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Government & Economy
PES
| Question | Answer |
|---|---|
| Private Goods | Good consumed by a single person or household |
| Public Goods | Good available for everyone to consume, regardless of ability to pay |
| Deadweight Loss from Taxation | Difference between total burden of a tax and amount of revenue collected by the government |
| Median Voter Rule | Rule suggesting choices made by the government will reflect preferences of median vote |
| Benefits-Received Principle | A few people share the benefit of a project and a large number of people share the cost, the government is more likely to approve inefficient projects |
| Free-Ride Problem | Each person will try to get the benefit of a public good without paying for it, trying to get a free ride at the expense of others who do pay |
| Total Burden of Tax | Loss in consumer surplus resulting from a tax |
| Excess Burden of Tax | Deadweight loss |
| Taxable Income | Total Income - Certain Deductions and Exemptions |
| Regressive Tax | Taxpayers pay the same amount. Lower income taxpayers pay higher rate. Punishes you for being poor. |
| Progressive Tax | Taxpayers pay different amounts. Higher income taxpayers pay a higher rate. Punishes you for being rich. |
| Proportional Tax | Taxpayers pay different amounts. All taxpayers pay the same rate. Treats rich and poor equally. |
| Equilibrium Output | Level of GDP at which the amount of demand for output equals the amount that is produced |
| Consumption Function | Relationship between the level of income and consumption spending |
| Autonomous Consumption | Part of consumption that does not depend on income |
| Marginal Propensity to Consume | Fraction of additional income that is spent |
| Marginal Propensity to Save | Fraction of additional income that is saved |
| Keynesian Fiscal Policy | Use of taxes and government spending to affect the level of GDP in the short run |
| Disposable Personal Income | Income that flows back into households, taking into account transfers and taxes |
| Expansionary Fiscal Policy | Government policy actions that lead to increases in output; this stimulates the economy |
| Contractionary Fiscal Policy | Government policy actions that lead to decreases in output; this fights inflation |
| Budget Deficit | Difference between the spending of a government and the revenues of the government from taxation |
| Automatic Stabilizers | Taxes and transfer payments that stabilize GDP without requiring policy makers to take explicit actions |
| Multiplier | Ratio of changes in output to changes in spending; measures the degree to which changes in spending are "multiplied" into changes in output |
| Savings Function | Relationship between the level of income and the level of savings |
| Permanent Income | An estimate of the long-run average level of income of a household |
| Marginal Propensity to Import | The fraction of additional income that is spent on imports |
| Money | Anything regularly used in exchange |
| Barter | Trading goods directly for goods |
| Medium of Exchange | Property of money that exchanges are made through the use of money |
| Standard Value (Unit of Account) | Property of money that prices are quoted |
| Store of Value | Property of money that it preserves value until used in exchange |
| M1 | Sum of currency in the hands of the public + the demand deposits + other checkable deposits |
| M2 | M1 + other assets including deposits in savings, loans, money market, and mutual funds |
| Net Worth | Difference between assets and liabilities |
| Monetary Policy | Range of actions taken by the Federal Reserve to influence the level of GDP or the rate of inflation |
| Federal Reserve System | Organization with the ability to increase/decrease the total amount of reserves in the banking system through open market operations |
| Open Market Purchases | Federal Reserve's Purchase of government loans, which increases the money supply |
| Open Market Sales | Federal Reserve's Sales of the government bonds to the public, which decreases the money supply |
| Money Multiplier | Initial deposit leads to a multiple expansion of deposits (Increase in deposits = (Initial Deposit) * (1/Reserve Ratio) |
| Reserve Ratio | Ratio of Reserves to deposits |
| Excess Reserves | Any additional reserves that a bank holds above its required reserves |
| Required Reserves | Fraction of the deposits banks are required to hold in their vaults or as deposits at the Federal Reserve |
| Reserves | Fraction of the deposits banks set aside in either vault cash or as deposits at the Federal Reserve |
| Assets | Uses of funds of a bank, including loans and reserves |
| Liabilities | Sources of funds for a bank, including deposits |
| Balance Sheet | Account for a bank whoch shows the sources of its funds (liabilities) as well as the uses for its funds (assets) |
Created by:
bmaze
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