question
crowding out
answer
a decrease in investment that results from government borrowing
question
bond
answer
a certificate of indebtedness
question
budget surplus
answer
an excess of tax revenue over government spending
question
budget deficit
answer
a shortfall of tax revenue from government spending
question
market for loanable funds
answer
the market in which those who want to save supply funds and those who want to borrow to invest demand funds
question
mutual fund
answer
an institution that sells shares to the public and uses the proceeds to buy a portfolio of stocks and bonds
question
stock
answer
a claim to partial ownership in a firm
question
financial intermediaries
answer
financial institutions through which savers can indirectly provide funds to borrowers
question
financial system
answer
the group of institutions in the economy that help to match one person's saving with another person's investment
question
private savings
answer
the income that households have left after paying for taxes and consumption
question
financial markets
answer
financial institutions through which savers can directly provide funds to borrowers
question
national savings
answer
the total income in the economy that remains after paying for consumption and government purchases
question
public savings
answer
the tax revenue that the government has left after paying for its spending
question
unemployment insurance
answer
a government program that partially protects workers' incomes when they become unemployed
question
strike
answer
the organized withdrawal of labor from a firm by a union
question
frictional unemployment
answer
unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills
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discouraged workers
answer
individuals who would like to work but have given up looking for a job
question
unemployment rate
answer
the percentage of the labor force that is unemployed
question
job search
answer
the process by which workers find appropriate jobs given their tastes and skills
question
labor-force participation rate
answer
the percentage of the adult population that is in the labor force
question
labor force
answer
the total number of workers, including both the employed and the unemployed
question
natural rate of unemployment
answer
the normal rate of unemployment around which the unemployment rate fluctuates
question
collective bargaining
answer
the process by which unions and firms agree on the terms of employment
question
cyclical unemployment
answer
the deviation of unemployment from its natural rate
question
union
answer
a worker association that bargains with employers over wages, benefits, and working conditions
question
structural unemployment
answer
unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one
question
efficiency wages
answer
above-equilibrium wages paid by firms to increase worker productivity
question
Federal Reserve
answer
the central bank of the United States
question
money supply
answer
the quantity of money available in the economy
question
federal funds rate
answer
the interest rate at which banks make overnight loans to one another
question
leverage
answer
the use of borrowed money to supplement existing funds for purposes of investment
question
capital requirement
answer
a government regulation specifying a minimum amount of bank capital
question
money multilpier
answer
the amount of money the banking system generates with each dollar of reserves
question
money
answer
the set of assets in an economy that people regularly use to buy goods and services from other people
question
fractional-reserve banking
answer
a banking system in which banks hold only a fraction of deposits as reserves
question
discount rate
answer
the interest rate on the loans that the Fed makes to banks
question
reserve ratio
answer
the fraction of deposits that banks hold as reserves
question
bank capital
answer
the resources a bank's owners have put into the institution
question
open-market operations
answer
the purchase and sale of U.S. government bonds by the Fed
question
leverage ratio
answer
the ratio of assets to bank capital
question
fiat money
answer
money without intrinsic value that is used as money because of government decree
question
monetary policy
answer
the setting of the money supply by policymakers in the central bank
question
demand deposits
answer
balances in bank accounts that depositors can access on demand by writing a check
question
reserves
answer
deposits that banks have received but have not loaned out
question
central bank
answer
an institution designed to oversee the banking system and regulate the quantity of money in the economy
question
store of value
answer
an item that people can use to transfer purchasing power from the present to the future
question
unit of account
answer
the yardstick people use to post prices and record debts
question
commodity money
answer
money that takes the form of a commodity with intrinsic value
question
reserve requirments
answer
regulations on the minimum amount of reserves that banks must hold against deposits
question
liquidity
answer
the ease with which an asset can be converted into the economy's medium of exchange
question
currency
answer
the paper bills and coins in the hands of the public
question
medium of exchange
answer
an item that buyers give to sellers when they want to purchase goods and services
question
velocity of money
answer
the rate at which money changes hands
question
quantity equation
answer
the equation M×V=P×Y, which relates the quantity of money, the velocity of money, and the dollar value of the economy's output of goods and services
question
classical dichotomy
answer
the theoretical separation of nominal and real variables
question
monetary neutrality
answer
the proposition that changes in the money supply do not affect real variables
question
quantity theory of money
answer
a theory asserting that the quantity of money available determines the price level and that the growth rate in the quantity of money available determines the inflation rate
question
real variables
answer
variables measured in physical units
question
menu costs
answer
the costs of changing prices
question
nominal variables
answer
variables measured in monetary units
question
fisher effect
answer
the one-for-one adjustment of the nominal interest rate to the inflation rate
question
shoeleather costs
answer
the resources wasted when inflation encourages people to reduce their money holdings
question
inflation tax
answer
the revenue the government raises by creating money
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