Help
Options
Didn't know it?
click below
click below
Knew it?
click below
click below
Don't know (0)
Remaining cards (0)
Know (0)
retry
shuffle
restart
0:00
Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page.
Normal Size Small Size show me how
Normal Size Small Size show me how
ECON 102
Exam II
| Term | Definition |
|---|---|
| Keynes’ law | “demand creates its own supply” |
| neoclassical economists | economists who generally emphasize the importance of aggregate supply in determining the size of the macroeconomy over the long run |
| Say’s law | “supply creates its own demand” |
| aggregate demand (AD) | the amount of total spending on domestic goods and services in an economy |
| aggregate supply (AS) | the total quantity of output (i.e. real GDP) firms will produce and sell |
| aggregate demand (AD) curve | the total spending on domestic goods and services at each price level |
| aggregate supply (AS) curve | the total quantity of output (i.e. real GDP) that firms will produce and sell at each price level |
| aggregate demand/aggregate supply model | a model that shows what determines total supply or total demand for the economy, and how total demand and total supply interact at the macroeconomic level |
| full-employment GDP | another name for potential GDP, when the economy is producing at its potential and unemployment is at the natural rate of unemployment |
| long run aggregate supply (LRAS) curve | vertical line at potential GDP showing no relationship between the price level for output and real GDP in the long run |
| potential GDP | the maximum quantity that an economy can produce given full employment of its existing levels of labor, physical capital, technology, and institutions |
| short run aggregate supply (SRAS) curve | positive short run relationship between the price level for output and real GDP, holding the prices of inputs fixed |
| stagflation | an economy experiences stagnant growth and high inflation at the same time |
| intermediate zone | portion of the SRAS curve where GDP is below potential but not so far below as in the Keynesian zone; the SRAS curve is upward-sloping, but not vertical in the intermediate zone |
| Keynesian zone | portion of the SRAS curve where GDP is far below potential and the SRAS curve is flat |
| neoclassical zone | portion of the SRAS curve where GDP is at or near potential output where the SRAS curve is steep |
| Barter | literally, trading one good or service for another, without using money |
| commodity money | an item that is used as money, but which also has value from its use as something other than money |
| commodity-backed currencies | are dollar bills or other currencies with values backed up by gold or another commodity |
| double coincidence of wants | a situation in which two people each want some good or service that the other person can provide |
| fiat money | has no intrinsic value, but is declared by a government to be the legal tender of a country |
| medium of exchange | whatever is widely accepted as a method of payment |
| money | whatever serves society in four functions |
| standard of deferred payment | money must also be acceptable to make purchases today that will be paid in the future |
| store of value | something that serves as a way of preserving economic value that can be spent or consumed in the future |
| unit of account | the common way in which market values are measured in an economy |
| coins and currency in circulation | 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 |
| credit card | immediately transfers money from the credit card company’s checking account to the seller, and at the end of the month the user owes the money to the credit card company; a credit card is a short-term loan |
| debit card | like a check, is an instruction to the user’s bank to transfer money directly and immediately from your bank account to the seller |
| demand deposit | checkable deposit in banks that is available by making a cash withdrawal or writing a check |
| M1 money supply | a narrow definition of the money supply that includes currency and checking accounts in banks, and to a lesser degree, traveler’s checks. |
| M2 money supply | a definition of the money supply that includes everything in M1, but also adds savings deposits, money market funds, and certificates of deposit |
| money market fund | the deposits of many investors are pooled together and invested in a safe way like short-term government bonds |
| savings deposit | 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 |
| smart card | stores a certain value of money on a card and then the card can be used to make purchases |
| time deposit | account that the depositor has committed to leaving in the bank for a certain period of time, in exchange for a higher rate of interest; also called certificate of deposit |
| asset | item of value owned by a firm or an individual |
| asset–liability time mismatch | a bank’s liabilities can be withdrawn in the short term while its assets are repaid in the long term |
| balance sheet | an accounting tool that lists assets and liabilities |
| bank capital | a bank’s net worth |
| depository institution | institution that accepts money deposits and then uses these to make loans |
| diversify | 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 |
| financial intermediary | an institution that operates between a saver with financial assets to invest and an entity who will borrow those assets and pay a rate of return |
| liability | any amount or debt owed by a firm or an individual |
| net worth | the excess of the asset value over and above the amount of the liability; total assets minus total liabilities |
| payment system | helps an economy exchange goods and services for money or other financial assets |
| reserves | funds that a bank keeps on hand and that are not loaned out or invested in bonds |
| T-account | 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 headings for “Assets” and “Liabilities” |
| transaction costs | the costs associated with finding a lender or a borrower for money |
| money multiplier formula | 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 |
| central bank | institution which conducts a nation’s monetary policy and regulates its banking system |
| bank run | when depositors race to the bank to withdraw their deposits for fear that otherwise they would be lost |
| deposit insurance | an insurance system that makes sure depositors in a bank do not lose their money, even if the bank goes bankrupt |
| lender of last resort | an institution that provides short-term emergency loans in conditions of financial crisis |
| discount rate | the interest rate charged by the central bank on the loans that it gives to other commercial banks |
| open market operations | the central bank selling or buying Treasury bonds to influence the quantity of money and the level of interest rates |
| reserve requirement | the percentage amount of its total deposits that a bank is legally obligated to to either hold as cash in their vault or deposit with the central bank |
| contractionary monetary policy | a monetary policy that reduces the supply of money and loans |
| countercyclical | moving in the opposite direction of the business cycle of economic downturns and upswings |
| expansionary monetary policy | a monetary policy that increases the supply of money and the quantity of loans |
| federal funds rate | the interest rate at which one bank lends funds to another bank overnight |
| loose monetary policy | see expansionary monetary policy |
| quantitative easing (QE) | the purchase of long term government and private mortgage-backed securities by central banks to make credit available in hopes of stimulating aggregate demand |
| tight monetary policy | see contractionary monetary policy |
| basic quantity equation of money | money supply × velocity = nominal GDP |
| excess reserves | reserves banks hold that exceed the legally mandated limit |
| inflation targeting | a rule that the central bank is required to focus only on keeping inflation low |
| velocity | the speed with which money circulates through the economy; calculated as the nominal GDP divided by the money supply |
Created by:
EdL