Long-run economic growth
Rule of 70
Output per worker; is also referred to as simply productivity. Increases in labor productivity are the only source of long-run economic growth.
The improvement in labor created by the education and knowledge embodied in the workforce.
An advance in the technical means of production of goods and services.
Diminishing returns to physical capital
Total factor productivity
Physical capital, such as roads, power lines, ports, information networks, and other parts of an economy, that provides the underpinnings, or foundation, for economic activity.
- Subsidies to infrastructure
- Subsidies to education
- Subsidies to R&D (research and development)
- Maintaining a well-functioning financial system
- Protection of property rights
- Political stability and good governance
Government actions/policies that can directly hinder or promote long-term growth
Sustainable long-run economic growth
The difference between tax revenue and government spending when tax revenue exceeds government spending; saving by the government in the form of a budget surplus is a positive contribution to national savings.
Trade surplus leads to demand going down and supply going up.
The difference between tax revenue and government spending when government spending exceeds tax revenue; dissaving by the government in the form of a budget deficit is a negative contribution to national savings.
Trade deficit leads to demand going up and supply going down.
The difference between tax revenue and government spending. A positive budget balance is referred to as a budget surplus; a negative budget balance is referred to as a budget deficit.
The total inflow of funds into a country minus the total outflow of funds out of the country.
Closed economy savings-investment spending identity
A situation where the interest rate at which the quantity of loanable funds supplied equals the quantity of loanable funds demanded.
A situation in which international capital flows are so large that they equalize interest rates across countries.
The principle by which an increase in expected future inflation drives up the nominal interest rate, leaving the expected real interest rate unchanged.
The banking, stock, and bond markets, which channel private savings and foreign lending into investment spending, government borrowing, and foreign borrowing.
(Of a household) the value of accumulated savings.
Real interest rate formula
A paper claim that entitles the buyer to future income from the seller, loans, stocks, bonds, and bank deposits are types of financial assets.
A requirement to pay income in the future.
The expenses of negotiating and executing a deal that often prevents a mutually beneficial trade from occurring.
Uncertainty about future outcomes that involve financial losses or gains.
Investment in several different assets with unrelated, or independent, risks, so that the possible losses are independent events.
Describes an asset that can be quickly converted into cash with relatively little loss of value.
Describes an asset that cannot be quickly converted into cash with relatively little loss of value.
Financial risk
A lending agreement between an individual lender and an individual borrower. Loans are usually tailored to the individual borrower's needs and ability to pay but carry relatively high transaction costs.
The failure of a bond issuer to make payments as specified by the bond contract.
Illiquid
An institution, such as a mutual fund, pension fund, life insurance company, or bank, that transforms the funds it gathers from many individuals into financial assets.
A financial intermediary that creates a stock portfolio by buying and holding shares in companies and then selling shares of this portfolio to individual investors.
A type of mutual fund that holds assets in order to provide retirement income to its members.
A financial intermediary that sells policies guaranteeing a payment to a policyholder's beneficiaries when the policy holder dies.
A claim on a bank that obliges the bank to give the depositor their cash when demanded.
A principle of asset price determination that holds that asset prices embody all publicly available information. The hypothesis implies that stock prices should be unpredictable, or follow a random walk, since changes should occur only in response to new information.
Pension funds
The movement over time of an unpredictable variable.
The increase in consumer spending when disposable income rises by $1. Because consumers normally spend part but not all of an additional dollar of disposable income, MPC is between 0 and 1.
The ratio of total change in real GDP caused by an autonomous change in aggregate spending to the size of that autonomous change.
The level of real GDP at which real GDP equals planned aggregate spending.
A diagram that identifies income-expenditure equilibrium as the point where the planned aggregate spending line crosses the 45-degree line.
The rate of return on a project is the profit
earned on the project expressed as a percentage
of its cost.
How to measure output
Occurs when actual sales are more or less than businesses expected, leading to unplanned changes in inventories.
(Of inflation) the increased costs of transactions caused by inflation.
Ex: Added fees for using a credit card.
The real costs of changing listed prices.
Ex: Have to change the price of goods at a store, which leads to it being more expensive for the economy as a whole.
(Of inflation) costs arising from the way inflation makes money a less reliable unit of measurement.
Ex: Distort the measures of income on which taxes are collected.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
