Macro Final Part 1

the model that most economists use to explain short-run fluctuations in economic activity around its long-run trend

a curve that shows the quantity of goods and services taht households, firms, the government, and customers abroad want to buy at each price level

a curve that shows the quantity of goods and services taht firms choose to produce and sell at each price level

the production of goods and services that an economy achieves in the long run when unemployment is at its normal rate

a period of falling output and rising prices

an item that buyers give to sellers when they want to purchase goods and services

the yardstick people use to post prices and record debts

an item that people can use to transfer purchasing power from the present to the future

the ease with which an asset can be converted into the economy's medium of exchange

money that takes the form of a commodity with intrinsic value

the set of assets in an economy that people regularly use to buy goods and services from other people

money without intrinsic value that is used as money because of government decree

the paper bills and coins in the hands of the public

balances in bank accounts that depositors can access on demand by writing a check

the central bank of the United States

an instituion designed to oversee the banking system and regulate the quantity of moeny in the economy

the quantity of money available in the economy

the setting of the money supply by policymakers in the central bank

deposists that banks have received but have not loanded out

a banking system in which banks hold only a fraction of deposits as reserves

the fraction of deposits that banks hold as reserves

the amount of moeny that banking system generates with each dollar of reserves

the resources a bank's owners have put into the institution

the use of borrowed money to supplement existing funds for purposes of investment

the ratio of assets to bank capital

a government regulation specifying a minimum amount of bank capital

the purchase and sale of U.S. governmentbonds by the Fed

the interest rate of the loans that the Fed makes to banks

regulations on the minimum amount of resrves that banks must hold against deposits

the interest rate at which banks make overnight loans to one another

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

variables measured in monetary units

variables measured in physical units

the theoretical separation of nominal and real variables

the proposition that changes in the money supply do not affect real variable

the rate at which money changes hands

the equation M x Y = P x Y, which relates the quantity of money, the velocity of money, and the dollar value of the economy's output of goods and services

the revenue the government raises by creating money

the one-for-one adjustment of teh nominal interest rate to the inflation rate

the resources wasted when infaltion encourages people to reduce their money holdings

the costs of changing prices

goods and services that are produced domestically and sold abroad

goods and services that are produced abroad and sold domestically

the value of nation's exports minus the value of its imports; also called the trade balance

the value of a nation's exports minus the value of its imports; also called net exports

an excess of exports over imports

an excess of imports over exports

a situation in which exports equal imports

the purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners

the rate at which a person can trade the currency of one country for the currency of another

an increase in the value of a currency as measured by the amount of foreign currency it can buy

a decrease in the value of a currency as measured by the amount of foreign currency it can buy

the rate at which a person can trade the goods and services of one country for the goods and services of another

a theory of exchange rates whereby a unit of any given currency should be able to buy the same quantity of goods in all countries

a government policy that directly influences the quantity of goods and services that a country imports or exports

a large and sudden reduction in the deman for assets located in a country