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ECO1102 > Midterm 2 > Flashcards

Midterm 2 Flashcards

1
Q

Financial system

A

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

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2
Q

Financial Markets

A

financial institutions through which savers can directly provide funds to borrowers

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3
Q

Bond

A

a certificate of indebtedness

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4
Q

Stock

A

a claim to partial ownership in a firm

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5
Q

Financial intermediaries

A

financial institutions through which savers can indirectly provide funds to borrowers

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6
Q

Mutual fund

A

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

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7
Q

National saving

A

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

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8
Q

Private saving

A

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

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9
Q

Public saving

A

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

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10
Q

Budget surplus

A

an excess of tax revenue over government spending

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11
Q

Budget deficit

A

a shortfall of tax revenue from government spending

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12
Q

Market for loanable funds

A

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

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13
Q

Government debt

A

the sum of all past budget deficits and surpluses

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14
Q

Crowding out

A

a decrease in investment that results from government borrowing

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15
Q

Vicious circle

A

the cycle that results when deficits reduce the supply of loanable funds, increase interest rates, discourage investment, and result in slower economic growth; slower growth leads to lower tax revenue and higher spending on income-support programs, and the result can be even higher budget deficits

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16
Q

Virtuous circle

A

the cycle that results when surpluses increase the supply of loanable funds, reduce interest rates, stimulate investment, and result in faster economic growth; faster growth leads to higher tax revenue and lower spending on income-support programs, and the result can be even higher budget surpluses

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17
Q

Government net debt

A

the difference between the value of government financial liabilities and financial assets

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18
Q

Labour force

A

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

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19
Q

Unemployment rate

A

the percentage of the labour force that is unemployed

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20
Q

Labour-force participation rate

A

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

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21
Q

Discouraged searchers

A

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

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22
Q

Natural rate of unemployment

A

the rate of unemployment to which the economy tends to return in the long run

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23
Q

Cyclical unemployment

A

the deviation of unemployment from its natural rate

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24
Q

Frictional unemployment

A

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

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25
Q

Structural unemployment

A

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

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26
Q

Job search

A

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

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27
Q

Employment Insurance (EI)

A

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

28
Q

Union

A

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

29
Q

Collective bargaining

A

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

30
Q

Strike

A

the organized withdrawal of labour from a firm by a union

31
Q

Efficiency wages

A

above-equilibrium wages paid by firms in order to increase worker productivity

32
Q

Money

A

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

33
Q

Medium of exchange

A

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

34
Q

Unit of account

A

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

35
Q

Store of value

A

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

36
Q

Liquidity

A

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

37
Q

Commodity money

A

money that takes the form of a commodity with intrinsic value

38
Q

Flat money

A

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

39
Q

Currency

A

the paper bills and coins in the hands of the public

40
Q

Demand deposits

A

balances in bank accounts that depositors can access on demand by writing a cheque or using a debit card

41
Q

Bank of Canada

A

the central bank of Canada

42
Q

Central Bank

A

an institution designed to regulate the quantity of money in the economy

43
Q

Money Supply

A

the quantity of money available in the economy

44
Q

Monetary policy

A

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

45
Q

Reserves

A

deposits that banks have received but have not loaned out

46
Q

Fractional reserve banking

A

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

47
Q

Reserve ratio

A

the fraction of deposits that banks hold as reserves

48
Q

Capital requirement

A

a government regulation specifying a minimum amount of bank capital

49
Q

Bank rate

A

the interest rate charged by the Bank of Canada on loans to the commercial banks

50
Q

Overnight rate

A

the interest rate on very short-term loans between commercial banks

51
Q

Open-market operations

A

the purchase or sale of government of Canada bonds by the Bank of Canada

52
Q

Quantitative easing

A

the purchase and sale by the central bank of nongovernment securities or government securities with long maturity terms

53
Q

Foreign exchange market operations

A

the purchase or sale of foreign money by the Bank of Canada

54
Q

Sterilization

A

the process of offsetting foreign exchange market operations with open-market operations, so that the effect on the money supply is cancelled out

55
Q

Reserve requirement

A

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

56
Q

Money multiplier

A

the fraction of deposits that banks hold as reserves

57
Q

Quantity theory of money

A

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

58
Q

Nominal variables

A

variables measured in monetary units

59
Q

Real variables

A

variables measured in physical units

60
Q

Classical dichotomy

A

the theoretical separation of nominal and real variables

61
Q

Monetary neutrality

A

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

62
Q

Velocity of money

A

the rate at which money changes hands

63
Q

Quantity equation

A

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

64
Q

Inflation tax

A

the revenue the government raises by creating money

65
Q

Fisher effect

A

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

66
Q

Shoe-leather cost

A

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

67
Q

Menu cost

A

the costs of changing prices

ECO1102 (1 decks)

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