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Glossary of economiiiiiiiiics vocab

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Created by karistenmarie

federal reserve

The central bank of the United States. Its main function is controlling the money supply through monetary policy.
CPI
measures the cost of a fixed basket of consumer goods and services and compares the cost of this basket in one time period with its cost in some base period. Changes are used to measure inflation
Market Economy
economic decisions made by people
Opportunity Cost
highest valued alternative given up
inelastic demand
price has little impact on demand
capital resources
factories, buildings, machinery, equipment
inferior good
good people buy less of when imcome rises
normal good
good people buy more of when income rises
GDP
total value of all goods produced in year
inflation
increase in price level
recession
decline in economy for at least six months
unemployment
arent working but seeking a job
real gdp
gdp adjusted for inflation
real income
income adjusted for inflation
cyclical unemployment
unemployment caused by recession and decline in spending
demand pull inflation
demand exceeds supply
cost push inflation
companies have to pay more to produce
investment spending
capital goods, inventory and construction
intermediate goods
item goes into making final item
transfer payments/entitlements
bonds, securities, welfare, tax refunds
index of leading econ indicators
predict future of economy
stagflation
unemployment and inflation
Fiscal Policy
gov spending and taxation stabilize economy
Budget defecit
spend more than take in
Budget surplus
take in more than spend
discretionary stabilizers
require gov approval to fix economy
automatic stabilizers
benefits kick in to fix economy with no approval needed
nation debt
money owed by gov
expansionary policy
fix recession more bonds lower reserve require and interest
contractionary policy
fix inflation
monetary policy
Fed does to regulate money supply
federal funds rate
interest banks charge eachother to borrow
prime interest rate
banks charge best customers
discount rate of interest
interest fed charges banks to borrow money
reserve requirement
% of loan banks have to keep
excess reserve
% of loan banks can loan out
fiat money
declared money by gov
M1
currency and checking accounts
M2
M1 + savings
checkable deposits/demand deposits
checking accounts
crowding out
gov borrows money and interest rate increases
absolute advantage
can produce more of item with less resources
comparative advantage
produce item at lower opp cost
balance of trade
difference between value of total imports and exports
trade defecit
imports greater than exports
trade surplus
exports greater than imports
capital account
equipment, machinery, buildings stock bonds
current account
exports and imports and money transfers
debit
money leaves
credit
money enters

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