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MacroEcon dunton

Terms

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Incentives
Rewards for engaging in a particular activity
Economics
The study of how people allocate their limited resources to satisfy their unlimited wants
Resources
things ised to produce goods and services to satisfy peoples wants
aggregates
total amounts or quantities
normative economics
value judgements about economic policies. statement of what ought to be.
positive economics
scientific predictions
Land, Labor, Physical Capital, Human Capital, Entrepreneurship
Natural Resources, Humans who work, all manufactured resources, education and training of workers, component of human resources that preforms the functions of raising capital.
Comparative Advantage
The ability to produce a good or service at a lower opportunity cost compared to other producers.
Absolute Advantage
The ability to produce more units of a good or service using a given quantity of labor or resource inputs. Equivalently, the ability to produce the same quantity of of a good or service using fewer units of labor or resource points.
Law of Demand
The observation that there is a negative, or inverse, relationship b/w the price of any good or service and the quantity demanded, holding other factors constant
demand curve
a graphical rep of the demand schedule; a negatively sloped line showing the inverse relationship bw the price and the QD
Ceteris Paribus Conditions
determinants of the relationship bw price and quantity that are unchanged along a curve; cause a curve Shift. Income, Tastes and Preferences, Expectations, Market Size
Change in Demand versus Change in Quantity Demanded
Change in demand happens when there is a change in the ceteris paribus conditions which makes a shift. Quantity demanded is a specific quantity at a specific price rep by a specific point on the demand curve = movement
Law of supply
the observation that the higher the price of a good, the more sellers will make available over a specified time period, other things being equal.
A change in the ____ leads to a change in the quantity supplied
price
Price ceiling
a legal maximum price that may be charged for a good/service
price floor
a legal minimum price that can be charged
Tax base
the value of goods, services, wealth or incomes subject to taxation
Tax rate
the proportion of a tax base that must be paid to a government as taxes
Marginal tax rate
the change in taxes due/ change in taxable income
Average tax rate
total taxes due/ total taxable income
tax bracket
a specified interval of income to which a specific and unique marginal tax rate is applied
proportional tax
a tax system in which regardless of an individuals income, the tax bill comprises exactly the same proportion
progressive tax
as income increases, a higher % of the additional income is paid as taxes.
Regressive taxation
as more dollars are earned, the % of tax paid on them falls
Labor force
people 16 and up who either have jobs or who are looking and available for jobs. # employed + # unemployed
Labor force participation rate
% of noninstitutionalized working- age individuals who are employed or seeking employment
Frictional Unemployment
unemployment due to the fact that workers must search for appropriate job offers. this takes time, and so they remain temp unemployed.
Structural unemployment
resulting from a poor match of workers\' abilities and skills with current requirements of employers
Cyclical Unemployment
resulting from business recessions that occur when total demand is insufficient to create full employment
Seasonal unemployment
resulting from the seasonal pattern of work in specific industries. constructions, agriculture, tourism, etc.
Full employment
an arbitrary level of unemployment that corresponds to \"normal\" friction in the labor market (today assumed to be around 5%)
Inflation
sustained increase in the average of all prices of goods and services
Deflation
decrease in average of all prices
Gross Domestic Product (GDP)
the total market value of all final goods and services produced during a year by factors of production located within a nation\'s borders.
Rule of 70
a rule stating that the approximate number of years required for per capita real GDP to double is equal to 70 divided by the average rate of economic growth
Four functions of money
1. medium of exchange 2. unit of accounting 3. store of value 4. a standard of deferred payment.
The fed...
1 supplies the economy with fiduciary currency 2. provides payment-clearing systems 3. holds depository institutions\' reserves 4. acts as the gov\'ts fiscal agent 5. supervises depository institutions. 6. acts as the \"lender of last resort\" 7. regulates the money supply 8. intervenes in foreign currency markets
Fractional Reserve Banking
a system in which depository institutions hold reserves that are less than the amount of total deposits
reserves
in the us fed reserve system, deposits held by Fed Res district banks for depository institutions, plus depository institutions\' vault cash
required reserves
value of reserves that a depository institution must hold in the form of vault cash or deposits within the fed
Excess reserves
the difference between actual reserves and required reserves
required reserve ratio
% of total transactions deposits that the Fed requires depository institutions to hold in the form of vault cash or deposits with the Fed.
Net Worth
the difference between assets and liabilities
Balance of trade
the difference between exports and imports of physical goods
Capital Account
a category of balance of payments transactions that measures flows of real and financial assets
Par value
the officially determined value of a currency

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