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74 Cards in this Set
- Front
- Back
Balance of Payments Accounts |
The accounts in which a nation records it's international trading, borrowing, and lending |
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Current Account |
Record receipts from the sale of goods and services to other countries (exports), minus payments for goods and services bought from other countries (imports), plus the net amount of interest and transfers received from and paid to other countries |
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Capital and Financial Account |
Record of foreign investment in the United States minus U.S. investment abroad |
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Official Settlements Account |
Record of the change in U.S. official reserves |
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U.S. Official Reserves |
The government's holdings of foreign currency |
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Net Borrower |
A country that is borrowing more from the rest of the world than it is lending to the rest of the world |
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Net Lender |
A country that is lending more to the rest of the world than it is borrowing from the rest of the world |
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Debtor Nation |
A country that during its entire history has borrowed more from the rest of the world than it has lent to the rest of the world |
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Creditor Nation |
A country that during its entire history has invested more.in the rest of the world than other countries has invested in it |
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Private Sector Balance |
Saving minus investment |
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Government Sector Balance |
The sum of the budget balances of the federal, state, and local governments - net taxes minus government expenditure on goods and services |
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Foreign Exchange Market |
The market in which the currency of one country is exchanged for the currency of another |
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Foreign Exchange Rate |
The price at which one currency exchanges for another |
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Currency Appreciation |
The rise in the value of one currency in terms of another currency |
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Currency Depreciation |
The fall in the value of one currency in terms of another currency |
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U.S. Interest Rate Differential |
The U.S. interest rate minus the foreign interest rate |
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Purchasing Power Parity |
Equal value of money - a situation in which money buys the same amount of goods and services in different currencies |
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Interest Rate Parity |
Equal interest rate - a situation in which the interest rate in one currency equals the interest rate in another currency when the exchange rate changes are taken into account |
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Aggregate Supply |
The relationship between the quantity of real GDP supplied and the price level when all other influences on production plans remain the same. |
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Aggregate Demand |
The relationship between the quantity of real GDP demanded and the price level when all other influences on expenditure plans remain the same. |
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Fiscal Policy |
Changing taxes, transfer payments, and government expenditure on goods and services |
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Monetary Policy |
Changing the quantity of money and the interest rate |
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Macroeconomic Equilibrium |
When the quantity of real GDP demanded equals the quantity of real GDP supplied at the point of intersection of the AD curve and the AS curve. |
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Full-employment Equilibrium |
When equilibrium real GDP equals potential GDP |
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Recessionary Gap |
A gap that exists when potential GDP exceeds real GDP and that brings a falling price level. |
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Inflationary Gap |
A gap that exists when real GDP exceeds potential GDP and that brings a rising price level. |
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Real Business Cycle |
A cycle that results from fluctuations in the pace of growth of labor productivity and potential GDP |
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Demand-Pull Inflation |
Inflation that starts because aggregate demand increases. |
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Cost-Push Inflation |
An inflation that begins with an increase in cost. |
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Stagflation |
The combination of recession (decreasing real GDP) and inflation (rising price level) |
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Aggregate Planned Expenditure |
Planned consumption expenditure plus planned investment, plus planned government expenditure, plus planned exports minus planned imports |
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Consumption Function |
The relationship between consumption expenditure and disposable income, other things remaining the same |
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Marginal Propensity to Consume |
The traction of a change in disposable income that is spent on consumption - the change in consumption expenditure divided by the change in disposable income that brought it about |
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Equilibrium Expenditure |
The level of aggregate expenditure that occurs when aggregate planned expenditure equals real GDP. |
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Multiplier |
The amount by which a change in any component of autonomous expenditure is magnified or multiplied to determine the change in equilibrium expenditure and real GDP that it generates. |
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Marginal Tax Rate |
The fraction of a change in real GDP that is paid in income taxes - the change in tax payments divided by the change in real GDP. |
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Short-Run Phillips Curve |
The relationship between the inflation rate and the unemployment rate when the natural unemployment rate and the expected inflation rate remain constant |
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Okun's Law |
For each percentage point that the unemployment rate is above (below the natural unemployment rate, real GDP is 2 percent below (above) potential GDP |
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Long-Run Phillips Curve |
The relationship between inflation and unemployment when the economy is at full employment. The long-run Phillips curve is a vertical line at the natural unemployment rate |
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Expected Inflation Rate |
The inflation rate that people forecast and use to set the money wage rate and other money prices |
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Natural Rate Hypothesis |
The proposition that when the inflation rate changes, the unemployment rate changes temporarily and eventually returns to the natural unemployment rate |
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Rational Expectation |
The forecast that results from the use of all the relevant data and economic science |
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Fiscal Policy |
The use of the federal budget to achieve the macroeconomic objectives of high and sustained economic growth and full employment |
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Budget Balance |
Tax revenues minus outlays |
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National Debt |
The amount of government debt outstanding - debt that has arisen from past budget deficits |
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Transfer Payments |
Social Security benefits. Medicare and Medicaid benefits, unemployment benefits, and other cash benefits |
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Fiscal Imbalance |
The present value of the government's commitments to pay future benefits minus the present value of its future tax revenues |
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Generational Imbalance |
The division of the fiscal imbalance between the current and future generations |
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Automatic Fiscal Policy |
A fiscal policy action that is triggered by the state of the economy |
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Discretionary Fiscal Policy |
A fiscal policy action that is initiated by an act of Congress |
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Automatic Stabilizers |
Features of fiscal policy that stabilize real GDP without explicit action by the government |
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Induced taxes |
Taxes vary with real GDP |
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Structural Surplus or Deficit |
The budget balance that would occur if the economy were at full employment |
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Cyclical Surplus or Deficit |
The budget balance that arises because tax revenue and outlays are not at their full-employment levels |
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Government Expenditure Multiplier |
The effect of a change in government expenditure on goods and services on aggregate demand |
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Tax Multiplier |
The effect of a change in taxes on aggregate demand |
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Transfer Payments Multiplier |
The effect of a change in transfer payments on aggregate demand |
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Balanced Budget Multiplier |
The effect on aggregate demand of a simultaneous change in government expenditure and taxes that leaves the budget balance unchanged |
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Supply - Side Effects |
The effects of fiscal policy on potential GDP and the economic growth rate |
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Tax Wedge |
The gap created by a tax between what a buyer pays and what a seller receives. In the labor market, it is the gap between the before-tax wage rate and the after-tax wage rate |
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Financial Stability |
A situation in which financial markets and institutions function normally to allocate capital resources and risk |
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Monetary Policy Instrument |
A variable that the Fed can directly control or closely target and that influences the economy in desirable ways |
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Federal Funds Rate |
The interest rate at which banks can borrow and lend reserves in the federal funds market |
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Discretionary Monetary Policy |
A monetary policy that sets a central bank's policy instrument at the level it believes will best achieve its mandated policy goals |
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Rule-Based Monetary Policy |
A monetary policy that is based on a rule for setting the policy instrument |
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Inflation Targeting |
A monetary policy strategy in which the central bank makes a public agreement with the government to achieve an explicit inflation target and to explain how its policy actions will achieve that target |
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K-percent Rule |
A monetary policy rule that makes the quantity of money grow at k percent per year, where k equals the growth rate of potential GDP |
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Imports |
The goods and services that people and firms in one country buy from firms in other countries |
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Exports |
The goods and services that firms in one country sell to people and firms in other countries |
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Tariff |
A tax imposed on a good when it is imported |
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Import Quota |
A quantitative restriction on the import of a good that limits the maximum quantity of a good that may be imported in a given period |
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Infant Industry Argument |
The argument that it is necessary to protect a new industry to enable it to grow into a mature industry that can compete in world markets |
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Dumping |
When a foreign firm sells it's exports at a lower price than its cost of production |
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Rent Seeking |
Lobbying and other political activity that aims to capture the gains from trade |