Unit 5

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  1. benefits-recieved tax principal
    those who receive more benefits from the government program funded by a tax should pay more of that tax
  2. ability-to-pay tax principle
    those with a greater abbility to pay, such as those with higher income, should pay more of the tax
  3. tax incidence
    indicates who actually bears the burden of a tax
  4. proportional taxation
    the tax as a percentage of income remains constant as income increases; also called flat tax
  5. progressive taxation
    the tax as a percentage of income increases as income increases
  6. regressive taxation
    the tax as a percentage of income decreases as income increases
  7. marginal tax rate
    the percentage of each additional dollar of income that goes to pay a tax
  8. government budget
    a plan for government spending and revenues for a specified period,usually a year
  9. payroll taxes
    taxes deducted from paychecks to support social security and medicare
  10. maximizing political support
    the objective assumed to guide the behavior of elected officials; comparable to profit maximizations by firms and utility maximization by household
  11. rational ignorance
    a stance adopted by voters when they find that the cost of understanding and voting on a particular issue exceeds the benefit expecterd from doing so
  12. bureaus
    Government agencies charged with implementing legislation and financed through legislative bodies
  13. potential output
    the economy's maximum sustainable outbput in the long run
  14. natural rate of unemployment
    the unemployment rate when the economy is producing its potential level of output
  15. classical economy
    a group of laissez-faire economists, who believe that economic dowturns corrected themselves in the long run through natural market forces
  16. annually balanced budget
    matching annual spending with annual revenue, except during way years; approach to the federal budget prior to the Great Depression
  17. multiplier effect
    any change in fiscal policy affects aggregate demand by more than the original change in spending or taxing
  18. discretionary fiscal policy
    legislative changes in government spending or taxing to promote macroeconomic goals
  19. automatic stabilizers
    government spendingand taxing programs that year after year automatically reduce fluctuationin disposable income, and thus inconsumption, over the business cycle
  20. recognition lag
    the time needed to identify a macroeconomic problem
  21. decision-making lag
    the time needed to decide hat to do once the problem has been identified
  22. implementation lag
    the time needed to execute a change in policy
  23. effectiveness lag
    the time needed for changes inpolicy to affect the economy
  24. crowding out
    private investment falls when larger government deficits drive up interest rates
  25. crowind in
    government spending stimulates private investment in an otherways stagment economy
  26. medium of exchange
    anything generally accepted by all parties in payment for goods or services
  27. commodity money
    anything that serves both as money and as a commodiy, such as gold
  28. fractional reserve bankning system
    only a portion of bank deposits is backed by reserves
  29. check
    a written order instructing the bank to pay someone from an amount deposited
  30. representative money
    bank notes that exchange for a specific commodity, such as gold
  31. fiat money
    money of no value in itself and not convertible into gold, silver, or anything else of value; declared money by government decree
  32. discount rate
    interst rate the Fed charges banks that borrow reserves
  33. Federal Open Market Committee
    Twelve-member group that makes decissions about open-market operation
  34. Federal Reserve System
    Established in 1913 as the central bank and monetary authority of the States
  35. M1
    the narrow definition of the money supply; consists of currency (including coins) held by the nonbanking public, checkable deposits, and traveler's checks
  36. checkable deposits
    deposists in financial institutions against which checks can be written and ATM, or debit, cards can be applied
  37. M2
    a broader definition of the money supply, consisting of M1 plus saving deposits, small-denomination time deposits, and money market mutual fund accounts owned by households
  38. net worth
    assests minus liabilities; also called owners' equity
  39. asset
    any physical property or finacial claim that is owned
  40. liability
    an amount owed
  41. balance sheet
    a finacial statement showing assets, liabilities and net worth at a given time; assets must equal liabilities plus net worth, so the statement is in balance
  42. required reserve ratio
    a Fed regulation that dictates the minimum fraction of deposits each bank must keep in reserve
  43. required reserves
    the dollar amount that must be held in reserve; checkable deposits multiplied by the required reserve ratio.
  44. excess reserves
    bank reserves in excess of required reserves
  45. money multiplier
    the multiple by which the money supply can increase as a result of an increase in excess reseres in the banking system
  46. money demand
    the relationship between how much money people want to hold and the interest rate
  47. money supply
    the stock of money available in the economy at a particular time
  48. federal funds market
    a market for overnight lending and borrowing of reserves held by the Fed for banks
  49. federal funds rate
    the interest rate banks charge one another to borrow reserves overnight; the Red's target interest rate
  50. euro
    the new european common currency
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Unit 5
2011-11-28 05:19:11

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