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Macroeconomics sucks
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| Question | Answer |
|---|---|
| Average propensity to consume | Fraction (or percentage) of disposable income that households plan to spend for consumer goods and services; consumption divided by disposable income. |
| Actual reserves | The funds that a bank had on deposit at the federal reserve bank of its district (plus its vault cash). |
| Asset demand | The amount of money people want to hold as a store of value; this amount varies inversely with the interest rate. |
| Average propensity to save | Fraction (or percentage) of disposable income that households plan to save; saving divided by disposable income. |
| Average propensity to consume | Fraction (or percentage) of disposable income that households plan to spend for consumer goods and services; consumption divided by disposable income. |
| Actual reserves | The funds that a bank had on deposit at the federal reserve bank of its district (plus its vault cash). |
| Asset demand | The amount of money people want to hold as a store of value; this amount varies inversely with the interest rate. |
| Average propensity to save | Fraction (or percentage) of disposable income that households plan to save; saving divided by disposable income. |
| Board of governors | The seven-member group that supervises and controls the money and banking system of the US; the board of governors of the federal reserve system; the federal reserve board. |
| Budget deficit | the amount by which the expenditures of the federal government exceed its revenues in any year |
| Budget surplus | the amount by which the revenues of the federal government exceed its expenditures in any year |
| Built-in stabilizer | a mechanism that increases governments budget deficit (or reduces its surplus) during a recession and increases goverments budget surplus (or reduces its deficit) during an expansion without any action by policymakers. The tax system is one such mechanism |
| Contractionary fiscal policy | a decrease in government purchases for goods and services, an increase in net taxes, or some combination of the two, for the purpose of decreasing aggregate demand and thus controlling inflation. |
| Crowding-out effect | a rise in interest rates and a resulting decrease in planned investment caused by the federal goverments increased borrowing to finance budget deficits and refinance debt. |
| Determinants of aggregate demand | consumption spending, investment, government spending, and net exports. |
| Determinants of aggregate supply | input prices, productivity, and the legal-institutional environment. |
| Discount rate | the interest rate that the federal reserve banks charge on the loans they make to commercial banks and thrift institutions. |
| Equilibrium price level | the price level at which the aggregate demand curve intersects the aggregate supply curve. |
| Equilibrium real output | the gross domestic product at which the total quantity of final goods and services purchased (aggregate expenditures) is equal to the total quantity of final goods and services produced (the real domestic output); the real domestic output at which the agg |
| Excess reserves | the amount by which the bank's or thrift's actual reserves exceed its required reserves; actual reserves – required reserves |
| Expansionary fiscal policy | an increase in government purchases of goods and services, a decrease in net taxes, or some combination of the two for the purpose of increasing aggregate demand and expanding real output. |
| Expansionary monetary policy | federal reserve system actions to increase the money supply, lower interest rates, and expand real GDP; an easy money policy. |
| Federal funds rate | the interest rate banks and other depository institutions charge one another on overnight loans made out of their excess reseerves. |
| Federal open market committee | The 12 member group that determines the purchase and sale policies of the federal reserve banks in the market for us government securities |
| Federal reserve banks | The 12 banks chartered by the us government to control the money supply and to perform other functions. |
| Federal Reserve System | the us central bank, consisting of the board of governors of the federal reserve and the 12 federal reserve banks, which controls the lending activity of the nation's banks and thrifts and thus the money supply; commonly referred to as the “fed” |
| Fiscal policy | changes in government spending and tax collections designed to achieve a full employment and noninflationary domestic output; also called discretionary fiscal policy. |
| Fractional reserve banking system | a reserve requirement that is less than 100% of the checkable-deposit liabilities of a commercial bank or thrift institution. |
| Interest | the payment made for the use of money (of borrowed funds) |
| M1 | the most narrowly defined money supply, equal to currency in the hands of the public and the checkable deposits of commercial banks and thrift institutions. |
| M2 | a more broadly defined money supply, equal to M1 plus non-checkable savings accounts (including money market deposit accounts), small time deposits (deposits less than $100,000), and individual money market mutual fund balances. |
| Marginal propensity to consume | the fraction of any change in disposable income spent for consumer goods; equal to the change in consumption divided by the change in disposable income |
| Marginal propensity to save | the fraction of any change in disposable income that households save; equal to the change in saving divided by the change in disposable income. |
| Medium of exchange | any item sellers generally accept and buyers generally use to pay for a good or service; money; a convenient means of exchanging goods and services without engaging in barter. |
| Monetary policy | a central bank's changing of the money supply to influence interest rates and assist the economy in achieving price stability, full employment, and economic growth. |
| Money multiplier | the multiple of its excess reserves by which the banking system can expand checkable deposits and thus the money supply by making new loans (or buying securities); equal to 1 divided by the reserve requirement ratio. |
| Multiplier | the ratio of change in the equilibrium GDP to the change in investment or in any other component of aggregate expenditures or aggregate demand; the number by which a change in any such component must be multiplied to find the resulting change in the equil |
| Open market operations | the buying and selling of us government securities by the federal reserve banks for purposes of carrying out monetary policy. |
| Productivity | a measure of average output or real output per unit of input. For example, the productivity of labor is determined by dividing real output by hours of work. |
| Progressive tax system | a tax whose average tax rate increases as the taxpayer's income increases and decreases as the taxpayer's income decreases |
| Proportional tax system | a tax whose average tax rate remains constant as the taxpayers income increases or decreases |
| Public debt | the total amount owed by the federal government to the owners of government securities; equal to the sum of past government budget deficits less government budget surplusses. |
| Regressive tax system | a tax whose average tax rate decreases as the taxpayer's income increases and increases as the taxpayer's income decreases |
| Required reserves | the funds that banks and thrifts must deposit with the federal reserve bank (or hold as vault cash) to meet the legal reserve requirement; a fixed percentage of the bank's or thrift's checkable deposits |
| Reserve ratio | the fraction of checkable deposits that a bank must hold as reserves in the federal reserve bank or in its own bank vault; also called the reserve requirement |
| Store of value | an asset set aside for future use; one of the three functions of money |
| Total demand for money | the sum of the transactions demand for money and the asset demand for money |
| Transaction demand | the amount of money people want to hold for use as a medium of exchange (to make payments); varies directly with nominal GDP Unit of account a standard unit in which prices can be stated and the value of goods and services can be compared; one of the th |
| Wealth effect | the tendency for people to increase their consumption spending when the value of their financial and real assets rises and to decrease their consumption spending when the value of those assets fall |
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