Untitled Flashcards Set

value of the bond at maturity

Par value

government policies like unemployment compensation

Higher structural unemployment

tuition increase relative to inflation

Tuition has increased more rapidly than inflation

every dollar borrowed

Represents a dollar leaving the circular flow

greater default risk

Lower the price of the bond

compound interest principle

Accumulating interest both on principal and any accumulated interest

money illusion effect

Feeling richer despite not keeping up with inflation

decreasing nation's supply of loanable funds

A rise in the national unemployment rate

firms selling bonds instead of stocks

Not giving up ownership control of the business

Treasury securities

Bonds sold by the U.S. government to pay for national debt

actual unemployment less than natural rate

Economy is in an expansion

price confusion problem

Price increase due to inflation leads to increased output

Friedman's view on inflation

Caused by increasing money supply relative to goods/services

equation %∆M + %∆V ≈ %∆P + %∆Y

Increase in money velocity leads to inflation

number of bookstores going out of business

Structural unemployment

unemployment rate defined by

Percentage of labor force that is unemployed

future price uncertainty in context of contracts

Effects of inflation on future costs

chained CPI measure

A better measure of prices than traditional CPI under certain conditions

cyclical unemployment

Unemployment caused by economic downturns

loanable funds market equilibrium declaration

Shortage of loanable funds at certain interest rates

home mortgage loan description

Loan for individuals to purchase a home

default risk on a bond

Risk of not paying back face value on maturity date

deflation characterized by

Overall level of prices of goods falls

profit-maximizing investment borrowing principle

Interest rate less than expected return

Phillips curve concept

Tradeoff between inflation and unemployment

money market mutual funds definition

Short-term investments in low-risk, liquid assets

U.S. dollar value decrease scenario

Increase in inflation leads to decreased dollar value

government budget surplus effect

Increases supply of loanable funds

loanable funds market reaction to demand increase

Increase in interest rate

inflation effect on money value

Value of money decreases

frictional unemployment description

Workers voluntarily leave one job for another

supply of loanable funds increase reason

Decrease in government debt

increase in active job seekers effect

Increase in frictional unemployment

defaulting on a bond means

Did not pay back loan on maturity date

government bonds to pay national debt

Treasury securities

structural unemployment explanation

Caused by changes in industrial makeup

M × V = P × Y variable M meaning

Quantity of money

velocity of money definition

Number of times a unit of money changes hands

discouraged workers definition

Willing to work, looked for jobs within past year, not in past 4 weeks

pilot jobs lost during recession classification

Cyclically unemployed

reducing structural unemployment means

Job training programs transitioning to new careers

consumer price index measurement purpose

Changes in average price level of a fixed basket of goods

example of frictional unemployment

Recent college graduate searching for a job

unemployment rate definition

Percentage of labor force actively seeking work

government monetary policy inflation response

Raises interest rates and reduces money supply

decreasing money supply operation

Increasing the reserve requirement

real value of money as inflation increases

Decreases

government policy that increases money supply

Decreasing the reserve requirement

nominal GDP grows faster than real GDP signifies

Increase in inflation

price ceiling effect below equilibrium

Shortage of the good

cost of inflation examples exclude

Increased savings

effect of Federal Reserve buying government bonds

Increase the money supply

primary goal of monetary policy

Stabilize prices and economic growth

example of public good

National defense

government high inflation response

Raise taxes

comparative advantage production definition

Lower opportunity cost compared to other countries

monopolistic competition characteristic

Many firms sell differentiated products

short run MC vs MR level output action

Reduce output

progressive tax system definition

Tax rate increases as income increases

law of demand defines

Quantity demanded decreases as price rises.