AP Macro Ch. 18 & 19
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11 terms
Terms | Definitions |
|---|---|
 Public Debt | The total amount owed by the Federal government to the owners of government securities; equal to the sum of past government budget deficits less government budget surpluses. |
| U.S. Securities | Bonds and bond-like securities issued by the U.S. Treasury when it borrows. |
| Deficit | What occurs when the government in one year spends more money than it takes in from taxes. |
| National Debt | the total amount of money the federal government has borrowed to finance deficit spending over the years. |
| Classical Economics | The macroeconomic generalizations accepted by most economists before the 1930s that led to the conclusion that a capitalistic economy was self-regulating and therefore would usually employ its resources fully. |
| Keynesian Economics | The macroeconomic generalizations that lead to the conclusion that a capitalistic economy is characterized by the macroeconomic instability and that fiscal policy and monetary policy can be used to promote full employment, price-level stability, and economic growth. |
| Monetarism | The macroeconomic view that the main cause of changes in aggregate output and price level is fluctuations in the money supply; espoused by advocates of a monetary rule. |
| Equation of Exchange | MV = PQ, where M is the money supply, V is the velocity of money, P is the price level, and Q is the quantity of output (Nominal GDP) of goods and services produced in an economy. |
| Velocity | The average number of times a dollar is spent to buy final goods and services in a year. |
| Rational Expectations Theory | the hypothesis that firms and households expect monetary and fiscal policies to have certain effects on the economy and take actions that make these policies ineffective |
| Monetary Rule | Monetarists' belief that the Fed should allow the money supply to grow at a smooth, consistent rate per year and not use monetary policy to stimulate or slow the economy |
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