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The set of assets in an economy that people regularly use to buy goods and services from other people |
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An item that buyers give to sellers when they want to purchase goods and services |
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The yardstick people use to post prices and record debts |
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An item that people can use to transfer purchasing power from the present to the future |
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The ease with which an asset can be converted into the economy's medium of exchange |
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Money that takes the form of a commodity with intrinsic value. |
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Money without intrinsic value that is used as money because of government decree |
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The paper bills and coins in the hands of the public |
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Balances in bank accounts that depositors can access on demand by writing a check |
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The central bank of the United States |
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An institution designed to oversee the banking system and regulate the quantity of money in the economy |
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The quantity of money available in the economy |
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The setting of the money supply by policy makers in the central bank |
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Deposits that banks have received but have not loaned out. |
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Fractional-reserve banking |
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A banking system in which banks hold only a fraction of deposits as reserves |
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The fraction of deposits that banks hold as reserves |
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The amount if money the banking system generates with each dollar of reserve |
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The resources a bank's owners have put into the institution |
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The use of borrowed money to supplement existing funds for purposes of investment |
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The ratio of assets to bank capital |
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A government regulation specifying a minimum amount of bank capital |
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The purchase and sale of U.S. Government bonds by the FED |
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The interest rate on the loans that the FED makes to banks |
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Regulations on the minimum amount of reserves that banks must hold against deposits |
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The interest rate at which banks make overnight loans to one another. |
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A theory asserting that the quantity of money available determines the price level and that the growth rate in the quantity of money available determines the inflation rate. |
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Variables measures in monetary units |
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Variables measured in physical units |
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The theoretical separation of nominal and real variables |
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The proposition that changes in the money supply do not affect real variables |
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The rate at which money changes hands |
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The equation M x V = P x Y, which relates the quantity of money, the velocity of money, and the dollar value of the Economy's output of goods and services. |
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The revenue the government raises by creating money |
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The one-for-one adjustment of the nominal interest rate to the inflation rate |
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The resources wasted when inflation encourages people to reduce their money holdings. |
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The costs of changing prices |
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Theory of liquidity preference |
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Keynes's theory that the interest rate adjusts to bring money supply and money demand into balance. |
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The setting of the level of government spending and taxation by government policymakers |
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The additional shifts in aggregate demand that result when expansionary fiscal policy increases income and thereby increases consumer spending. |
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The offset in aggregate demand that results when expansionary fiscal policy raises the interest rate and thereby reduces investment spending. |
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Changes in fiscal policy that stimulate aggregate demand when the economy goes into a recession without policy makers having to take any deliberate action |
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A curve that shows the shirt-run trade-off between inflation and unemployment |
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The claim that unemployment eventually returns to its normal, or natural, rate, regardless of the rate if inflation |
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An event that directly alters firms costs and prices, shifting the economy's aggregate-supply curve and thus the Phillips curve |
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The number of percentage points of annual output lost in the process of reducing inflation by 1 percentage point. |
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The theory that people optimally use all the information they have, including information about government policies, when forecasting the future |
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