Macroeconomics terms-McGraw Hill

Recurring increases and decreases (fluctuations) in the level of in economic activity over periods of years; consists of peak, recession, trough, and expansion phases. (such as employment and production)

the study of how society manages its scarce resources

the property of society getting the most it can from its scarce resources

the property of distributing economic prosperity uniformly among the members of society

the impact of one person’s actions on the well-being of a bystander

something that induces a person to act

A rise in the general level of prices in an economy.

small incremental adjustments to a plan of action

an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services

a situation in which a market left on its own fails to allocate resources efficiently

the ability of a single economic actor (or small group of actors) to have a substantial influence on market prices

whatever must be given up to obtain some item

the quantity of goods and services produced from each unit of labor input

the ability of an individual to own and exercise control over scarce resources

people who systematically and purposefully do the best they can to achieve their objectives

the limited nature of society’s resources

a visual model of the economy that shows how dollars flow through markets among households and firms

the study of economy-wide phenomena, including inflation, unemployment, and economic growth

the study of how households and firms make decisions and how they interact in markets

claims that attempt to prescribe how the world should be

claims that attempt to describe the world as it is

a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology

the ability to produce a good using fewer inputs than another producer

the ability to produce a good at a lower opportunity cost than another producer

goods produced domestically and sold abroad

goods produced abroad and sold domestically

whatever must be given up to obtain some item

a market in which there are many buyers and many sellers so that each has a negligible impact on the market price

two goods for which an increase in the price of one leads to a decrease in the demand for the other

a graph of the relationship between the price of a good and the quantity demanded

a table that shows the relationship between the price of a good and the quantity demanded

a situation in which the market price has reached the level at which quantity supplied equals quantity demanded

the price that balances quantity supplied and quantity demanded

the quantity supplied and the quantity demanded at the equilibrium price

a good for which, other things equal, an increase in income leads to a decrease in demand

the claim that, other things equal, the quantity demanded of a good falls when the price of the good rises

the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises

the claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance

a group of buyers and sellers of a particular good or service

a good for which, other things equal, an increase in income leads to an increase in demand

the amount of a good that buyers are willing and able to purchase

the amount of a good that sellers are willing and able to sell

a situation in which quantity demanded is greater than quantity supplied

two goods for which an increase in the price of one leads to an increase in the demand for the other

a graph of the relationship between the price of a good and the quantity supplied

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

a situation in which quantity supplied is greater than quantity demanded

spending by households on goods and services, with the exception of purchases of new housing

a measure of the price level calculated as the ratio of nominal GDP to real GDP times 100

(G) Expenditures by government for goods and services tat government consumes in providing public goods and services that government consumes in providing public goods and for public (social) capital that has a long lifetime; the expenditures of all governments in the economy for those final goods and services. (spending on goods and services by local, state, and federal governments).

The total market value of all final goods and services produced annually, within the boundaries within a country (ex.United States), whether by U.S.-or foreign-supplied resources.

spending on capital equipment, inventories, and structures, including household purchases of new housing

the study of economy-wide phenomena, including inflation, unemployment, and economic growth

the study of how households and firms make decisions and how they interact in markets

spending on domestically produced goods by foreigners (exports) minus spending on foreign goods by domestic residents (imports)

the production of goods and services valued at current prices

The Real Gross Domestic Product adjusted for inflation gross domestic in a year divided by the GDP price index for that year, index expressed as a decimal.

a measure of the overall cost of the goods and services bought by a typical consumer

the automatic correction by law or contract of a dollar amount for the effects of inflation

the percentage change in the price index from the preceding period

the interest rate as usually reported without a correction for the effects of inflation

a measure of the cost of a basket of goods and services bought by firms

the interest rate corrected for the effects of inflation

the property whereby countries that start off poor tend to grow more rapidly than countries that start off rich

the property whereby the benefit from an extra unit of an input declines as the quantity of the input increases

the knowledge and skills that workers acquire through education, training, and experience

the inputs into the production of goods and services that are provided by nature, such as land, rivers, and mineral deposits

the stock of equipment and structures that are used to produce goods and services

the quantity of goods and services produced from each unit of labor input

society’s understanding of the best ways to produce goods and services

a certificate of indebtedness

a shortfall of tax revenue from government spending

an excess of tax revenue over government spending

a decrease in investment that results from government borrowing

financial institutions through which savers can indirectly provide funds to borrowers

financial institutions through which savers can directly provide funds to borrowers

the group of institutions in the economy that help to match one person’s saving with another person’s investment

the market in which those who want to save supply funds and those who want to borrow to invest demand funds

an institution that sells shares to the public and uses the proceeds to buy a portfolio of stocks and bonds

the total income in the economy that remains after paying for consumption and government purchases

the income that households have left after paying for taxes and consumption

the tax revenue that the government has left after paying for its spending

a claim to partial ownership in a firm

the accumulation of a sum of money in, say, a bank account, where the interest earned remains in the account to earn additional interest in the future

the reduction of risk achieved by replacing a single risk with a large number of smaller, unrelated risks

the theory that asset prices reflect all publicly available information about the value of an asset

the field that studies how people make decisions regarding the allocation of resources over time and the handling of risk

risk that affects only a single company

the study of a company’s accounting statements and future prospects to determine its value

the amount of money in the future that an amount of money today will yield, given prevailing interest rates

the description of asset prices that rationally reflect all available information

risk that affects all companies in the stock market

the amount of money today that would be needed, using prevailing interest rates, to produce a given future amount of money

the path of a variable whose changes are impossible to predict

a dislike of uncertainty

the process by which unions and firms agree on the terms of employment

the deviation of unemployment from its natural rate

individuals who would like to work but have given up looking for a job

above-equilibrium wages paid by firms to increase worker productivity

unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills

the process by which workers find appropriate jobs given their tastes and skills

the total number of workers, including both the employed and the unemployed

the percentage of the adult population that is in the labor force

the normal rate of unemployment around which the unemployment rate fluctuates

the organized withdrawal of labor from a firm by a union

unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one

a government program that partially protects workers’ incomes when they become unemployed

the percentage of the labor force that is unemployed

a worker association that bargains with employers over wages, benefits, and working conditions

an institution designed to oversee the banking system and regulate the quantity of money in the economy

money that takes the form of a commodity with intrinsic value

the paper bills and coins in the hands of the public

balances in bank accounts that depositors can access on demand by writing a check

the interest rate on the loans that the Fed makes to banks

the interest rate at which banks make overnight loans to one another

the central bank of the United States

money without intrinsic value that is used as money because of government decree

a banking system in which banks hold only a fraction of deposits as reserves

the ease with which an asset can be converted into the economy’s medium of exchange

an item that buyers give to sellers when they want to purchase goods and services

the setting of the money supply by policymakers in the central bank

the set of assets in an economy that people regularly use to buy goods and services from other people

the amount of money the banking system generates with each dollar of reserves

the quantity of money available in the economy

the purchase and sale of U.S. government bonds by the Fed

the fraction of deposits that banks hold as reserves

regulations on the minimum amount of reserves that banks must hold against deposits

deposits that banks have received but have not loaned out

an item that people can use to transfer purchasing power from the present to the future

the yardstick people use to post prices and record debts

the theoretical separation of nominal and real variables

the one-for-one adjustment of the nominal interest rate to the inflation rate

the revenue the government raises by creating money

the costs of changing prices

the proposition that changes in the money supply do not affect real variables

variables measured in monetary units

the equation M × V = P × Y relates the quantity of money, the velocity of money, and the dollar value of the economy’s output of goods and services

a theory asserting that the quantity of money available determines the price level and that the growth rate in the quantity of money available determines the inflation rate

variables measured in physical units

the resources wasted when inflation encourages people to reduce their money holdings

the rate at which money changes hands

an increase in the value of a currency as measured by the amount of foreign currency it can buy

a situation in which exports equal imports

an economy that does not interact with other economies in the world

a decrease in the value of a currency as measured by the amount of foreign currency it can buy

the purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners

the value of a nation’s exports minus the value of its imports; also called the trade balance

the rate at which a person can trade the currency of one country for the currency of another

an economy that interacts freely with other economies around the world

a theory of exchange rates whereby a unit of any given currency should be able to buy the same quantity of goods in all countries

the rate at which a person can trade the goods and services of one country for the goods and services of another

the value of a nation’s exports minus the value of its imports; also called net exports

an excess of imports over exports

an excess of exports over imports

a large and sudden reduction in the demand for assets located in a country

a government policy that directly influences the quantity of goods and services that a country imports or exports

a curve that shows the quantity of goods and services that households, firms, the government, and customers abroad want to buy at each price level

a curve that shows the quantity of goods and services that firms choose to produce and sell at each price level

a severe recession

the model that most economists use to explain short-run fluctuations in economic activity around its long-run trend

the production of goods and services that an economy achieves in the long run when unemployment is at its normal rate

a period of declining real incomes and rising unemployment

a period of falling output and rising prices

changes in fiscal policy that stimulate aggregate demand when the economy goes into a recession without policymakers having to take any deliberate action

the offset in aggregate demand that results when expansionary fiscal policy raises the interest rate and thereby reduces investment spending

the setting of the level of government spending and taxation by government policymakers

the additional shifts in aggregate demand that result when expansionary fiscal policy increases income and thereby increases consumer spending

Keynes’s theory that the interest rate adjusts to bring money supply and money demand into balance

the claim that unemployment eventually returns to its normal, or natural, rate, regardless of the rate of inflation

a curve that shows the short-run trade-off between inflation and unemployment

the theory that people optimally use all the information they have, including information about government policies, when forecasting the future

the number of percentage points of annual output lost in the process of reducing inflation by 1 percentage point

an event that directly alters firms’ costs and prices, shifting the economy’s aggregate-supply curve and thus the Phillips curve