Unit 2
The total value of all final goods and services produced within a country in a specific time period
GDP
A mandatory financial charge levied by a government on the annual earnings or profits of individuals
income tax
The money used in a particular country as a medium of exchange for goods and services, especially paper money but also including coins
currency
The amount of money a government owes its creditors
national debt
A tax on imported goods from other countries
tariff
A graphic representation of how different parts of the economy interact
circular flow model
Payments by the government to individuals with no goods or services provided in return
government transfers
Any resource of value that can be converted into cash
asset
Dividing the real GDP by the current population
An economy that freely trades most good, services, and investments with few tariffs or other barriers
open economy
A tomato being used to make ragu sauce
intermediate good
When nominal wages are slow to rise or fall in response to changes in the economy
sticky wages
Guaranteed that governments would redeem paper money for gold
gold standard
When increased government spending leads to a reduction in private sector spending or investment
crowding out
The rate of exchange that does not account for the difference in aggregate price levels for the same products in two different countries
nominal exchange rate
A measure that tracks the change in the average price of a group of consumer goods and services
consumer price index
Fiscal policies that help moderate fluctuations in an economy and occur without special government action
automatic stabilizers
A model of the way money from savers makes its way into the hands of borrowers
The buying and selling of government securities by a central bank to control the money supply and influence interest rates
open market operations
Accounts that encompass all transactions that countries' individuals, governments, and businesses complete with the same entities in other countries
balance of payment accounts
Finding GDP by determining the value of goods and services and subtracting the goods and services that were used in generating the output
value added approach
tax muliplier
A financial statement that summarizes assets, liabilities, and net worth
balance sheet
The theory that claims there is a direct relationship between the quantity of money in an economy and the price level of goods and services
quantity theory of money
Oversees trade and mediates disputes between countries