Macroeconomics: Productivity, Banking, Saving, and Financial Markets

A collection of vocabulary flashcards covering fundamental macroeconomic concepts, including productivity, banking systems, macroeconomic saving and investment, and financial markets.

Average labor productivity

Output per employed worker.

Wealth

The value of assets minus liabilities.

Saving

Current income minus spending on current needs.

Saving rate

Saving divided by income.

Money

Any asset that can be used in making purchases.

Fractional reserve banking

A banking system in which bank reserves are less than deposits so that the reserve-deposit ratio is less than $100$ percent.

Reserve-deposit ratio

Bank reserves divided by deposits.

Private saving

The saving of the private sector equal to after-tax income minus consumption expenditures ($Y - T - C$).

Public saving

The saving of the government sector equal to net tax payments minus government purchases ($T - G$).

Crowding out

The tendency of government budget deficits to reduce investment spending by driving up the real interest rate.

Capital gains

Increases in the value of existing assets.

Capital losses

Decreases in the value of existing assets.

Capital inflows

Purchases of domestic assets by foreign households and firms.

Capital outflows

Purchases of foreign assets by domestic households and firms.

Diversification

The practice of spreading one's wealth over a variety of different financial investments to reduce overall risk.

Mutual fund

A financial intermediary that sells shares in itself to the public and uses the funds to buy a wide portfolio of financial assets.