ECO403 Midterm Objective

Objectives of Macroeconomics ECO403

Actual budget

The amount spent by the Federal government (to purchase goods and services and for transfer payments) less the amount of tax revenues collected by it in any fiscal year; and which can not reliably used to determine whether it is pursuing an expansionary or concretionary fiscal policy.

Actual deficit : The size of federal government’s budget deficit actually measured or recorded in any given year.

Actual

The amount which business firms do invest: equal to planned investment plus unplanned investment.

Actual

reserves :

The funds which a member bank has on deposit at the Federal Reserve Bank of its district.

Adaptive · expectation · theory :

The idea that people determine their expectations about future events (e.g. inflation) on the basis of past and present events (rates of inflation) and only change their expectations as events unfolds.

Aggregate

demand :

A schedule or curve which shows the total quantity of goods and services demanded (purchased) at different price levels.

Aggregate

supply :

A schedule or curve showing the total quantity of goods and services supplied (produced) at different price level.

Anticipated

inflation :

Inflation at a rate equal to the rate expected in that period of time

Asset demand

for money :

The amount of money people want to hold as a store of value (the amount of their financial assets they wish to have in the form of money); and which varies inversely with the rate of interest.

Average

consume :

Fraction of disposable income which households spend for consumer goods and services; consumption divided by disposable income.

Average

save :

Fraction of disposable income which household save; saving divided by disposable income.

Average

revenue :

Total revenue from the sale of a product divided by the quantity of the product sold equal to the price at which the product is sold so long as all units of product are sold at same price.

Average tax

rate :

Total tax paid divided by total income; the tax rate on total income.

Average total

cost :

A firm’s total cost divided by output; equal to average fixed cost plus average variable cost.

Capital :

Human made resources (machinery and equipment) used to produce goods and services; goods which do not directly satisfy human wants; capital goods.

ntral bank :

A bank whose chief function is the control of the nation’s money supply

Circular flow

of income :

The flow of resources from households to firms and of products from firms to household accompanied in an economy using money by flows of money from households to firms and from firms to households.

Economic

development :

The process of growth by which countries raise income per capita and become industrialized; also refers to the branch of economics that studies this process.

Final good :

A new good that undergoes no further processing before it is sold to consumers.

GDP deflator

nominal :

GDP divided by real GDP; it measures the level of prices of goods and services included in real GDP relative to a given base year.

Gross

The total amount of investment, including that which goes to replacing worn-out capital.

Balanced

budget

The effect of equal increases (decreases) in government spending for goods and services and in taxes is to increase (decreases) the equilibrium gross domestic product by the amount of the equal increase (decrease)

Balance of · payments · deficit :

The sum of balance on current account and the balance on the capital account is negative.

Balance of · payments · surplus :

The sum of the balance on current account and the balance on capital account is positive

Bank deposits

The deposits which banks have at the Federal Reserve Bank

Bankers bank

A bank which accepts the deposits of and makes loans to Depositary institutions; a federal reserve bank.

Bank reserves

Bank reserves held at the Federal Reserve banks plus bank vault cash

Inflation rate : The percentage increase in the overall price level over a given period of time, usually one year.

Keynesian

revolution :

A change in macroeconomic thinking, shaped by the Great Depression and the work of John Maynard Keynes, leading to a greater consideration of demand-side policies.

M1 :

Currency plus checking deposits plus traveler’s checks.

Money

The multiple by which the money supply changes due to a change in the monetary base.

National

income :

The sum of labor income and capital income.

National

saving :

Aggregate income minus consumption minus government purchases.

National

saving rate :

The proportion of GDP that is saved, neither consumed nor spent on government purchases; equals national saving (S) divided by GDP, or S/Y. It also equals 1 minus the consumption share minus the government purchases share of GDP

Nationalization

The taking over of private firms by the government.

Natural

rate :

The unemployment rate that exists in normal times when there is neither a recession nor a boom and real GDP is equal to potential

Neoclassical

growth school

An approach to macroeconomics that uses the aggregate production function and the growth accounting formula in describing long-term growth, emphasizing aggregate supply.rather than aggregate demand.

Net exports :

The value of goods and services sold abroad minus the value of goods and services bought from the rest of the world; exports minus imports.

Net investment

Gross investment minus depreciation

Budget deficit

The amount by which the expenditures of the Federal government exceed its revenues in any year.

Built-in-

stability :

The effect of non discretionary fiscal policy on the economy; when net taxes vary directly with the gross domestic product, the fall in net taxes during a recession (inflation) lessens unemployment (inflationary pressures).