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Definition
| payments to individuals or institutions that are not linked to the current supply of a good or service by the recipient |
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Term
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| the study of decision making as it affects the formation and operation of collective organizations like governments. In general the principals and methodology of economics are applied to political science topics |
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Term
| rational ignorance effect |
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Definition
| because it is highly unlikely that an individual vote will decide an outcome of an election a rational individual has little or no incentive to search for an acquire the information needed to cast an informed vote |
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Definition
| payments user are required to make if they want to receive certain services provided by that government |
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| an issue that generates substantial individual benefits to a small minority while imposing a small individual cost on many other citizens. in total the net cost of the majority might either exceed or fall short of the net benefits to the special interest group |
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| the exchange between politicians of political support on one issue for political support on another |
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| a package of spending projects bundled into a single bill. it is often used as a device to obtain funding for a group of projects intensely desired by regional or interest groups that would be unlikely to pass if voted on separately |
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Term
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Definition
| the direction of budgeted funds to specific projects, programs and locations. the technique is costly but provides major benefits to business firms and other concentrated constituent groups and to the districts where the spending takes place. the benefits are often targeted at those willing to make a substantial campaign contributions |
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Term
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Definition
| the misallocation of resources that result because public sector action is biased 1. in favor of proposals yielding clearly defined current benefits in exchange for difficult to-identify future costs and 2. against proposals with clearly identifiable current costs that yield less concrete and less obvious future benefits |
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Term
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Definition
| actions by individuals and groups designed to restructure public policy in a manner that will either directly or indirectly redistribute more income to themselves or the projects they promote |
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| a reduction in private spending as a result of higher interest rates generated by budget deficit that are financed by borrowing in the private loanable fund market |
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| economists who believe that there are strong forces pushing a market economy toward full-employment equilibrium and that macroeconomic policy is an ineffective tool with which to reduce economic stability |
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| the view that a tax reduction financed with government debt will exert no effect on current consumption and aggregate demand because people will fully recognize the higher future taxes implied by the additional debt |
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Term
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Definition
| economists who believe that changes in marginal tax rates exert important effects on aggregate supply |
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Term
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Definition
| an asset that is used to buy and sell goods or services |
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Term
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Definition
| an asset that will allow people to transfer purchasing power from one period to the next |
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Term
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Definition
| a unit of measurement used by people to post prices and keep track of revenues and costs |
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Term
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Definition
| money that has neither intrinsic value nor the backing of a commodity with intrinsic value; paper currency is an example |
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Definition
| the sum of 1. currency in circulation 2. checkable deposits maintained in depository intuitions and 3. travelers checks |
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Term
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Definition
| medium of exchange of metal or paper |
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Term
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| non-interest earning checking deposits that can be either withdrawn or made payable on demand to a third party. like currency these deposits are widely used as means of payment |
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Term
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Definition
| interest earning deposits that are also available for checking |
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Term
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Definition
| equal to m1 plus 1. saving deposits 2. time deposits held in depository institutions, and 3. money market mutual funds shares |
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Term
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Definition
| business that accept checking and savings deposits and use a portion of them to extend loans an make investments. Banks, savings and loan associations and credit unions and examples |
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Term
| money market mutual funds |
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Definition
| interest earning accounts that pool depositors funds and invest them in highly liquid short-term securities. because these securities can be quickly converted to cash, depositors are permitted to write checks against these accounts |
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| funds acquired by borrowing |
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Term
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Definition
| the current bank of the United States, it carries out banking regulatory policies and is responsible for the conduct of monetary policy |
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Term
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Definition
| an institution that regulates the banking system and controls the money supply |
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Term
| savings and loan associations |
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Definition
| financial institutions that accept deposits in exchange for shares that pay dividends. historically these funds were channeled into residential mortgage loans but today they offer essentially the same services as a commercial bank |
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Term
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Definition
| financial cooperative organizations of individuals with a common affiliation such as a employer or a labor union. they accept deposits including checkable deposits, pay interest on them out of earnings, and lend funds primarily to members |
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Term
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Definition
| financial institutions that offer a wide range of services to their customers. commercial banks are owned by stockholders and seek to operate at a profit |
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Term
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Definition
| vault cash plus deposits of banks with federal reserve banks |
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Term
| fractional reserve banking |
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Definition
| a system that permits banks to hold reserves of less than 100 percent against their deposits |
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Term
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Definition
| the minimum amount of reserves that a bank is required by law to keep on hand to back up its deposits |
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Term
| federal deposit insurance |
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Definition
| a federally chartered corporation that insures the deposits held by commercial banks, savings and loans, and credit unions |
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Term
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Definition
| the ratio of reserves relative to a specified liability category that banks are required to maintain |
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Term
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Definition
| actual reserves that exceed the legal requirement |
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Term
| deposit expansion multiplier |
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Definition
| the multiple by which an increase in reserves will increase the money supply. it is inversely related to the required reserve ratio |
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Term
| potential deposit expansion multiplier |
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Definition
| the maximum potential increase in the money supply as a ratio of the new reserves injected into the banking system. it is equal to the inverse of the required reserve ratio |
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Term
| federal open market committee |
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Definition
| a committee of the federal reserve system that establishes fed policy with regard to the buying and selling of government securities the primary mechanism used to control the money supply. it is composed of the seven members of the board of governors and the twelve district bank presidents of the fed |
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Term
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Definition
| the buying and selling of US government securities and other financial assets in the open market by the federal reserve |
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Term
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Definition
| the interest rate the federal reserve charges banking institution for short term loans |
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Term
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Definition
| a loanable funds market in which banks seeking additional reserves borrow short term funds from banks with excess reserves. the interest rate in this market is called the federal funds rate |
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Term
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Definition
| the sum of currency in circulation plus bank reserves. it reflects the purchases of financial assets and extensions of loans by the fed |
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Term
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Definition
| a curve that indicates the relationship between the interest rate and the quantity of money people want to hold. because higher interest rates increase the opportunity cost of holding money the quantity of money demanded will be inversely related to the interest rate |
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Term
| expansionary monetary policy |
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Definition
| a shift in monetary policy designed to stimulate aggregate demand. injection of additional bank reserves, lower short term interest rates and acceleration in the growth rate of money supply are indicators of a ore expansionary monetary policy |
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Term
| restrictive monetary policy |
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Definition
| a shift in monetary policy designed to reduce aggregate demand and put downward pressure on the general level of prices. a reduction in bank reserve, higher short-term interest rates and a reduction in the growth rate of the money supply are indicators of a ore restrictive monetary policy |
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Term
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Definition
| a theory that hypothesizes that a change in the memory supply will cause a proportional change in the price level because velocity and real output are unaffected by the quantity of money |
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Term
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Definition
| the average number of times a dollar is used to purchase final goods and services during a year. It is equal to GDP divided by the stock of money |
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Term
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Definition
| MV=PY where M is the money supply. V is the velocity of money. P is the price level and Y is the output of goods and services produced in an economy |
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