the value of what must be given up to obtain it; also called "trade-off"

deflation

declines in the price level

gross investment

defined as net investment plus replacement investment

durable goods

defined as those products exepected to last at least three years

savings

defined by economists as: that part of after-tax income which is not consumed

investment

defined by national income accountants to include any increase in business inventories

positive economics

economics that state what is

normative economics

economics that state what ought to be

resource flow

emigration of software designers from india to the US best illustrates a ______ ____

M2

equals M1 plus savings and small time deposits, money-maker mutual-fund share, and other highly liquid assets

foreign currencies

evidence of a chronic balance of payments deficit is its diminishing reserves of _______ ________

crowding out effect

expansionary fiscal policy may increase the interest rate and decrease private spending thereby weakening/canceling the stimulus of policy

hyperinflation

extraordinarily rapid inflation; can have a devastating impact on real output and employment

land labor capital

factors of production

corporation

form of business enterprise that accounts for the largest proportion of total output

real GDP per capita

found by dividing real GDP by the size of population

aggregate

gather in a mass, sum, or whole

substitute good

good that can be used in place of another good

complementary good

good that is used together with another good

net private domestic investment

gross private domestic investment less consumption of fixed capital; the addition to the nation's stock of capital during a year

industry

group of firms that produce identical or similar products

scarcity problem

problems that states that economies want to exceed available productive resources

corporate bonds

promises by a corporation to repay a loan

marginal tax rate

rate at which the tax is paid on each additional unit of taxable income

business cycle

recurring fluctuations in economic activity consisting of recession and recovery and growth and decline

scarcity

requires that choices be made

private

rivalry and excludability are the main characteristics of ______ goods

Production possibilities curve

scientific method that represents or models the central concept underlying that of limited resources

stocks

shares of ownership of a corporation

monopoly

single seller controls an industry

financial flow

spending by americans while traveling in europe best illustrates a _______ ____

command system

who owns factor of production and the method used to coordinate economic activity

rule of 70

70/percentage growth rate=doubling time in years

circular flow diagram

A visual model of the economy that shows how dollors flow through markets among households and firms

NDP (Net Domestic Product)

GDP - Consumption of fixed capital

real GDP

GDP that has been adjusted for price changes; GDP measured in base-year, or constant, prices

determinants of demand

______ __ _______ are resource prices, technology, taxes and subsidies, prices of other goods, producer expectations, and the number of sellers in the market

competition

_______ requires two or more buyers and two or more sellers acting independently in a particular product or resource market, and freedom of sellers and buyers to enter or leave markets on their basis of economic self-interest

resources

_________ can only be used for one purpose at a time

discount rate

a bank borrows money "at the window" from district federal banks with a _______ ____

monetary policy

a central bank's changing of the money supply to influence interest rates and assist the economy in achieving price stability, full employment and economic growth

bond

a certificate of debt (usually interest-bearing or discounted) that is issued by a government or corporation in order to raise money

normal good

a good for which the demand increases as income rises and decreases as income falls.

budget line

a graph showing what combinations of quantities of two goods can be afforded by a CONSUMER with a fixed total amount to spend

conglomerate

a group of diverse companies under common ownership and run as a single organization

price ceiling

a legally determined maximum price that sellers may charge.

price floor

a legally determined minimum price that sellers might receive.

nominal GDP

a measure of GDP in which the quantities produced are valued at current-year prices; measure current dollar value of production

price index

a measure of the average price of a given class of goods or services relative to the price of the same goods and services in a base year; nominal over real GDP

scientific method

a method of investigation involving observation and theory to test scientific hypotheses

financial account balance

a nation's sale of real and financial assets to people living abroad minus its purchases of real and financial assets from foreigners

demand schedule

a table showing quantities of goods demanded at varying prices

supply schedule

a table that shows the relationship between the price of a product and the quantity of the product supplied.

law of supply

an economic rule that states that businesses will provide more products when they can sell them at highter prices and fewer products when they must sell htem at lower prices

personal income

includes all income received whether earned or unearned

disposable income

income (after taxes) that is available to you for saving or spending

functional distribution of income

indicates how the nation's earned income is apportioned among wages, rents, interest, and profits (according to the function performed by the income receiver)

personal distribution of income

indicates how the nation's money income is divided among the individual households

inpayments

inflows of funds to a country or payments of funds to that country

MPC

marginal propensity to consume

foreign exchange market

market in which various national currencies are exchanged for one another

real income

measure of the amount of goods and services nominal income can buy; it is the purchasing power of nominal income, or income adjusted for inflation; nominal over PI

outpayments

outflows of funds to a country or payment of funds to a country

transfer payment

payments to recipient who have not earned them through the sale of their factors of production and who have not supplied current goods or services in exchange for these payments

utility

pleasure/satisfaction obtained from consumption

law of increasing opportunity costs

principle that as the production of a good increases, the opportunity cost of producing an additional unit rises

market system

private ownership of resources/freedom of enterprise; markets and prices coordinate and direct economic activity; competition; characteristics of a ______ ______

definition of macroeconomics

study of an economy's functions in the consumption, distribution and production of final goods and services and how changes affect society

invisible hand

term economists use to describe the self- regulating nature of the marketplace

comparative advantage

the ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than other producers.

absolute advantage

the ability of an individual, firm, or country to produce more of a good or service than competitors using the same amount of resources.

economic growth

the ability of the economy to produce increasing quantities of goods and services.

federal reserve

the central bank of the United States

equilibrium

the condition that exists when quantity supplied and quantity demanded are equal. at this there is no tendency for price to change

reserve ratio

the fraction of deposits that banks hold as reserves

FOMC (Federal Open Market Committee)

the most powerful committee of the Fed, because it makes the decisions that affect the economy as a whole by manipulating the money supply; sets policy on buying/selling of government securities, bills, and bonds

trade flow

the physical export of motorcycles from the US to Mexico best illustrates a _____ ____

board of governors

the seven-member board that oversees the Federal Reserve System

nominal GDP

the sum of all monetary transactions involving final goods and services that occur in the economy in a year

M1

the sum of currency (paper money and coins), demand deposits as commercial banks held by the nonbanking public, travelers' checks, and other checkable deposits, such as NOW (negotiable order of withdrawal) accounts and ATS (automatic transfer services) accounts

national income

the total value of all income in a nation (wages and profits and interest and rents and pension payments) during a given period (usually 1 yr)

international payments

there must always be a balance of a nation's ________ ________

limited liability

this means that creditors have no legal claim on the personal assets of a corporate stockholder

specialization

use of resources of an individual, firm, region, or nation to concentrate production on one or a small number of goods and services