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Principles of Macroeconomics > Units 4-7 Key Terms > Flashcards

Units 4-7 Key Terms Flashcards

1
Q

if employers reduce wages for all workers, the best will leave

A

adverse selection of unemployment

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2
Q

unemployment closely tied to the business cycle, like higher unemployment

A

cyclical unemployment

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3
Q

those who have stopped looking for employment due to the lack of unsuitable positions available

A

discouraged workers

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4
Q

the theory that the productivity of workers, either individually or as a group, will increase if the employer pays more

A

efficiency wage theory

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5
Q

unemployment that occurs as workers move between jobs

A

frictional unemployment

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6
Q

an unwritten agreement in the labor market that the employer will try to keep wages from falling when the economy is weak or the business cycle is having trouble, an the employee will not except a huge salary increases when the economy or the business cycle is strong

A

implicit contract

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7
Q

those already working for the firm are “insiders” who know the producers; the others workers are “outsiders” who are recent or prospective hires

A

insider-outsider model

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8
Q

this is the percentage of adults in an economy who are either employed or who are unemployed who are looking for a job

A

labor force participation rate

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9
Q

the unemployment rate that would exist in a growing and healthy economy from the combination of economic, social, and political factors that exist at a given time

A

natural rate of unemployment

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10
Q

those who are not working and not looking for work—whether they want employment or not; also termed “not in the labor force”

A

out of the labor force

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11
Q

across-the-board wage cuts are hard work for an economy to implement, and workers fight against them

A

relative wage coordination argument

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12
Q

unemployment that occurs because individuals lack skills valued by employers

A

structural employment

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13
Q

individuals who are employed in a job below their skill

A

structural unemployment

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14
Q

the percentage of adults who are in the labor force and thus seeking jobs, but who do not have jobs

A

unemployment rate

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15
Q

a loan a borrower who uses to purchase a hoe in which the interest rate varies with market interest rates varies with market interest rates

A

adjustable-rate mortgage (ARM)

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16
Q

arbitrary year whose value as an index number economists define as 100, so if the index number for a year is 105, then there has been exactly a 5% inflation between that year and the arbitrary year

A

base year

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17
Q

a hypothetical group of different items, with specified quantities of each one, meant to represent a “typical” set of consumer purchases, used as a basis for calculation who know how the price level changes over time

A

basket of goods and services

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18
Q

a measure of inflation that the U.S. government statisticians calculate based on the price level from a fixed basket of goods and services that represents the average consumer’s purchases

A

consumer price index (CPI)

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19
Q

a measure of inflation typically calculated by taking the CPI and excluding volatile economic variables such as food and energy prices to better measure the underlying and persistent trend in long-term prices

A

core inflation index

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20
Q

a contractual provision that wage increases will keep up with inflation

A

cost-of-living adjustments (COLAs)

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21
Q

negative inflation; most prices in the economy are falling

A

deflation

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22
Q

a measure of inflation based on wages paid in the labor market

A

employment cost index

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23
Q

a measure of inflation based prices of all GDP components

A

GDP deflator

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24
Q

an outburst of high inflation that often occurs (although not exclusively) when economies shift from a controlled economy to a market-oriented economy

A

hyperinflation

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25
Q

a unit-free number derived from the price level over a number of years, which makes computing inflation rates easier, since the index number has values around 100

A

index number

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26
Q

a price, wage, or interest rate is adjusted automatically for inflation

A

indexed

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27
Q

a general and ongoing rise in price level in an economy

A

inflation

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28
Q

a measure of inflation based on prices paid for supplies and inputs by producers of goods and services

A

producer price index (PPI)

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29
Q

inflation does not calculate a fixed basket of goods over time tends to overstate the true rise in the cost of living, because it does not account for improvements in the quality of existing goods or the invention of new goods

A

quality/new goods bias

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30
Q

an inflation rate calculated using a fixed basket of goods over time tends to overstate the true rise in the cost of living because it does not take into account that the person can substitute away from goods whose prices rise considerably

A

substitution bias

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31
Q

supply creates its own demand

A

Say’s Law

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32
Q

economists who generally emphasize the importance of aggregate supply in determining the size of the macroeconomy over the long run

A

neoclassical economists

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33
Q

a model that shows the total supply or total demand for the economy, and how total demand and supply interact at the macroeconomic level

A

aggregate demand/supply model

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34
Q

the total quantity of output (i.e. real GDP) firms will produce and sell

A

aggregate supply (AS)

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35
Q

the maximum quantity that an economy can produce given the full employment of its existing levels of labor, physical capital, technology and institutions

A

potential GDP

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36
Q

the amount of total spending on domestic goods and services in an economy

A

aggregate demand

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37
Q

the total spending on domestic goods and services at each price level

A

aggregate demand curve

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38
Q

positive short-run relationship between the price level for output and real GDP, holding the prices of inputs fixed

A

short-run aggregate supply (SRAS) curve

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39
Q

potential GDP showing no relationship between the price and the output and real GDP in the long run

A

long-run aggregate supply (LRAS) curve

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40
Q

an economy experiences stagnant growth and high inflation at the same time

A

stagflation

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41
Q

tax increases or cuts in government spending designed to decrease aggregate demand and reduce inflationary pressures

A

contractionary fiscal policy

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42
Q

downward wage and price flexibility requires perfect information about the level of lower compensation acceptable to other laborers and market participants

A

coordination argument

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43
Q

income after taxes

A

disposable income

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44
Q

tax cuts or increases in government spending designed to stimulate aggregate demand and move the economy out of recession

A

expansionary fiscal policy

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45
Q

Keynesian concept that asserts that a change in autonomous spending causes more than proportionate changes in real GDP

A

expenditure multiplier

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46
Q

equilibrium at a level of output above potential GDP

A

inflationary gap

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47
Q

occurs when what happens at the macro level is different from and inferior to what happens at the micro-level; an example would be where the upward-sloping supply curves for firms become a flat aggregate supply curve, illustrating that the price level cannot fall to stimulate aggregate demand

A

macroeconomic externality

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48
Q

costs that firms face in changing prices

A

menu costs

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49
Q

the trade between unemployment and inflation

A

Phillips curve

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50
Q

the amount of goods and services actually sold in a nation

A

real GDP

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51
Q

equilibrium at a level of output below potential GDP

A

recessionary gap

52
Q

a situation where wages and prices do not fall in response to a decrease in demand or do not rise in response to an increase in demand, or do not rise in response to an increase in demand

A

sticky wages and prices

53
Q

the theory that people look at past expensive and gradually adapt their beliefs and behavior as circumstances change

A

adaptive expectations

54
Q

a future rate of inflation that consumers and firms build into current decision making

A

expected inflation

55
Q

the philosophy that, in long run, the business cycle will fluctuate around the potential, or full-employment, level of output

A

neoclassical perspective

56
Q

the amount and kind of machinery and equipment available to help a person to produce a good or service

A

physical capita per person

57
Q

the theory that people from the most accurate possible expectations about the future can, using all information available to them

A

rational expectations

58
Q

item of value that a firm or an individual owns

A

asset

59
Q

customers can withdraw a bank’s liabilities in the short-term while customers replay its assets in the long-term

A

asset-liability time mismatch

60
Q

an accounting tool that lists liabilities

A

balance sheet

61
Q

a bank’s net worth

A

bank capital

62
Q

literally, trading one good or service for another without using money

A

barter

63
Q

the coins and bills that circulate in an economy that are not held by the U.S. Treasury, at the Federal Reserve Bank, or in bank vaults

A

coins and currency in circulation

64
Q

an item that is used as money, but which also has value from its use as something other than money

A

commodity money

65
Q

dollar bills or other currencies with values backed by gold or another commodity

A

commodity-backed currencies

66
Q

immediately transfers money from the credit card company’s checking account to the seller, and at the end of the month, the user owes money to the credit card company; a credit card is a short-term loan

A

credit card

67
Q

like a check, is an instruction to the user’s bank to transfer money directly and immediately from your bank account to the seller

A

debit card

68
Q

checkable deposit in banks that is available by making a cash withdrawal or writing a check

A

demand deposit

69
Q

institution that accepts money deposits and then users these to make loans

A

depository institution

70
Q

making loans or investments with a variety of firms, to reduce the risk of being adversely affected by events at one or a few firms

A

diversify

71
Q

a situation in which two people each want some good or service that the other person can provide

A

double coincidence of wants

72
Q

has no intrinsic that operates between a saver with financial assets to invest and an entity who will borrow those assets and pay the rate of return

A

fiat money

73
Q

any amount or debt that a firm or an individual owes

A

liability

74
Q

a narrow definition of money supply that includes currency and checking accounts in banks, and to a lesser degree, traveler’s checks

A

M1 money supply

75
Q

a definition of the money supplied that includes everything in M1, but also adds saving deposits, money market funds and certificates of deposit

A

M2 money supply

76
Q

whatever is widely accepted as a method of payment

A

medium of exchange

77
Q

whatever serves society in four functions: as a medium of exchange, a store of value, a unit of account, and a standard of deferred payment

A

money

78
Q

the deposits of many investors are pooled together and invested in a safe way like short-term government bonds

A

money market fund

79
Q

total money in the economy divided by the original quantity of money, or change in the total money in the economy divided by a change in the original quantity of money

A

money multiplier formula

80
Q

the excess of the asset of value over and above the amount of liability; total assets minus total liabilities

A

net worth

81
Q

helps an economy exchange goods and services for money or other financial assets

A

payment system

82
Q

funds that a bank keeps on hand and that it does not loan out or invest in bonds

A

reserves

83
Q

bank account where you cannot withdraw money by writing a check, but can withdraw the money at a bank—or can transfer it easily to a checking account

A

savings deposit

84
Q

stores a certain amount of money on a card and then one can use the card to make purchases

A

smart card

85
Q

money must also be acceptable to make purchases today that will be paid in the future

A

standard deferred payment

86
Q

something that serves as a way of preserving economic value that one can spend or consume in the future

A

store of value

87
Q

a balance sheet with a two-column format, with the T-shape formed by the vertical line down the middle and the horizontal line under the column for “Assets” and “Liabilities”

A

T-account

88
Q

account that the depositor has a commitment to leaving in the bank for a certain amount of time, in exchange for a higher rate of interest; also called certificate of deposit

A

time deposit

89
Q

the costs associated with finding a lender or a borrower for money

A

transaction costs

90
Q

the common way in which we measure market values in an economy

A

unit of account

91
Q

when depositors race to withdraw their deposits for fear that otherwise they would be lost

A

bank run

92
Q

money supply x velocity = nominal GDP

A

basic equation of money

93
Q

institution which conducts a nation’s monetary policy and regulates its banking system

A

central bank

94
Q

a monetary policy that reduces the supply of money and loans

A

contractionary monetary policy / tight monetary policy

95
Q

moving the opposite direction of the business cycle of economic downturns and upswings

A

countercyclical

96
Q

an insurance system that makes sure depositors in a bank do not lose their money, even if the bank goes bankrupt

A

deposit insurance

97
Q

the interest rate charges by the cental bank on loans gives it to other commercial banks

A

discount rate

98
Q

reserve banks hold exceed legally mandated linit

A

excess reserves

99
Q

a monetary policy that increases the supply of money and the quantity of loans

A

expansionary monetary policy / loose monetary policy

100
Q

the interest rate at which one bank lends funds to another bank overnight

A

federal funds rate

101
Q

a rule that the central bank is that is required to focus on keeping inflation rate low

A

inflation targeting

102
Q

an institution that provides short-term emergency loans in conditions of financial crisis

A

lender of last resort

103
Q

the central banks buying and selling Treasury bonds to influence the quantity of money and the level of interest rates

A

open market operations

104
Q

the purchase of long-term government and private mortgage-backed securities by central banks to make credit available in hopes of simulating aggregate demand

A

qualitative easing (QE)

105
Q

the percentage amount of its total deposits that a bank is legally obligated to either hold as cash in their vault or deposit with the central bank

A

reserve requirement

106
Q

the speed at which money circulates through the economy; calculated as the nominal GDP divided by the monetary supply

A

velocity

107
Q

tax and spending rules that have the effect of slowing down the rate of decrease in aggregate demand when the economy speeds up, without any additional change in legislation

A

automatic stabilizers

108
Q

when government spending and taxes are equal

A

balanced budget

109
Q

when the federal government spends more money than it receives in taxes in a given year

A

budget deficit

110
Q

when the government receives more money in taxes in a given year

A

budget surplus

111
Q

fiscal policy that decreased the level of aggregate demand, either through cuts in government spending or increases in taxes

A

contractional fiscal policy

112
Q

a tax imposed on corporate profits

A

corporate income tax

113
Q

federal spending and borrowing causes interest rate to rise and the business investments to fall

A

crowding out

114
Q

the government passes a new law that explicitly changes overall tax or spending level with the intent of influencing the level or overall economic activity

A

discretionary fiscal policy

115
Q

a tax on people who pass assets to the next generation—either after death in the form of gifts

A

estate and gift tax

116
Q

a tax on a specific good—on gasoline, tobacco, and alcohol

A

excise tax

117
Q

fiscal policy that increases the level of aggregate demand, either through increases in government spending or cuts in taxes

A

expansionary fiscal policy

118
Q

the time it takes for the funds relating to fiscal policy to be dispersed to the appropriate agencies to implement the programs

A

implementation lag

119
Q

a tax based on the income, or all forms, received by individuals

A

individual income tax

120
Q

the time it takes to get a fiscal policy bill passed

A

legislative lag

121
Q

the tax must be paid on all yearly income

A

marginal tax rates

122
Q

the total accumulated amount the government had borrowed, over time, and not yet paid back

A

national debt

123
Q

a tax based on the pay received form employers; the taxes provided for Social Security and Medicare

A

payroll tax

124
Q

a tax that is a flat percentage of income, regardless of level of income

A

progressive tax

125
Q

a tax that is a flat percentage of income earned, reguardless of level of income

A

proportional tax

126
Q

the tqax in which people with higher incomes pay a smaller share of the income tax

A

regressive tax

127
Q

the budget deficit or surplus in any given year adjusted to for what is would have been if the economy were producing at potential GDP

A

standardized employment budget

Principles of Macroeconomics (1 decks)

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