econ 161 robert krol csun final
Terms in this set (58)
the ability to produce a good at a lower opportunity cast than another producer.
a situation where prices are relatively stable and there is neither a surplus nor shortage in the market.
Total income of everyone in the economy and the total expenditure on the economy's output of goods and services.
The production of goods and services valued at current prices.
The production of goods and services valued at constant prices.
a measure of the price level calculated as the ratio of nominal GDP to real GDP times 100.
Consumer Price Index (CPI)
a measure of the overall cost of the goods and services bought by a typical consumer.
The automatic correction by law or contract of a dollar amount for the effects of inflation.
Nominal Interest rate
The interest rate as usually reported without a correction for the effects of inflation.
Real Interest Rate
The interest rate corrected for the effects of inflation.
the percentage of the labor force that is unemployed.
The deviation of unemployment from its natural rate.
Natural rate of unemployment
The normal rate of unemployment around which the unemployent rate fluctuates
the process by which workers find appropriate jobs given their tastes and skills.
Above-equilibrium wages paid by firms to increase worker productivity.
The quantity of goods and services produced from each unit of labor input
The stock of equipment and structures that are used to produce goods and services
The knowledge and skills that workers acquire through education, training, and experience.
Saving and Investment
A society can change the amount of capital it has. Society sacrifices consumption of goods and services in the present to enjoy higher consumption in the future.
The property whereby the benefit from an extra unit of an input declines as the quantity of the input increases.
Private Property Rights
The right of persons and firms to obtain, own, control, employ, dispose of, and bequeath land, capital, and other forms of property
Investment in Human Capital-An educated person might generate new ideas about how best to produce goods and services and if the ideas enter society's pool of knowledge then the ideas are an external benefit of education
Free trade-Inward orientated policies
Helps keep little firms from competition of big firms
Free trade-Outward Oriented policies
Makes trades in some ways, a type of technology(If a country export wheat and Imports Textile its as if it had invented a technology for turning wheat into textile)
Free trade- Geography
Geography- Nations located near oceans have advantage with seaports trading
Research and Development
Knowledge is a public good: Once one person discovers an idea, the idea enters society's pool of knowledge, and other people can freely use it. If the product is original the inventor can get a patent which gives him exclusive rights to make the product.
The total income in the economy that remains after paying for consumption and government purchases.
the income that households have left after paying for taxes and consumption
The tax revenue that the government has left after paying for its spending
An excess of tax revenue over government spending.
Market for Loanable Funds
The market in which those who want to save supply funds and those who want to borrow to invest demand funds.
A decrease in Investment that results from government borrowing
The amount of money today that would be needed, using prevailing interest rates, to produce a given future amount of money
a dislike of uncertainty
Efficient market hypothesis
The theory that asset prices reflect all publicly available information about the value of an asset.
Lack of incentive to guard against risk where one is protected from its consequences
the process of estimating the potential market value of a financial asset or liability. Value of asset=Present value of the cash flow owner will receive. For a share of stock, these cash flows include the stream of dividends and the final price.
Ease with which an asset can be converted into the economy's medium of exchange.
Other checkable deposits
Everything in M1 +
Small time deposits
Money market mutual funds
A few minor categories.
The setting of the money supply by policymakers in the central bank.
Deposits that banks have received but have not loaned out.
a banking system in which banks hold only a fraction of deposits as reserves.
The amount of money the banking system generates with each dollar of reserves.
Open market operations
Purchase of U.S. government bonds by the fed.
Regulations on the minimum amount of reserves that banks must hold against deposits.
activity in which an institutional unit incurs liabilities on its own account for the purpose of acquiring financial assets by engaging in financial transactions on the market; the role of financial intermediaries is to channel funds from lenders to borrowers by intermediating between them.
Functions of money- medium of exchange
an item that buyers give to sellers when they purchase goods and services.
Functions of money- unit of account
The yardstick people use to post prices and record debts. If you go to the store a shirt is 30$ and a burger cost 3$ Even though you can say the price of a shirt is 10 burgers and a burger is 1/10th of a shirt, prices are never quoted this way.
Functions of money- Store value
item that people can use to transfer purchasing power from the present to the future. If a seller accepts money today in exchange for a good or service, he can hold the money and become a buyer of another G or S at another time.
Quantity Theory of Money
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.
Velocity of Money
the rate at which money changes hands
M x V= P x Y , (money supply x Velocity= Price-Value x Output)
the one-for-one adjustment rate to the inflation rate.
Expansion- When the economy's output is increasing
Recession- When the total output is decreasing for 3 quarters in a row (leads to unemployment)
A sudden event that increases or decreases demand for goods or services temporarily. falling house prices, the subprime mortgage crisis, and lost household wealth, which led to a drop in consumer spending led to demand shock in 2008
A sudden event that increases or decreases supply for goods or services temporarily. i.e: earthquake.
Package or set of measures introduced to stabilize a financial system or economy. The term can refer to policies in two distinct sets of circumstances: business cycle stabilization and crisis stabilization
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