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zieba 2023

1

loanable funds market

a hypothetical market that brings together those who want to lend money and those who want to borrow money.

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2

rate of return

(on a project) is the profit earned on the project expressed as a percentage of its cost.

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3

crowding out

occurs when a government deficit drives up the interest rate and leads to reduced investment spending.

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4

investment tax credit

an amount that firms are allowed by law to deduct from their taxes based on their investment spending.

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5

cyclically adjusted budget balence

an estimate of what the budget balance would be if real GDP were exactly equal to potential output.

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6

govâ€™t debt

the accumulation of past budget deficits, minus past budget surpluses.

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7

debt-GDP ratio

the government's debt as a percentage of GDP.

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8

target federal funds rate

the Federal Reserve's desired level for the federal funds rate; the Federal Reserve can achieve this target through open market operations.

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9

expansionary monetary policy

monetary policy that increases aggregate demand.

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10

contractionary monetary policy

monetary policy that reduces aggregate demand.

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11

taylor rule for monetary policy

rule for setting the federal funds rate that takes into account both the inflation rate and the output gap.

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12

inflation targeting

when the central bank sets an explicit target for the inflation rate and sets monetary policy in order to hit that target.

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13

monetary neutrality

the concept that changes in the money supply have no real effects on the economy.

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14

monetarism

asserts that GDP will grow steadily if the money supply grows steadily.

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15

quantity theory of money

emphasizes the positive relationship between the price level and the money supply; relies on the velocity equation (MÂ V = PÂ Y).

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16

velocity of money

the ratio of nominal GDP to the money supply; a measure of the number of times the average dollar bill is spent per year.

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17

rule of 70

a mathematical formula that tells us that the time it takes a variable that grows gradually over time to double is approximately 70 divided by that variable's annual growth rate.

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18

labor productivity

output per worker; also known simply as productivity.

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19

physical capital

often referred to simply as capitalâ€”consists of manufactured (human-made) productive resources, such as equipment, buildings, tools, and machines, used to produce other goods and services.

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20

human capital

the improvement in labor created by the education and knowledge that is embodied in the workforce.

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21

technology

the technical means for producing goods and services.

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