Macroeconomics/Glossary

Macroeconomics

Contents - Glossary

Economics

Market Economics

Supply and Demand

Why Macroeconomics

Measuring Domestic Output

Open Economies

Business Cycle

Aggregate Expenditures

Aggregate Supply and Demand

Fiscal Policy

Money

Monetary Policy

Government Finances

A

• Aggregate Demand / Aggregate Expenditure - The total amount of goods and services supplieded in the economy at a given overall price level and in a given time period.
• Average Rate of Tax (ART) - An individual or company’s taxes divided by its taxable income.

B

• Balance of Payments - the difference between a nation's total payments to foreign countries, including movements of capital and gold, investments, tourist spending, etc., and its total receipts from foreign countries.

C

• Central Bank - a bank, as the Federal Reserve Bank, that holds basic banking reserves, issues currency, and acts as lender of last resort and controller of credit.
• Consumption - the using up of goods and services having an exchangeable value

D

• Demand Curve - A mathematical curve, drawn on a graph, that represents what the demand for a commodity would be if its price ranged anywhere from zero to infinity.
• Direct Taxation - Taxes which are imposed directly on the individual paying them.
• Disposable Income - The amount of after-tax income that is available to divide between spending and personal savings.
• Discount Rate - The amount banks are charged in Interest if they need to borrow from Federal Reserve if they have not met the Reserve Requirements at the end of the business day. If the Discount Rate is lower than Fed Reserve there is an increase in Aggregate Demand.

E

• Exchange Rate - The price of one country's currency expressed in another country's currency
• Exports - To send or transport abroad, especially for trade or sale.

F

• Federal Funds Rate - Amount that banks charge each other in interest. Is less than Discount Rate and usually favored by banks.
• Fiscal Policy - Government spending increases as there is a decrease in taxation. A form of Government involvement Keynes advocated for

G

• Government Spending - A large apart of Keynesian economics, belief that more government spending will increase the amount of money supplied in the economy. During a recession/ shortage, the government will buy bonds, lowering i-rates which yields more investments/ aggregate demand and therefore less savings. Ultimately Increasing the supply of money. During inflation the opposite would occur which the government will sell bonds, decreasing the amount of money supplied in the economy, increasing i-rates with will slow the amount of investments and people will want to save more.
• Gross - The total amount before anything is deducted
• Gross Domestic Product (GDP) - gross national product excluding payments on foreign investments
• Gross National Product (GNP) - The total market value of all the goods and services produced by a nation during a specified period.

Gross Domestic Saving (GDP) - Total savings of an economy in a financial Year.

I

• Imports - To bring or carry in from an outside source, especially to bring in goods or materials from a foreign country for trade or sale.
• Income (Y) - The amount of money or its equivalent received during a period of time in exchange for labor or services, from the sale of goods or property, or as profit from financial investments.
• Inflation - a persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of currency
• Interest Rates - the amount of money held in liquid form for daily transactions. If interest rates are low, expectation that borrowing is more attractive. At lower i-rate, businessmen can invest more, hire more, borrow more, etc in hopes that this will create a positive multiplier effect.
• Investment - the investing of money or capital in order to gain profitable returns, as interest, income, or appreciation in value.

K

• Keynesian Economics - An economic theory stating that active government intervention in the marketplace and monetary policy is the best method of ensuring economic growth and stability.
• Keynesian Theory of Consumption - current real disposable income is the most important determinant of consumption in the short run.

M

• Marginal Propensity to Consume (MPC) - the increase in personal consumer spending that occurs with an increase in disposable income.
• Marginal Propensity to Save (MPS) - the increase in saving that results from an increase in income.
• Marginal Rate of Tax - The tax rate paid on the last dollar of one's income
• Monetarist/Monetary Economist - a set of views concerning the determination of national income and monetary economics
• Monetary Policy - The actions of a central bank, currency board, or other regulatory committee, that determine the size and rate of growth of the money supply, which in turn affects interest rates.
• Monetary Tools - The discount rate, reserve requirements, and other policies the Fed may use to control the supply of money in the economy and economic activity
• Money - A commodity or asset, such as gold, an officially issued currency, coin, or paper note, that can be legally exchanged for something equivalent, such as goods or services.

N

• Nominal - Not adjusted for inflation. The par value of a bond.
• Net - A net amount, as of profit or weight
• National Income – the total value of all income in a nation (wages and profits and interest and rents and pension payments etc)

O

• Opportunity Cost - The cost of not getting an item because you bought another (eg buying a chocolate bar - where you could have got some crisps)
• Output -
• Open Market Operations - the buying and selling of government bonds in the bond market to stabilize the money supply in the economy. During inflation [too much money in the market, makes value of dollar decrease], the gov. sells bonds to take money out of the system.

P

• Price - The money cost of a good, service, or asset. price is measured in monetary units per unit of the good (as in 5 dollars per 1 jeans)
• Privatisation -
• Productivity - A term referring to the ratio of output to inputs (total output divided by labor inputs is labor productivity). Productivity increases if the same quantity of inputs produces more output. Labor productivity increases because of improved technology, improvement in labor skills, or capital deepening.
• Progressive tax - a progressive weights more heavily on the rich
• Propensity -
• Proportional tax - proportional tax if the average tax rate is equal at all income level.

Q

• Quantity -

R

• Real National Output -
• Real GDP -
• Regressive -
• Reserve Requirement - The percentage of the amount of money the banks are required to hold. During inflation, this rises so that banks will not lend out more money

S

• Saving -

T

• Taxation -
• Theory of Liquidity Preference - Keynes theory to explain why the economy will not self correct or be sensitive to use monetary policy because of the three main reasons people hold money: Ordinary Actions, Precautionary measure, and Speculative purposes. In a recession, people will get less returns for their money so they hold onto it, and interest rates continue to drop and no one buys bonds. People demand money in liquid form.

U

• Unemployment -

X

• X -

Y

• Y -