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epf 2
| Term | Definition |
|---|---|
| GDP (Gross Domestic Product) | the sum of all goods and services produced within a country. |
| Real GDP | the inflation adjusted value of the goods and services produced by labor and property located in the United States |
| Total utility | the total satisfaction derived from consuming a specific quantity of a good or service; the total of marginal utilities for all individual units consumed |
| Satiate | satisfy |
| Initial decision | over-simplified decision-making process based on utility (consume until marginal utility) |
| Bliss point | maximization of utility |
| Marginal analysis | evaluating the impact of one additional unit |
| Diminishing marginal productivity | initially, one input increases the initial successive units of input toward the output, but eventually this will add to less output |
| Balancing at the margin | maximizing utility in light of scarcity |
| Discounting the future | utility diminishes the further in the future that utility is realized (this one may require you to google for a better understanding). |
| Monetary policy | the use of the money supply to impact interest rates, which in turn affects rGDP |
| Fiscal policy | the use of taxes, government spending, government transfers to affect GDP |
| Stabilization policy | the use of policy (fiscal or monetary) to reduce the severity of recessions and excessively strong expansions |
| Discretionary fiscal policy | fiscal policy that requires an action by a government (e.g. pass a law to change government spending or taxes) |
| Lump Sum taxes | taxes that do not depend on the taxpayers income |
| Expansionary fiscal policy | the use of fiscal policy to expand the economy by increasing aggregate demand, which leads to increased output, a decrease in unemployment, and an increase to price level (used to fix recessions) |
| Contractionary fiscal policy | the use of fiscal policy to contract the economy by decreasing aggregate demand, which leads to decreased output, an increase in unemployment, and a decrease in price levels (used to fix booms) |
| Balanced budget | when expenditures= income; tax revenue collected= government spending |
| Debt | accumulation of deficits over time |
| Deficit | when expenditures exceed income |
| The Federal Reserve | the “Fed”; central bank of the U.S.; responsible for maintaining the health of the financial system and conducting monetary policy |
| Discount rate | the name given to the interest rate that the Fed sets on loans it gives banks; tool of monetary policy |
| Reserve ratio | the amount of reserves that banks are required to keep on hand by a central bank; tool of monetary policy |
| Fed funds rate | the interest rate banks charge each other for short term loans; tool for managing money supply |
Created by:
deissyg
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