Macroeconomics Flashcards

Only 10 flashcards are shown at a time! Once you’ve mastered these 10 Economic terms, click the shuffle button below for 10 new terms. There are approximately 150 flashcards covering Macroeconomics.

Money supply
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The vertical curve representing the total supply of reserves in a nation’s banking system. Determined by the monetary policy actions of the central bank. Increases (shifts to the right) lead to lower interest rates and are the result of expansionary monetary policies. Decreases (shifts to the left) lead to higher interest rates and are the result of contractionary monetary policies.

Money supply
Flat rate taxes
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Indirect taxes which are of a fixed amount, rather than a percentage of the sales price. For example a $3 per pack tax on cigarettes. It would be $3 whether the sales price is $2 or $5.

Flat rate taxes
Transfer payments
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Payments from the government to one group of individuals using tax money raised from taxes on another group of individuals. Meant to reallocate income in an economy, often times from the rich to the poor, but also from households to firms (in the case of subsidies for certain industries).

Transfer payments
Ceteris paribus
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“All else equal”; used as a reminder that all variables other than the ones being studied are assumed to be constant.

Ceteris paribus
Cyclical unemployment
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The state of being out of work due to a fall in aggregate demand in a nation, thus occurs when a nation is in a recession. Not included in the natural rate of unemployment.

Cyclical unemployment
Net Export effect
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The fall in net exports resulting from a deficit-financed fiscal stimulus. When a government deficit spends, it will drive up domestic interest rates (see crwoding-out effect), causing the country’s currency to appreciate on the foreign exchange market. This reduces demand for the country’s exports, reducing the expansionary effect of the deficit financed government spending.

Net Export effect
Inflationary gap
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The difference between a nation’s equilibrium level of output and its full employment level of output when the nation is over-heating (producing beyond its full employment level).

Inflationary gap
Excess reserves
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The amount by which a bank’s actual reserves exceeds its required reserves. The amount of excess reserves in the banking system determines equilibrium interest rate.

Excess reserves
Short run aggregate supply
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An upward sloping curve, relatively flat below the full employment level of output, and relatively steep beyond the full employment level, showing the amount of output a nation’s producers will supply at a range of price levels in a particular period of time. The curve’s shape reflects the fact that output cannot grow beyond the full employment level due to the limited factors of production available in the economy, but when aggregate demand falls output will decline due to the inflexibility of wages in the short run.

Short run aggregate supply
Command Economy
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An economic system in which resources are allocated through central planning, usually by the state or central government.

Command Economy

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