Term
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Definition
| study of how the allocation of resources affects economic well-being |
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Term
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Definition
| max amount a buyer will pay for a good |
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Term
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Definition
amount buyer is willing to pay for a good minus the amount the buyer actually pays for it
-use demand curve measure (area below curve & above $ = c.s.)
-used to answer buyer's wellbeing rise in response to lower price
-measures the benefit buyer receives from participating in a market |
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Term
| What concept helps to make judgments about the desirability of market outcomes (yet does not reflect economic well-being)? |
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Definition
consumer surplus
...because measures benefit received by buyer as the buyer themselves perceives it |
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Term
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Definition
| value of everything a seller must give up to produce a good |
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Definition
amount a seller is paid for a good minus the seller's cost of providing it
-use supply curve (vs. demand) to measure
-supply curve shows the cost of the marginal seller, the seller who would leave the market first if the price were any lower
-area below the price and above the supply curve measures the p.s. in a market
-measures the benefit sellers (vs. consumer surplus) receive from participating in a market |
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Term
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Definition
| property of a resource allocation of maximizing the total surplus received by all members of society |
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Term
| What analysis is used to evaluate market outcome? |
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Definition
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Term
| What tools (2) are used to address: is the allocation of resources determined by free markets desirable? |
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Definition
consumer + producer surplus
...study welfare buyers/sellers |
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Term
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Definition
| c.s.= value to buyers- amount paid by buyers |
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Term
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Definition
| p.s.= amount received by sellers- cost to sellers |
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Term
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Definition
t.s.= (value to buyers- amount paid by buyers) + (amount received by sellers- cost to sellers)
or
value to buyers- cost to sellers |
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Term
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Definition
| property of the distributing economic prosperity uniformly among the members of society |
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Term
| 3 insights market outcomes: |
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Definition
1. free markets allocate the supply of goods to the buyers who value them most highly, as measured by their willingness to pay.
2. Free markets allocate the demand of for goods to the sellers who can produce them at least cost.
3. Free markets produce the quantity of goods that max the sum of consumer & producer surplus |
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Term
| formula total government tax revenue |
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Definition
T x Q
T= size of the tax
Q= quantity of the good sold |
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Term
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Definition
| the fall in total surplus that results from a market distortion, such as a tax |
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Term
| What causes deadweight loss? |
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Definition
| Taxes because they prevent buyers/sellers from realizing some of the gains from trade |
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Term
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Definition
| price of a good that prevails in the world market for that good |
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Term
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Definition
a tax on goods produced abroad and sold domestically
-reduces the quantity of imports & moves the domestic market closer to its equilibrium without trade |
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Term
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Definition
- increased variety of goods
-lower costs through economies of scale
-increased competition
-enhanced flow of ideas |
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Term
| GDP (gross domestic product) |
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Definition
| the market value of all final goods and services produced within a country in a given period of time |
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Term
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Definition
Y = C + I + G + NX
Y= GDP
C= consumption
I= investment
G= government purchases
NX= net exports
- identity equation must be true because the way the values are defined |
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Term
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Definition
| spending by households on goods/services with the exception of purchases of new housing |
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Term
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Definition
| spending on capital equipment, inventories, and structures, including household purchases of new housing |
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Term
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Definition
spending on goods/services by local, state, & federal governments
... also called "gvnt consumption expenditure and gross investment" |
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Term
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Definition
| spending on domestically produced goods by foreigners (exports) minus spending on foreign goods by domestic residents (imports) |
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Term
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Definition
| the production of goods/services valued @ current price |
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Term
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Definition
| the production of goods/services valued @ constant prices |
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Term
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Definition
| a measure of the price level calculated as the ratio of nominal GDP to real GDP times 100 |
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Term
| CPI (consumer price index) |
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Definition
| a measure of the overall cost of goods/services bought by a typical consumer |
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Term
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Definition
| the percentage change in price index from the preceding period |
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Term
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Definition
| a measure of the cost of a basket of goods and services bought by firms |
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Term
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Definition
| the automatic correction by law or contract of a dollar amount for the effects of inflation |
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Term
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Definition
| the interest rate as usually reported w/o a correction for the effects of inflation |
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Term
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Definition
| the interest rate corrected for the effects of inflation |
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Definition
| the quantity of goods/services produced from each unit of labor input |
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Definition
| the stock of equipment and structures that are used to produce goods and services |
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Definition
| knowledge/skills that workers acquire through education, training, & experience |
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Definition
| the inputs into the production of goods/services that are provided by nature, such as land, rivers, and mineral deposits |
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Term
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Definition
| society's understanding of the best way to produce goods/services |
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Term
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Definition
| the property whereby the benefit from an extra unit of an input declines as the quantity of the input increases |
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Term
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Definition
| the property whereby countries that start off poor tend to grow more rapidly than countries that start off rich |
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Term
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Definition
| the group of institutions in the economy that help to match one person's saving with another person's investment |
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Term
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Definition
| financial institutions through which savers can directly provide funds to borrowers |
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Term
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Definition
| a certificate of indebtedness |
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Term
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Definition
| a claim to partial ownership in a firm |
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Term
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Definition
| financial institutions through which savers can indirectly provide funds to borrowers |
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Term
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Definition
| an institution that sells shares to the public and uses the proceeds to buy a portfolio of stocks and bonds |
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Term
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Definition
| the total income in the economy that remains after paying for consumption and government purchases |
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Term
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Definition
| the income that households have left after paying for taxes and consumption |
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Term
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Definition
| the tax revenue that the gvnt has left after paying for taxes and consumption |
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Term
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Definition
| an excess of tax revenue over gvnt spending |
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Term
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Definition
| a shortfall of tax revenue from gvnt spending |
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Term
| market for loanable funds |
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Definition
| 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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Term
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Definition
| a decrease in investment that results from government borrowing |
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Definition
| the field that studies how people make decision regarding the allocation of resources over time and handling of risk |
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Term
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Definition
| the amount of $ today that would be needed, using prevailing interest rates, to produce a given future amount of $ |
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Term
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Definition
| the amount of $ in the future that an amount of $ today will yield, given prevailing interest rates |
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Term
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Definition
| accumulation of a sum of money in, say, a bank account, where the interest earned remains in the account to earn additional interest in the future |
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Term
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Definition
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Term
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Definition
| the reduction of risk achieved by replacement a single risk with a large # of smaller, unrelated risks |
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Term
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Definition
| risk that affects only a single company |
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Term
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Definition
| risk that affects all companies in the stock market |
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Term
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Definition
| the study of a company's accounting statements and future prospects to determine its value |
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Term
| efficient markets hypothesis |
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Definition
| the theory that asset prices reflect all publicly available info about the value of an asset |
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Term
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Definition
| the description of asset prices that rationally reflect all available info |
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Term
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Definition
| the path of a variable whose changes are impossible to predict |
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Term
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Definition
| the total # of workers, including both the employed and the unemployed |
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Term
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Definition
| the % of the labor force that is unemployed |
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Term
| labor-force participation rate |
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Definition
| the % of the adult population that is in the labor force |
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Term
| natural rate of unemployment |
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Definition
| the normal rate of unemployment around which the unemployment rate fluctuates |
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Term
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Definition
| the deviation of unemployment from its natural rate |
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Term
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Definition
| individuals who would like to work but have given up looking for a job |
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Term
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Definition
| unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills |
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Term
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Definition
| unemployment that results because the # of jobs available in some labor markets is insufficient to provide a job for everyone who wants one |
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Term
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Definition
| the process by which workers find appropriate jobs given their tastes and skills |
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Term
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Definition
| a gvnt program that partially protects workers' incomes when they become unemployed |
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Term
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Definition
| a worker association that bargains with employers over wages, benefits, and working conditions |
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Term
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Definition
| the process by which unions and firms agree on the terms of employment |
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Term
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Definition
| the org withdrawal of labor from a firm by a union |
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Term
| ( theory) efficiency wages |
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Definition
| above-equilibrium wages paid by firms to increase worker productivity |
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Term
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Definition
| an item that buyers give to sellers when they want to purchase goods/services |
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Term
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Definition
| the yardstick people use to post prices & record debts |
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Term
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Definition
| an item that people can use to transfer purchasing power from the present to the future |
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Term
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Definition
| the ease w/ which an asset can be converted into the economy's medium of exchange |
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Term
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Definition
| money that takes the form of a commodity w/ intrinsic value |
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Term
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Definition
| the set of assets in an economy that people regularly use to buy goods/services from other people |
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Term
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Definition
| money without intrinsic value that is used as $$$ because of government decree |
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Term
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Definition
| the paper bills and coins in the hands of the public |
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Term
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Definition
| balances in the bank accounts that depositors can access on demand by writing a check |
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Term
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Definition
| the central bank of the US |
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Term
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Definition
| an institution designed to oversee the banking system and regulate |
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