AP Macroeconomics Vocab Units 5-8; McMullen

Currency

a medium of exchange for goods and services

Excess Reserves

a bank’s reserves over and above its required reserves

Fiat Money

a medium of exchange whose value derives entirely from its official status as a means of payment

Government Securities

government debt issuances used to fund daily operations, and special infrastructure and military projects.

Liquidity

the availability of liquid assets to a market or company

Money

anything that can serve as a store of value, which means people can save it and use it later

Money Multiplier

measures the effect that increases in fiscal spending will have on a nation's economic output, or gross domestic product

Required Reserves

the amount of funds that a bank holds in reserve to ensure that it is able to meet liabilities in case of sudden withdrawals

Reserve Requirements

rules set by the Federal Reserve that determine the required reserve ratio for banks

Savings Account

a basic type of financial product that allows you to deposit your money and typically earn a modest amount of interest

Monetary Policy

the central bank’s use of changes in the quantity of money or the interest rate to stabilize the economy

Money Demand

the demand for money is the desired holding of financial assets in the form of money

Capital

manufactured goods used to make other goods and services; also called physical capital

Human Capital

the skills, knowledge, and experience possessed by an individual or population, viewed in terms of their value or cost to an organization or country

Economic Growth

an increase in the maximum amount of goods and services an economy can produce

Labor Productivity

a measure of economic performance that compares the amount of output with the amount of labor used to produce that output

Potential GDP

a theoretical construct, an estimate of the value of the output that the economy would have produced if labor and capital had been employed at their maximum sustainable rates

Productivity

how much output can be produced with a given set of inputs

Total Productivity

measures residual growth in total output of a firm, industry or national economy that cannot be explained by the accumulation of traditional inputs such as labor and capital

Appreciation

the value of a financial asset increases over time

Depreciation

the value of a financial asset decreases over time

Import Quota

a limit on the quantity of a good that can be imported within a given period

Import Tariff

taxes charged by the customs authority on the importation of goods into a country

Trade Deficit

the amount by which the cost of a country's imports exceeds the value of its exports

Trade Surplus

the amount by which the value of a country's exports exceeds the cost of its imports

Certificate of Deposit

a time deposit that requires you to give up the use of your money for a fixed term or period of time

Discount Rate

a time deposit that requires you to give up the use of your money for a fixed term or period of time

M1

the money supply that is composed of currency, demand deposits, other liquid deposits—which includes savings deposits

M2

the U.S. Federal Reserve's estimate of the total money supply including all of the cash people have on hand plus all of the money deposited in checking accounts, savings accounts, and other short-term saving vehicles such as certificates of deposit

Open Market Operations

a term that refers to the purchase and sale of securities in the open market by the Federal Reserve

Federal Funds Rate

the interest rate that banks charge other banks for lending them cash on an overnight basis

Federal Open Market Committee

the division of the Federal Reserve that sets monetary policy by managing open market operations

Monetary Neutrality

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

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

Dumping

when foreign firms dump products at artificially low prices in the European market

Net Investment Income

income received from assets before taxes including bonds, stocks, mutual funds, loans, and other investments

Net Transfers

equal to the unrequited transfers of income from nonresidents to residents minus the unrequited transfers from residents to nonresidents

Official Reserves

assets denominated in foreign currency, readily available to and controlled by monetary authorities for meeting balance of payments financing needs, intervening in exchange markets to affect the currency exchange rate, and for other related purposes

Secondary Market

where investors buy and sell securities they already own

Board Of Governors

the governing body of the Federal Reserve System

Demand Management Policy

monetary and fiscal measures designed to affect the aggregate level or rate of growth of demand relative to production

Equation of Exchange

an economic identity that shows the relationship between money supply, the velocity of money, the price level, and an index of expenditures

Monetarist

believe that the objectives of monetary policy are best met by targeting the growth rate of the money supply

Balance of Payments

the difference in total value between payments into and out of a country over a period

Balance of Trade

the difference in value between a country's imports and exports

Capital Account

the part of the balance of payments that records net changes in a country's financial assets

Gold Standard

a monetary system in which the standard economic unit of account is based on a fixed quantity of gold

Infant Industries

an industry that is in its early stages of development

Managed Float

an exchange rate system that allows a nation's central bank to intervene regularly in foreign exchange markets to change the direction of the currency's float and/or reduce the amount of currency volatility

Open Economy

a type of economy where not only domestic factors but also entities in other countries engage in trade of products