Principles of Economics Final

Indifference Curve

A curve showing combinations of goods that give the same utility.

Autonomous Consumption

Portion of consumption that doesn’t depend on income.

Open Market Operations

Fed buying/selling of Treasury bills, usually to/from commercial banks, to impact the money supply.

Fiscal Policy

Government spending and taxation policy.

CPI

Consumer price index- measure of overall price level.

Marginal Propensity to Consume

The fraction of an additional dollar of disposable income spent on consumption. Change in consumption divided by change in income.

Structural Unemployment

Unemployment that results when there are more people seeking jobs in a particular labor market than there are jobs available at the current wage rate.

Money demand curve

Shows relationship between interest rate and quantity of money demanded.

Stagflation

A combination of high unemployment and high inflation.

Consumer surplus

Difference between what consumers are willing to pay for a good and what they actually pay. 1/2(Initial Q)(Pmax-Pinitial).

Discount rate

Rate at which banks lend to each other.

Federal funds rate

Rate at which banks borrow from the fed.

Shoe-leather costs

The time, effort, and resources people spend to reduce their holdings of money when inflation is high.

Menu costs

The cost to firms of changing prices in response to inflation.

Discouraged workers

People who want a job and are available to work but have stopped actively looking because they have no jobs available to them.