Macroeconomics
Employed: Holding a job that yields earnings. Entrepreneurship: A factor of production that involves decision making and risk taking to combine all other factors of production. Equilibrium: The price and quantity at which quantity demanded and supplied are equal. Excess demand/shortage: A situation that occurs when quantity demanded exceeds quantity supplied at a price lower than equilibrium price. Excess reserves: The difference between a bank’s actual reserves and required reserves. Excesssupply/surplus: Asituationthatoccurs when quantity supplied exceeds quantity demanded at a price higher than equilibrium price. Exchangerate: Thepriceofacurrencyinterms of another. Expandedcircularflow: Adiagramthatshows how goods, services, money, and factors of productionflowbetweenhouseholds,frms,the government, and the foreign sector in anopen economy. Expansion/growth: A phase of the business cycle characterized by a fast increase in real GDP and employment. Expansionaryfscalpolicy: Aneconomicpolicy implemented by the government to stimulate aggregate demand by increasing government spending and reducing taxes. Expansionary/loose monetary policy: An economic policy implemented by the central bank to increase money supply and stimulate the economy by reducing interest rates. Expectations-augmented Phillips curve: An economic model that uses Phillips curves to
justifymonetarists’viewthatgovernmentpolicy toolsusedtoincreaseaggregatedemandinthe long run will only raise the inflation rate. Expected inflation rate (π): The rate atwhich people expect prices to increase. Expendituremultiplier: Theratioofachangein realGDPtoanautonomouschangeinaggregate spending or aggregate autonomous expenditure. Extension of demand: An increase in the quantity demanded of a productreflectedbya movement down the demand curve. Extension of supply: An increase in the quantity supplied of a product reflected by a movement up the supply curve. Factorsofproduction: Theresourcesorinputs used in the productionprocess,includingland, labor, capital, and enterprise. Federal funds rate/policy rate/overnight interbank lending rate: The rate that commercial banks charge each other for short-term loans. Foreign exchange rate market: A market in which currencies are exchanged for each other. Fiat money: Items used asmoneywhilebeing intrinsically worthless. Financial sector: A sector serving as an intermediary between those who have excess funds(e.g.,lenders)andthosewhoareinneed of capital (e.g., borrowers). Fractional-reservebanking: Asystemwhereby a percentage of the deposits is kept on hand while the remaining amount is loaned out. Frictional unemployment: Temporary unemployment that arises when people are moving from one job to another.
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