Macroeconomics

‭Glossary‬ ‭Absolute‬ ‭advantage:‬ ‭The‬ ‭ability‬ ‭to‬ ‭produce‬ ‭more‬‭of‬‭a‬‭good‬‭or‬‭service‬‭than‬‭another‬‭producer‬ ‭or country given the available resources.‬ ‭Aggregate‬‭demand‬‭(AD):‬ ‭The‬‭total‬‭demand‬‭for‬ ‭an‬ ‭economy’s‬ ‭goods‬ ‭and‬ ‭services‬ ‭at‬ ‭a‬ ‭given‬ ‭price level in a given period of time.‬ ‭Aggregate‬ ‭demand‬ ‭curve‬ ‭(AD‬ ‭curve):‬ ‭A‬ ‭line‬ ‭that‬ ‭reflects‬ ‭the‬ ‭negative‬ ‭relationship‬‭between‬ ‭the‬ ‭total‬ ‭demand‬ ‭for‬ ‭an‬ ‭economy’s‬ ‭products‬ ‭and the price level.‬ ‭Aggregate‬ ‭demand-aggregate‬ ‭supply‬ ‭model‬ ‭(AD-AS‬‭model):‬ ‭A‬‭graphical‬‭model‬‭that‬‭explains‬ ‭economic‬ ‭fluctuations‬ ‭using‬ ‭the‬ ‭aggregate‬ ‭demand,‬ ‭short-run‬ ‭aggregate‬ ‭supply,‬ ‭and‬ ‭long-run aggregate supply curves.‬ ‭Aggregate‬‭production‬‭function:‬ ‭A‬‭function‬‭that‬ ‭calculates‬ ‭the‬ ‭amount‬ ‭of‬ ‭output‬ ‭that‬ ‭can‬ ‭be‬ ‭produced‬‭using‬‭a‬‭given‬‭set‬‭of‬‭inputs,‬‭specifcally‬ ‭labor‬ ‭and‬ ‭capital,‬ ‭while‬ ‭taking‬ ‭into‬ ‭consideration‬ ‭the‬ ‭economy’s‬ ‭level‬ ‭of‬ ‭technology.‬ ‭Aggregate‬ ‭supply‬ ‭(AS):‬ ‭The‬ ‭total‬ ‭output‬ ‭of‬ ‭goods‬ ‭and‬ ‭services‬ ‭that‬ ‭an‬ ‭economy’s‬ ‭producers‬‭can‬‭provide‬‭at‬‭a‬‭given‬‭price‬‭in‬‭a‬‭given‬ ‭period of time.‬ ‭Anticipated‬ ‭inflation:‬ ‭Expected‬ ‭or‬ ‭predicted‬ ‭inflation.‬ ‭Asset:‬ ‭Anything of value owned by someone.‬ ‭Automatic‬ ‭stabilizers/built-in‬ ‭stabilizers:‬ ‭Fiscal‬ ‭policy‬ ‭measures‬ ‭that‬ ‭do‬ ‭not‬ ‭require‬ ‭active‬ ‭government‬ ‭intervention‬ ‭and‬ ‭will‬ ‭automatically‬ ‭take‬ ‭place‬ ‭based‬ ‭on‬ ‭the‬ ‭current‬ ‭stage‬ ‭of‬ ‭the‬ ‭business‬ ‭cycle,‬ ‭such‬ ‭as‬ ‭transfer‬ ‭payments and progressive taxes.‬

‭Autonomous/exogenous‬ ‭variable:‬ ‭A‬ ‭variable‬ ‭that‬ ‭does‬ ‭not‬ ‭directly‬ ‭change‬ ‭with‬ ‭a‬ ‭change‬‭in‬ ‭GDP.‬ ‭Balanced‬ ‭budget:‬ ‭When‬ ‭government‬‭spending‬ ‭is equal to tax revenues.‬ ‭Balance‬ ‭of‬ ‭payments‬ ‭(BOP):‬ ‭A‬ ‭record‬ ‭of‬ ‭a‬ ‭country’s‬ ‭international‬ ‭transactions‬ ‭made‬ ‭with‬ ‭other‬‭countries,‬‭including‬‭all‬‭funds‬‭going‬‭in‬‭and‬ ‭out of the country.‬ ‭Bank‬ ‭run:‬ ‭A‬ ‭situation‬ ‭in‬ ‭which‬ ‭a‬ ‭lot‬ ‭of‬ ‭depositors‬ ‭ask‬ ‭to‬ ‭withdraw‬ ‭their‬ ‭funds‬ ‭from‬ ‭a‬ ‭bank‬ ‭out‬ ‭of‬ ‭fear‬ ‭that‬ ‭it‬ ‭will‬ ‭fail‬ ‭to‬ ‭meet‬ ‭its‬ ‭liabilities‬ ‭in‬ ‭the‬ ‭future.‬ ‭This‬ ‭creates‬ ‭liquidity‬ ‭problems for the bank.‬ ‭Barter:‬ ‭A‬ ‭system‬ ‭involving‬ ‭the‬ ‭exchange‬ ‭of‬ ‭goods‬‭and‬‭services‬‭for‬‭other‬‭goods‬‭and‬‭services‬ ‭instead‬ ‭of‬ ‭using‬ ‭money‬ ‭as‬ ‭a‬ ‭medium‬ ‭of‬ ‭exchange.‬ ‭Bond:‬ ‭A‬ ‭fnancial‬ ‭asset‬ ‭that‬ ‭represents‬ ‭a‬ ‭contract‬ ‭between‬ ‭a‬ ‭borrower‬ ‭and‬ ‭a‬ ‭lender,‬ ‭in‬ ‭which‬‭the‬‭borrower‬‭promises‬‭to‬‭pay‬‭the‬‭loan‬‭in‬ ‭the‬‭future.‬‭Some‬‭bonds‬‭make‬‭regular‬‭payments‬ ‭to their holders.‬ ‭Budget‬ ‭defcit:‬ ‭When‬ ‭government‬ ‭spending‬ ‭exceeds‬ ‭tax‬ ‭revenues‬ ‭prohibiting‬ ‭the‬ ‭government‬ ‭from‬ ‭covering‬ ‭its‬ ‭expenditures‬ ‭without borrowing.‬ ‭Budget‬ ‭surplus:‬ ‭When‬ ‭tax‬ ‭revenues‬ ‭exceed‬ ‭government‬ ‭spending‬ ‭allowing‬ ‭the‬‭government‬ ‭to cover its expenses.‬ ‭Business‬ ‭cycle:‬ ‭A‬ ‭representation‬ ‭of‬ ‭the‬ ‭fluctuations‬ ‭in‬ ‭economic‬ ‭activity‬ ‭measured‬ ‭by‬ ‭changes in real output over time.‬ ‭Capital:‬ ‭A‬ ‭factor‬ ‭of‬ ‭production‬ ‭that‬ ‭involves‬ ‭physical‬‭goods‬‭used‬‭as‬‭inputs‬‭to‬‭produce‬‭other‬

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