Macroeconomics
Future value: The value of a current sum of money or cash flow at a future date assuming growth. Gains from trade: The positive outcomes that countriesreceivefromengagingininternational trade based on comparative advantage. GDP deflator: A price index of domestically produced goods and services usedtomeasure nominal and real GDP. Government budget: A record of a government’s revenues and expenditures. Governmentspending(G): Themoneyspentby the government or public sector on goods and services. Gross Domestic Product(GDP): Themonetary valueofallgoodsandservicesproducedwithin a country’s borders over a period of time, usually a year. Inferiorgood: Agoodwhosedemandincreases as consumers’ incomes decrease, such as low-grade rice. Inflation: A persistent increase in the general price level that makes money lose its purchasing power. Inflationary/positive output gap: The gap created when actual output is beyond the full employment level. Injections: Moneygoingintothecircularflowof income in the form of investment, government spending, and exports. Interest on Reserves (IOR): Interest rate on thedepositsthatcommercialbanksholdwithin the central bank, often used as a monetary policy tool.
Intermediate goods: Goods used in the productionofothergoods,suchassteelusedto produce cars. Investment demand curve: A line that represents the negative relationship between the real interest rate and investment spending. Investment spending (I): Capital additions to frms’ capital stock. Labor: A factor of production that consists of the human effort and work involved in production. Labor force: The sum of employed and unemployed people in an economy. Labor force participation rate: Theproportion ofapopulationthatareofworkingageandwho are either working or actively looking for a job. Laffer curve: A curve that depicts the initial increase in tax revenues with rising tax rates, followed by a subsequent decline beyond a certain tax rate. Land: Afactorofproductionthatconsistsofall natural resources used in production, such as natural gas and water. Law of Demand: A law thatimpliesanegative relationshipbetweenthepriceofaproductand its quantity demanded, meaning that as price increases, quantity demanded decreases, and vice versa. Law of Diminishing Returns: When additional unitsofaninputareadded,afteracertainpoint the output of the inputs starts to decline. Law of Supply: A law that implies a positive relationshipbetweenthepriceofaproductand its quantity supplied, meaning that as price increases,quantitysuppliedincreases,andvice versa.
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