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