AP Macro Section 6 Flashcards

9596328838	cyclically adjusted budget balance	An estimate of what the budget ballence would really be if real GDP were exactly equal to potential output	0
9596328839	Government Debt	Is the accumulations of past budget deficits, minus past budget surpluses	1
9596328840	Fiscal year	Runs from October 1 to September 30 and is labeled according to the calendar year in which it ends	2
9596328841	Public debt	Is government debt held by individuals and institutions outside the government	3
9596328842	Debt GDP Ratio	Is the government's debt as a percentage of GDP	4
9596328843	Implicit liabilities	Spending promises made by the government that are effectively a debt despite the fact that they are not included in the usual debt statistics.	5
9596328844	Target Federal funds	A desired level for federal funds rates. The Fed will use open market operations to achieve that target.	6
9596328845	Expansionary monetary policy	Is monetary policy that increases aggregate demand	7
9596328846	Contractionary Monetary policy	Policy that reduces aggregate demand	8
9596368730	Taylor rule for monetary policy	a rule for setting the federal funds rate that takes in account both the inflation rate and the output gap.	9
9596328847	Inflationary targeting	occurs when the central bank sets an explicit target for the inflation rate and sets monetary policy in order to hit that target	10
9596328848	Monetary neutrality	changes in the money supply have no real effects on the economy	11
9596328849	Classical model of the price level	according to this model the quantity of money is always at its long-run equilibrium level	12
9596328850	Inflation tax	Is the reduction in the value of money held by the public caused by inflation	13
9596328851	cost-push inflation	is inflation that is caused by a significant increase in the price of an input with an economy-wide importance	14
9596328852	Demand pull inflation	Is inflation that is caused by an increase in aggregate demand	15
9596328853	nonaccelerating inflation rate of unemployment (NAIRU)	the unployment rate at which inflation does not chnage over time.	16
9596328854	Long run Philips curve	shows the relationship between unemployment and inflation after expectations of inflation have had time to adjust to experience	17
9596328855	Debt deflation	Is the reduction in aggregate demand arising from the increase in the real burden of outstanding debt caused by deflation	18
9596328856	Zero bound	when the nominal interest rate cannot go below zero	19
9596328859	Monetarism	asserts that GDP will grow steadily if the money supply grows steadily	20
9596328860	discretionary monetary policy	is the use of changes in rate or money supply to stabilize the economy	21
9596328861	Monetary policy rule	Is a formula that determines the central bank's actions.	22
9596328862	Quantity theory of money	Emphasizes the positive relationship between the price level and the money supply M x V = P x Y	23
9596328863	velocity of money	is the ratio of nominal GDP to the money supply. it is a measure of the average number of times the average dollar bill is spent per year.	24
9596328864	Natural rate hypothesis	to avoid accelerating inflation over time, the unemployment rate must be high enough that actual inflation rate equals the expected rate of inflation	25
9596328865	Political business cycle	results when politicians use macroeconomic policy to serve political ends	26
9596328866	New classical macroeconomics	is an approach to the business cycle that returns to the classical view that shifts in the aggregate demand curve affect only the aggregate price level, not aggregate output	27
9596328867	Rational expectations	is the view that individuals and firms make decisions optimally, using all available information	28
9596328868	new Keynesian economics	market imperfections can lead to price stickiness for the economy as a whole	29
9596328869	real businiess cycle theory	claims that fluctuations in the rate of growth of total factor productivity cause the business cycle	30