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60 Cards in this Set
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the group of institutions in the economy that help to match one person's saving with another person's investment.
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financial system
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financial institutions through which savers can directly provide funds to borrowers.
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financial markets
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a certificate of indebtedness
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bond
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a claim to partial ownership in a firm
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stock
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financial institutions through which savers can indirectly provide funds to borrowers.
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financial intermediaries
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and institution thats ells shares to the public and uses the proceeds to buy a portfolio of stocks and bonds.
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mutual funds
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the total income in an economy that remains after paying for consumption and government purchases,
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national saving
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the income that households have left after paying for taxes and consumption.
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private saving
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the tax revenue that the government has left after paying for its spending.
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public saving
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and excess of tax revenue over government spending.
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budget surplus
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a shortfall of tax revenue from government spending.
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budget deficit
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depositing an unspent income in a bank or using it to buy a stock or bond.
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saving
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purchase of new capital such as equipment or buildings, or selling stock.
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investment
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the market in which those who want to save supply funds and those who want to borrow to invest demand funds.
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market for loanable funds
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a decrease in investment that results from government borrowing
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crowding out
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the field that studies how people make decisions regarding the allocation of resources over time and the handling of risk.
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finance
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the amount of money today that would be needed using prevailing interest rates to produce a given future amount of money.
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present value
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the amount of money in the future that an amount of money today will yield, given prevailing interest rates.
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future value
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the accumulation in, say, a bank account where the interest earned remains in the account to earn additional interest in the future.
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compouding
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a dislike of uncertainty; people dislike bad things more than they like comparable good things.
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risk averse
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the reduction of risk achieved by replacing a single risk with a large number of smaller unrelated risks.
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diversification
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risk that affects only a single company
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firm-specific risk
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risk that affects all companies in a stock market
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market risk
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the study of a company's accounting statements and future prospects to determine its value.
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fundamental analysis
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the theory that asset prices reflect all publicly available information about the value of an asset.
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efficient markets hypothesis
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the description of asset prices that rationally reflect all available information
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informational efficiency
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the path of a variable whose changes are impossible to predict
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random walk
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the total number of workers, including both the employed and unemployed
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labor force
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the percentage of the labor force that is unemployed.
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unemployment rate
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the percentage of the adult population that is in the labor force.
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labor force participation rate
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the normal rate of unemployment around which the unemployment rate fluctuates.
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natural rate of unemployment
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the deviation of unemployment from its natural rate.
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cyclical unemployment
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individuals who would like to work but have given up looking for a job.
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discouraged workers
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unemployment that results because it takes time for workers to search for jobs that best suit their tastes and skills.
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frictional unemployment
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unemployment that results because the number of jobs available in some labor markets is insufficient to find a job for everyone who wants one.
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structural unemployment
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the process by which workers find appropriate jobs according to their tastes and skills.
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job search
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a government program that partially protects workers' incomes when they become unemployed.
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unemployment insurance
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a worker association that argues with employers over wages, benefits, and working conditions.
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unions
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the process by which workers and firms agree on terms of employment
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collective bargaining
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the organized withdrawal of labor by a union from a firm
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strike
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above equilibrium wages paid by firms to increase worker productivity.
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efficiency wages
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the set of assets in an economy that people regularly use to buy goods and services from other people
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money
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an item that buyers give to sellers when they want to purchase goods and services
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medium of exchange
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the yardstick people use to post prices and record debts
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unit of account
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an item that people can use to transfer purchasing power from the present to the future
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store of value
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the ease with which an asset can be converted into the economy's medium of exchange
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liquidity
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money that takes the form of a commodity with intrinsic value (gold,cigarettes)
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commodity money
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money without intrinsic value that can be used as money because of government decree
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fiat money
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the paper bills and coins in the hands of the public
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currency
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balances in bank accounts that depositors can access on demand by writing a check
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demand deposits
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the central bank of the united states
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the fed
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an institution designed to oversee the banking system and regulate the quantity of money in the economy
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central bank
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the quantity of money available int he economy
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money supply
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the setting of the money supply by policy makers in the central bank
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monetary policy
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a banking system in which banks hold only a fraction of deposits as reserves
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fractional - reserve banking
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the fraction of deposits that banks hold as reserves
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reserve ratio
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the amount of money the banking system generates with each dollar of reserves
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money multiplier
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the purchase and sale of us government bonds by the fed
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open-market operations
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regulations on the minimum amount of reserves that banks must hold against deposits.
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reserve requirements
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the interest rate on the loans that the fed makes to banks
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discount rate
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