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| 13445212228 | Factors of Production | 1. Land 2. Labor 3. Capital | 0 | |
| 13445212233 | Shifters of Long-Run Aggregate Supply | Results from a change in productivity | 1 | |
| 13445212235 | Shifters of Aggregate Demand | 1. GDP (or its components) 2. Monetary policy 3. Fiscal policy | 2 | |
| 13445212413 | PPC Graph |  | 3 | |
| 13445212414 | Demand and Supply Graph |  | 4 | |
| 13445212415 | Business Cycle |  | 5 | |
| 13445212416 | Short Run AD/AS Graph |  | 6 | |
| 13445212417 | Money Market Graph |  | 7 | |
| 13445212418 | Loanable Funds Graph |  | 8 | |
| 13445212420 | Foreign Exchange Graph |  | 9 | |
| 13445212421 | Phillips Curve |  | 10 | |
| 13445212236 | GDP = C + I + G + Xn | The expenditure approach to measuring GD correlates well with aggregate demand (AD) | 11 | |
| 13445212239 | GDP Deflator | A price index used to adjust nominal GDP to arrive at real GDP. Called the "deflator" because nominal GDP will usually overstate the value of a nation's output if there has been inflation. The Consumer Price Index (CPI) is another commonly used price index. | 12 | |
| 13445212240 | GDP Growth Rate: | ( Current year's GDP - Last year's GDP)/ (Last year's GDP) x 100. The GDP growth rate is a percentage change in a nation's real output between one year and the next. | 13 | |
| 13445212241 | The Inflation Rate via the CPI | (This year's CPI - Last year's CPI)/(Last year's CPI) x 100. The inflation rate is the percentage change in the CPI from one period to the next. | 14 | |
| 13445212242 | Real Interest Rate | the interest rate corrected for the effects of inflation; Nominal interest rate - inflation rate | 15 | |
| 13445212243 | Unemployment Rate | (Number of unemployed/Number in the labor force) x 100. The labor force includes all non-institutionalized people of working age who are employed or seeking employment. | 16 | |
| 13445212244 | Money Multiplier | 1/RR where RR equals the required reserve ratio. Application: an initial injection of $1,000 of new money into a banking system with a reserve ratio of 0.1 will generate up to $1,000 x (10) = $10,000 in total money. | 17 | |
| 13445212245 | Quantity Theory Of Money | MV = PQ = Y. A monetarist's view that explains how changes in the money supply (M) will affect the price level (P) and/or real output assuming the velocity of money (V) is fixed in the short run. | 18 | |
| 13445212246 | MPC + MPS = 1 | The fraction of an increase in disposable income that is spent (MPC) plus the fraction that is saved (MPS) must equal 1. | 19 | |
| 13445212247 | Spending Multiplier | = 1/(1-MPC) or 1/MPS. This tells you how much total spending an initial interjection of spending in the economy will generate. For example, if the MPC = .8 and the government spends $100 million, then the total increase in spending in the economy = $100 x 5 = $500 million. | 20 | |
| 13445212248 | Tax Multiplier = (-MPC)/MPS | This tells you how much total spending will result from an initial change in the level of taxation. It is negative because when taxes decrease, spending increases, and vice versa. The tax multiplier will always be smaller than the spending multiplier. | 21 | |
| 13445212249 | Absolute Advantage | A country or individual has an absolute advantage in the production of a good when the country can produce the good using fewer resources (inputs) than another country or individual. | 22 | |
| 13445212250 | Appreciation | An increase in the value of one currency relative to another, resulting from an increase in demand for or a decrease in supply of the currency on the foreign exchange market. | 23 | |
| 13445212251 | Balance Of Payments | Measures all the monetary exchanges between one nation and all other nations. Includes the current account and the capital account. | 24 | |
| 13445212252 | Bonds | A certificate of debt issued by a company or government to an investor. | 25 | |
| 13445212253 | Budget Deficit | When a government spends more than it collects in tax revenues in a given year. | 26 | |
| 13445212254 | Capital | Human-made resources (machinery and equipment) used to produce goods and services; goods that do not directly satisfy human wants. Sometimes separated into human capital (education, know-how) and physical (tools you can touch and operate). | 27 | |
| 13445212255 | Capital Account (AKA Financial Account) | Measures the flow of funds for investment in real assets (such as factories or office buildings) or financial assets (such as stocks and bonds) between a nation and the rest of the world. | 28 | |
| 13445212257 | Circular Flow Diagram | A model of the macroeconomy that shows the interconnectedness of businesses, households, government, banks, and the foreign sectors. Money flows in a circular direction, and goods, services, and resources flow in the opposite circular direction. | 29 | |
| 13445212258 | Classical Economic Theory | The view that an economy will self-correct from periods of economic shock if left alone. AKA "laissez-faire" | 30 | |
| 13445212259 | Comparative Advantage | When an individual, a firm, or a nation is able to produce a particular product at a lower opportunity cost than another individual, firm, or nation. Comparative advantage is the basis on which nations trade with one another. | 31 | |
| 13445212260 | Consumer Price Index (CPI) | An index that measures the price of a fixed market basket of consumer goods bought by a typical consumer. The CPI is used to calculate the inflation rate in a nation. | 32 | |
| 13445212261 | Consumption. | A component of a nation's aggregate demand; measures the total spending by domestic households of goods and services. | 33 | |
| 13445212262 | Contractionary Fiscal Policy | A policy whereby government increases taxes or decreases its spending in order to reduce aggregate demand. Could be used in a period of high inflation to bring down the inflation rate. | 34 | |
| 13445212263 | Contractionary Monetary Policy | A demand-side policy whereby the central bank 1. Increases reserve requirments 2. Decreases discount rate 3. Sells bonds on the open market | 35 | |
| 13445212264 | Cost-Push Inflation | Inflation resulting from a decrease in AS (from higher wage rates and raw material prices, such as the price of oil) and accompanied by a decrease in real output and employment. Also reffered to as "stagflation" or "adverse aggregate supply shock". | 36 | |
| 13445212265 | Crowding-Out Effect | The rise in interest rates and the resulting decrease in investment spending in the economy caused by increased government borrowing in the loanable funds market. Seen as a disadvantageous side effect of expansionary fiscal policy. | 37 | |
| 13445212266 | Current Account | Measures the balance of trade in goods and services and the flow on income between one nation and all other nations. It also records monetary gifts or grants that flow into or out of a country. Equal to a country's net exports (its exports minus its imports). | 38 | |
| 13445212267 | Cyclical Unemployment | Unemployment caused by a fall in aggregate demand in a nation. Not included in the natural rate of unemployment. When a nation is in a recession, there will be cyclical unemployment. | 39 | |
| 13445212268 | Demand Deposit | A deposit in a commercial bank against which checks may be written. Also known as a "checkable deposit". | 40 | |
| 13445212269 | Depreciation | A decrease in the value of one currency relative to another, resulting from a decrase in demand for or an increase in the supply of the currency on the foreign exchange market. | 41 | |
| 13445212270 | Devaluation | When a government intervenes in the market for its own currency to weaken it relative to another currency. | 42 | |
| 13445212271 | Discount Rate | One of the three tools of monetary policy, it is the interest rate that the federal government charges on the loans it makes to commercial banks. | 43 | |
| 13445212272 | Economic Growth | An increase in the potential output of goods and services in a nation over time. | 44 | |
| 13445212273 | Economic Resources | Land, labor, capital, and entrepreneurial ability that are used in the production of goods and services. They are "economic" resources because they are scarce (limited in supply and desired). Also known as "factors of production". | 45 | |
| 13445212274 | Excess Reserves | The amount by which a bank's actual reserves exceed its required reserves. Banks can lend excess reserves; when they do, they expand the money supply. The amount of excess reserves in the banking system determines equilibrium interest rate. | 46 | |
| 13445212275 | Exchange Rate: | The price of one currency in terms of another currency, determined in the forex market. | 47 | |
| 13445212276 | Exports | The spending by foreigners on domestically produced goods and services. Counts as an injection into a nation's circular flow of income. | 48 | |
| 13445212277 | Federal Funds Rate | The interest rate banks charge one another on overnight loans made out of their excess reserves. The FFR is the interest rate targeted by the FEd through it's open market operations. | 49 | |
| 13445212278 | Fiscal Policy | Changes in government spending and tax collections implemented by government with the aim of either increasing or decreasing aggregate demand to achieve the macroeconomic objectives of full employment and price-level stability. | 50 | |
| 13445212280 | Foreign Exchange Market | The market in which international buyers and sellers exchange foreign currencies for one another to buy and sell goods, services, and assets from various countries. It is where a currency's exchange rate relative to other currencies is determined. | 51 | |
| 13445212281 | Fractional Reserve Banking | A banking system in which banks hold only a fraction of deposits as required reserves and can lend some of the money deposited by their customers to other borrowers | 52 | |
| 13445212282 | Full Employment | When an economy is producing at a level of output at which almost all the nation's resources are employed. The unemployment rate when an economy is at full employment equals the natural rate, and includes only frictional and structural unemployment. Full-employment output is also referred to as "potential output". | 53 | |
| 13445212283 | GDP (Gross Domestic Product) | The total market value of all final goods and services produced during a given time period within a country's borders. Equal to the total income of the nation's households or the total expenditures on the nation's output. | 54 | |
| 13445212284 | Human Capital | The value skills integrated into labor through education, training, knowledge, and health. An important determinant of aggregate supply and the level of economic growth in a nation. | 55 | |
| 13445212285 | Imports | Spending on goods and services produced in foreign nations. Counts as a leakage from a nation's circular flow of income. | 56 | |
| 13445212286 | Inflation | A rise in the average level of prices in the economy over time (percentage change in the CPI) | 57 | |
| 13445212288 | Interest Rate | The opportunity cost of money. Either the cost of borrowing money or the cost of spending money (e.g., the interest rate is what would be given up by not saving money). Conversely, this is the price a lender is paid for allowing someone else to use money for time. | 58 | |
| 13445212289 | Investment | A component of aggregate demand, it includes all spending on capital equipment, inventories, and technology by firms. This does not include financial investment, which is the purchase of financial assets (stocks and bonds). Also includes household purchasing of newly constructed residences. | 59 | |
| 13445212290 | Law of Increased Opportunity Cost | As more of particular product is produced, the opportunity cost, in terms o what must be given up of other goods to produce each unit of the product, increases. Explains the convex shape of a nation's production possibilities curve. | 60 | |
| 13445212291 | Loanable Funds Market | The market in which the demand for private investment and the supply of household savings intersect to determine the equilibrium real interest rate. | 61 | |
| 13445212293 | Long Run Aggregate Supply (LRAS) | The level of output to which an economy will always return in the long run. The LRAS curve intersects the horizontal axis at the full employment or potential level of output. | 62 | |
| 13445212294 | M1 | A component of money supply including currency and checkable deposits | 63 | |
| 13445212295 | M2 | A more broadly defined component of money supply, equal to M! plus savings deposits, money-market deposits, mutual funds, and small-time deposits. | 64 | |
| 13445212297 | Macroeconomics | The study of entire nations economies and the interactions between households, firms, government, and the foreigners | 65 | |
| 13445212300 | Marginal Propensity To Consume (MPC) | The fraction of any change in income spent on domestically produced goods and services; equal to the change in consumption divided by the change in disposable income. | 66 | |
| 13445212301 | Marginal Propensity TO Save (MPS) | The fraction of any change in income that is saved, equal to the change in savings divided by the change in disposable income. | 67 | |
| 13445212302 | Monetarism | The macroeconomic view that the main cause of changes in aggregate output and the price level are fluctuations in the money supply. | 68 | |
| 13445212303 | Monetary Policy | The central bank's manipulation of the supply of money aimed at raising or lowering interest rates to stimulate or contract the level of aggregate demand to promote the macroeconomic objectives of price-level stability and full employment | 69 | |
| 13445212304 | Money | Any object that can be used to facilitate the exchange of goods and services in a market. | 70 | |
| 13445212305 | Money Demand | The sum of the transaction demand and the asset demand for money. Inversely related to the nominal interest rate. | 71 | |
| 13445212306 | Money Market | The market where the supply of money is set by the central bank; includes the downward sloping money-demand curve and a vertical money-supply curve. The "price" of money is the nominal interest rate. | 72 | |
| 13445212307 | Money Supply | The vertical curve representing the total supply of excess reserves in a nation's banking system. Determined by the monetary policy actions of the central bank. | 73 | |
| 13445212308 | Multiplier Effect | The increase in total spending in an economy resulting from an initial interjection of new spending. The size of the multiplier effect depends upon the spending multiplier. | 74 | |
| 13445212309 | Natural Rate Of Unemployment (NRU) | The level of unemployment that prevails in an economy that is producing at a full employment level of output. Includes structural and frictional unemployment. While countries NRUs can vary, the NRUs in the US tend to be close to 5 percent. | 75 | |
| 13445212311 | Open-Market Operations | The central bank's buying and selling of government bonds on the open market from commercial banks and the public. This is aimed at increasing or decreasing the level of reserves in the banking system and thereby affects the interest rate and the level of aggregate demand. | 76 | |
| 13445212312 | Opportunity Cost | What must be given up to have anything else. Opportunity costs are not neccesarily monetary costs, but rather include what you could do with the resources you use to undertake any activity or exchange. | 77 | |
| 13445212313 | Phillips Curve (long run) | A curve vertical at the NRU showing that in the long run there is no trade-off between the price level and level of unemployment in an economy. | 78 | |
| 13445212314 | Phillips Curve (short run) | A downward-sloping curve showing the short-run inverse relationship between the level of inflation and the level of unemployment. | 79 | |
| 13445212315 | Production Possibilities Curve (PPC) | A graph that shows the various combinations of output that the economy can produce given the available factors of production and the available production technology. | 80 | |
| 13445212316 | Productivity | The output per unit of input of a resource. An important determinant of the level of aggregate supply in a nation. | 81 | |
| 13445212317 | Protectionism | The use of tariffs, quotas, or subsidies to give domestic producers a competitive advantage over foreign producers. Meant to protect domestic production and employment from foreign competition. | 82 | |
| 13445212318 | Rational Expectations Theory | The hypothesis that business firms and househlds expect monetary and fiscal policies to have certain effects on the economy and take, in pursuit of their own self interests, actions which make these policies ineffective at changing real output. | 83 | |
| 13445212319 | Recession | A contraction in total output of goods and services in a nation between two periods of time. Could be caused by a decrease in aggregate demand or in aggregate supply. | 84 | |
| 13445212320 | Recessionary Gap | The difference between an economy's equilibrium level of output and its full employment level of output when an economy is in a recession. | 85 | |
| 13445212321 | Self-Correction | The idea that an economy producing at an equilibrium level of output that is below or above its full employment will return on its own to its full employment level left to its own devices. Requires flexible wages and prices and is associated with classical economic views. | 86 | |
| 13445212322 | Stagflation | A macroeconomic situation in which both inflation and unemployment increase. Caused by a negative supply shock. | 87 | |
| 13445212323 | Sticky Wage and Price Model | The short run Aggregate-Supply Curve is sometimes referred to as the "sticky wage and price model", because worker's wage demands take time to adjust to changes in the overall price level, and therefore, in the short run an economy may produce well below or beyond its full employment level of output. | 88 | |
| 13445212324 | Structural Unemployment | Unemployment caused by changes in the structure of demand for goods and in technology; workers who are unemployed because they do not match what is in demand by producers in the economy or whose skills have been left behind by economic advancement | 89 | |
| 13445212325 | Supply Shock | Anything that leads to a sudden, unexpected change in aggregate supply. Can be negative (decreases AS) or positive (increases AS). May include a change in energy prices, wages, or business taxes, or may result from a natural disaster or a new discovery of important resources. | 90 | |
| 13445212326 | Trade Deficit | When a country's total spending on imported goods and services exceeds its total revenues from the sale of exports to the rest of the world. Synonymous with a surplus in the current account of the balance of the payments and with a negative net export component of the GDP. | 91 | |
| 13445212327 | Trade Surplus | When a country's sale of exports exceeds its spending on imports. Synonymous with a surplus in the current account of the balance of payments. | 92 | |
| 13445212329 | aggregate demand curve | a curve depicting the relationship between real GDP demanded (i.e., expenditures) and the price level in the economy; the aggregate demand curve slopes downward from left to right. | 93 | |
| 13445212330 | consumer surplus | the difference between the maximum price a consume is (or would be) willing to pay and the price he or she actually pays. | 94 | |
| 13445212331 | demand-pull inflation | inflation that follows from an increase in aggregate demand, which will cause equilibrium real GDP (Y) to increase and the equilibrium price level (P) to increase. | 95 | |
| 13445212334 | expansion | period in which the economy moves from a trough to a peak and a real GDP is increasing; also called a boom. | 96 | |
| 13445212335 | expansionary fiscal policy | enacted when the government deliberately increases its deficit to stimulate the economy; the government increases its spending (increases G), cuts taxes (decreases T), or both, and stimulates the economy by expanding aggregate demand (AD). | 97 | |
| 13445212336 | expansionary monetary policy | monetary policy methods by which the Fed aims to increase the money supply and lower interest rates, thereby creating an increase in output; in pursuit of expansionary policy goals, the Fed can lower the required reserve ratio, lower the discount rate, or purchase government securities on the open market. | 98 | |
| 13445212337 | expenditure approach | a way of measuring the GDP by adding up all spending on final goods and services during a given year. | 99 | |
| 13445212339 | hyperinflation | a very high rate of inflation, under which prices go up very rapidly, often more than 1,000 percent in a year. This causes money to become a poor store of value. | 100 | |
| 13445212343 | interest | the payment that capital receives in the factor market. | 101 | |
| 13445212344 | labor force | the group of individuals who are either working or actively looking for work; the labor force includes the unemployed: labor force = number of individuals in labor force/number of individuals in the adult population, expressed as a percentage. | 102 | |
| 13445212353 | nominal GDP | the gross domestic product calculated using current-year prices; for example, the nominal GDP for 2001 would calculate the value of production using2001 prices for goods and services. Nominal GDP can vary widely from year to year, due to forces such as inflation. | 103 | |
| 13445212356 | Phillips curve | graphic representation of an inverse relationship between wage growth (percentage change in price level, such as inflation) and unemployment. | 104 | |
| 13445212359 | required reserve ratio (RR) | a specific percentage of checking account deposits that each bank must keep in liquid, zero-interest reserves; this amount is set by the Fed. | 105 | |
| 13445212362 | simple money multiplier | 1/RR, where RR is the required reserve ratio expressed as a decimal; if the required reserve ratio is 10% (0.1), the money multiplier is 1/0.1 = 10. | 106 | |
| 13445212363 | SRAS curve | short-run aggregate supply curve | 107 | |
| 13445212364 | tariff | a special tax imposed on imported goods. | 108 | |
| 13445212366 | unemployment rate* | the percentage of the civilian labor force that is unemployed. The number of persons unemployed divided by the number of persons in the civilian labor force (expressed as a percentage). | 109 | |
| 13445212369 | government expenditures | the dollar value of goods and services sold to governments. | 110 | |
| 13445212511 | automatic stabilizers | Government program that changes automatically depending of GDP and a person's income | 111 | |
| 13445212512 | producer price index | A measure of the cost of a basket of goods and services bought by firms | 112 | |
| 13445212516 | seasonal unemployment | Joblessness related to changes in weather, tourist patterns, or other seasonal factors | 113 | |
| 13445212521 | fiat money | Money that has value because the government has ordered that it is an acceptable means to pay debts | 114 | |
| 13445212522 | liquidity | Availability of resources to meet short-term cash requirements. | 115 | |
| 13445212534 | nominal interest rate | the interest rate as usually reported without a correction for the effects of inflation | 116 | |
| 13445212563 | Stabilization Policy | government programs designed to prevent or shorten recessions and to counteract inflation. | 117 | |
| 13445212568 | Discouraged Worker | an unemployed person who gives up looking for work and is therefore no longer counted as part of the labor force. | 118 | |
| 13445212569 | Frictional Unemployment | unemployment that is due to normal turnover in the labor market. It includes people who are temporarily between jobs because they are moving or changing occupations, or for similar reasons. | 119 | |
| 13445212584 | Aggregate Demand (AD) | The total amount that all consumers, business firms, and government agencies are willing to spend on final goods and services at various price levels at a given period of time. | 120 | |
| 13445212585 | Consumer Expenditure (C) | the total amount spent by consumers on newly produced goods and services (excluding purchases of new homes, which are considered investment goods). | 121 | |
| 13445212586 | Investment Spending (I) | the sum of the expenditures of business firms on new plant and equipment and households on new homes. Financial "investments" are not included, nor are resales of existing physical assets. | 122 | |
| 13445212587 | Government Purchases (G) | the goods and services purchased by all levels of government. | 123 | |
| 13445212588 | Net Exports (X - IM) | the difference between U.S. exports and U.S. imports. It indicates the difference between what we sell to foreigners and what we buy from them. | 124 | |
| 13445212591 | Transfer Payments | sums of money that the government gives certain individuals as outright grants rather than as payments for services rendered to employers. | 125 | |
| 13445212596 | Inflationary Gap | the amount by which equilibrium real GDP exceeds the full-employment level of GDP. | 126 | |
| 13445212598 | Aggregate Supply Curve | shows for each possible price level the quantity of goods and services that all the nation's businesses are willing to produce during a specified period of time, holding all other determinants of aggregate quantity supplied constant. | 127 |
