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macroecon test 4 ch 9-13

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Term
Definition
ECON 1 test 4 Arnold Ch 9-13 Ch 9 Classical Macroeconomics and the Self-Regulating Economy Say’s Law   show
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Recessionary Gap   show
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show the condition in which the Real GDP that the economy is producing is greater than the Natural Real GDP and the unemployment rate is less than the natural unemployment rate  
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Laissez-faire   show
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Efficiency Wage Models   show
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Consumption Function   show
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show the ratio of the change in consumption to the change in disposable income  
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Autonomous Consumption   show
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Marginal Propensity to Save (MPS)   show
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show the # that is multiplied by the change in autonomous spending to obtain the overall change in total spending; multiplier (m) = 1/(1-MPC)  
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Progressive Income Tax   show
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show an income tax system in which a person’s tax rate is the same regardless of taxable income  
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Regressive Income Tax   show
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show gov’t expenditures greater than tax revenues  
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Budget Surplus   show
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Balanced Budget   show
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show the part of the budget deficit that is a result of a downturn in economic activity  
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show the part of the budget deficit that would exist even if the economy were operating at full employment  
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show the total amount that the federal gov’t owes its creditors  
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Fiscal Policy   show
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Expansionary Fiscal Policy   show
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Contractionary Fiscal Policy   show
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show deliberate changes of gov’t expenditures and/or taxes to achieve economic goals  
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show changes in gov’t expenditures and/or taxes that occur automatically w/o (additional) congressional action  
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show the decrease in private expenditures that occurs as a consequence of increased gov’t spending or the financing needs of a budget deficit  
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show a decrease in one or more components of private spending that completely offsets the increase in gov’t spending  
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Incomplete Crowding Out   show
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show the change in a person’s tax payment divided by the change in taxable income  
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show the curve that shows the relationship between tax rates and tax revenues; as tax rates rise from 0, tax revenues rise, reach a maximum at some point, and then fall w/ further increases in tax rates (dome curve)  
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show in terms of income taxes, the total amount of taxable income  
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show any good that is widely accepted for purposes of exchange and the repayment of debt  
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show exchanging of goods and services for other goods and services w/o the use of money  
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show anything that is generally acceptable in exchange for goods and services; a function of money  
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Unit of Account   show
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Store of Value   show
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show in a barter economy, a requirement which must be met before a trade can be made; it specifies that a trader must find another trader who at the same time is willing to trade what the first trader wants and wants what the first trader has  
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show currency held outside banks plus checkable deposits plus traveler’s checks  
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Currency   show
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Federal Reserve Notes   show
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Checkable Deposits   show
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show M1 plus savings deposits (inc money market deposit accounts) plus small-denomination time deposits plus money market mutual funds (retail)  
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show an interest-earning account at a commercial bank or thrift institution; normally, checks can’t be written on savings deposits, and the funds in a savings deposit can be withdrawn at any time w/o penalty payment  
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show an interest-earning deposit w/ a specified maturity date; these deposits are subject to penalties for early withdrawal (withdrawal before maturity date); small-denomination time deposits are less than $100,000  
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Money Market Deposit Account (MMDA)   show
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show an interest-earning account at a mutual fund company, for which a minimum balance is usually required and most of which offer limited check-writing privileges; only retail MMMF’s are part of M2  
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show a banking arrangement that allows banks to hold reserves equal to only a fraction of their deposit liabilities  
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Federal Reserve System (the Fed)   show
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show the sum of bank deposits at the Fed and vault cash  
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Required Reserve Ratio (r)   show
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Required Reserves   show
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Reserve Requirement   show
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show any reserves held beyond the required amount; the difference between (total) reserves & required reserves  
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show borrowers & lenders come together in a market setting, ie, the bond market  
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Indirect Finance   show
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show a financial intermediary transfers funds from those who want to lend funds to those who want to borrow them  
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Asymmetric Information   show
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show a phenomenon that occurs when the parties on one side of the market, who have info not known to others, self-select in a way that adversely affects the parties on the other side of the market  
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Moral Hazard   show
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Balance Sheet   show
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Asset   show
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show anything that is owed to someone else  
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Insolvency   show
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Board of Governors   show
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Federal Open Market Committee (FOMC)   show
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show the buying and selling of gov’t securities by the Fed  
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Monetary Policy   show
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show bonds and bond-like securities issued by the US Treasure when it borrows  
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Open Market Purchase   show
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Cash Leakage   show
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show the reciprocal of the required reserve ratio, 1/r  
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show the selling of gov’t securities by the Fed  
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Reserve Deficit/Deficient   show
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show a loan the Fed makes to a commercial bank  
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show the interest rate the Fed charges depository institutions that borrow reserves from it; the interest rate charged on a discount loan  
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show the interest rate in the federal funds market; the interest rate banks charge one another to borrow reserves  
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Federal Funds Market   show
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Federal Funds Target Rate   show
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Term Auction Facility (TAF) Program   show
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