• Adaptive expectations Shows how consumers base their projections of the future largely on what has occurred in the past. Future expectations are based on a weighted average of past events, with the greatest weight given to those of the most recent past.

• Absolute Advantage the ability of an individual, a firm, or a country to produce more of a good or service than competitors, using the same amount of resources

• Aggregate demand- the total demand for final goods and services in the economy (Y) at a given time and price level.

• Aggregate demand curve - Shows the relationship between the aggregate price level and the quantity of aggregate output demanded by households, businesses, the government, and the rest of the world.

• Aggregate supply- is the total supply of goods and services that firm in a national economy plan on selling during a specific time period.

• Aggregate supply curve the relationship between the aggregate price level and the quantity of aggregate output supplied in the economy.

• AD-AS model the aggregate supply curve and the aggregate demand curve are used together to analyze economic fluctuations.

• Appreciation an increase in price or value

• Aggregate expenditures schedule - a schedule or curve that shows the total amount spent for final goods and services at different levels of real GDP.

• Aggregate Supply Shocks are sudden large increases in resource costs that jolt an economy's short-run aggregate supply curve leftward.

• Average propensity to save (APS) refers to the proportion of income which is saved, usually expressed for household savings as a percentage of total household disposable income.

• Average propensity to consume (APC) - fraction (or %) of disposable income that households plan to spend for consumer goods and services; consumption divided by disposable income.

• Balance of Trade the difference between a country's total exports and total imports.

• Balance of Payments the difference between the amount of money that comes into a country and the amount that goes out of it

• Bilateral monopoly- there is both a monopoly (a single seller) and monopsony (a single buyer) in the same market.

• Business cycle is type of fluctuations which is found in economic activity of the nations relying on business. Provided 4 phases in the business cycle: the rise, the bottom, the recession and the peak.

• Business cycle is the periodic but irregular up-and-down movements in economic activity, measured by fluctuations in real GDP and other macroeconomic variables. If you're looking for information on how various economic indicators and their relationship to the business cycle, please see A Beginner's Guide to Economic Indicators. A business cycle is not a regular, predictable, or repeating phenomenon like the swing of the pendulum of a clock. Its timing is random and, to a large degress, unpredictable. A business cycle is identified as a sequence of four phases: Contraction: A slowdown in the pace of economic activity; The lower turning point of a business cycle, where a contraction turns into an expansion; Expansion: A speedup in the pace of economic activity; Peak: The upper turning of a business cycle.

By increasing the interest rate you control the money supply (it gets less) By decreasing the reserve rate you increase the money supply (banks can lend more)

• Break-even income - the level of disposable income at which households plan to consume (spend) all their income and save none of it.

• Cyclical Unemployment-a factor of over all unemployment that relates to the cyclical trends in growth and production that occur within the business cycle. When business cycles are at the irpeak, cyclical unemployment will below because total economic output is being maximized.

• Consumer Price Index (CPI)- measures changes in the price level of a market basket of consumer goods and services purchased by households.

• Consumption of Fixed Capital - An estimate of the amount of capital worn out or used up in producing the GDP; also called depreciation.

• Consumption schedule - a schedule showing the amounts of households plan to spend for consumer goods at different levels of disposable income

• Comparative Advantage the ability to produce a good or service at a lower opportunity cost than another producer

• Coordination failures This occurs when people fail to reach a mutually beneficial equilibrium bc they lack a way to coordinate their actions, fourth view of macroeconomic instability - bad equilibrium = coordination failure

• Cost-push inflation When prices rise due to an increase in the cost of production.

• Corporation a business owned by stockholders who share in its profits but are not personally responsible for its all it debts.

• Creditor nation is a country that has invested more in the rest of the world than other  countries have invested in it.

• Crawling peg exchange rate policy is one that selects a target path for the exchange rate with intervention in the foreign exchange market to achieve that path.

• Currency depreciation fall in the value of one currency in terms of another currency.

• Currency appreciation the rise in the value of one currency in terms of another currency

• Current account records payments for imports of goods and services from abroad, receipts from exports of goods and services sold abroad, net interest paid abroad, and net transfers (such as foreign aid payments).

• Definitionof'Monetarism'-a set of views based on the belief that inflation depends on how much money the government prints.

• Definitionof'Substitution Effect-the idea that as prices rise (orin comes decrease) consumers will replace more expensive items with less costly alternatives.

• Deflation - increase the purchasing power of the local currency, which is manifested in the reduction of the price index. In fact, deflation - inflation is a negative growth of prices.

• Demand-pull inflation increases in the price level (inflation) resulting from an excess of demand over output at the existing price level, caused by an increase in aggregate demand

• Derived demand - the demand for inputs (factors of production), driven by demand for the goods for which these resources are used.

• Demand shock an event that shifts the aggregate demand curve.

• Debtor nation is a country that during its entire history has borrowed more from the rest of the world than is has lent to it.

• Discouraged worker is a person of legal employment age who is not actively seeking employment or who does not find employment after long-term unemployment.

• Disinflation is a decrease in the rate of inflation – a slowdown in the rate of increase of the general price level of goods and services in a nation's gross domestic product over time.

• Disposable income-The amount of income left to an individual after taxes have been paid, available for spending and saving.

• Discretionary fiscal policy The deliberate manipulation of government purchases, taxation, and transfer payments to promote macroeconomic goals, such as full employment, price stability, and economic growth.

• Depreciation a decrease in price or value.

• Economic growth- the increase in the amount of the goods and services produced by an economy over time.

• Economic growth - Increase in a country's productive capacity, as measured by comparing gross national product (GNP) in a year with the GNP in the previous year. Increase in the capital stock, advances in technology, and improvement in the quality and level of literacy are considered to be the principal causes of economic growth. In recent years, the idea of sustainable development has brought in additional factors such as environmentally sound processes that must be taken into account in growing an economy.

• Economic investment- the amount by which the stock of capital (plant, machinery, materials, etc.) in an enterprise or economy changes

• Economic profit-is similar to accounting profit but smaller because it reflects the total opportunity costs (both explicit and implicit) of a venture to an investor.

• Efficiency wage Wage that minimizes the firm's labor cost per unit of output.

• Exclusive Unionism-the practice of a labor union of restricting the supply of skilled union labor to increase the wages received by union members; the policies typically employed by a craft union.

• Explicit costs- direct payment made to others in the course of running a business, such as wage, rent and materials, as opposed to implicit costs, which are those where no actual payment is made.

• Expenditures Approach - The method that adds all expenditures made for final goods and services to measure the GDP

• Exports domestic goods and services that are sold to buyers in other nations.

• Equilibrium GDP - the GDP at which the total quantity of final goods and services purchased (aggregate expenditures) is equal to the total quantity of final goods and services produced (the real domestic output); the real domestic output at which the aggregate demand curve intersects the aggregate supply curve.

• equation of exchange MV = PQ, where M is the money supply, V is the velocity of money, P is the price level, and Q is the quantity of output of goods and services produced in an economy.

• Exchange Rate the charge for exchanging currency of one country for currency of another.

• Expected rate of return - the increase in profit a firm anticipates it will obtain by purchasing capital (or engaging in research and development); expressed as a percentage of the total cost of the investment (or R&D).

• Exports effect The lower the exchange rate, the cheaper are Canadian-produced goods to foreigners, and the greater the level of exports, the greater the quantity of Canadian dollars demanded on the foreign exchange market.

• Expected profit effect The lower the exchange rate, the larger the expected profit from buying Canadian dollars, and the greater the quantity of dollars demanded on the foreign exchange market.

• Flexible prices- thod of selling where the prices are open to negotiations between buyers and sellers, and allow for bargaining within a certain range.

• Foreign purchases effect-suggests that as the price of the dollar depreciates, then countries could buy more of our goods.

• Frictional unemployment is the time period between jobs when a worker is searching for, or transitioning from one job to another.

• Fractional Reserve System A banking system in which banks keep less than 100 percent of deposits as reserves. A portion (fraction) of checkable deposits. All of the banks keep a portion of the money in banks. To meet the needs of the people the rest you can invest. you have to keep a certain percentage. Reserve against deposits. Don't mix with reserve for loans. Take the deposit and keep the reserve.

• FDIC Federal Deposit Insurance Corporation. If the bank fails, people get their money. All of the banks are insured.  Banks have to state that they're not insured. (there's no choice)

• Final Goods - Goods that have been purchased for final use and not for resale or further processing or manufacturing.

• Fiscal policy the use of taxes, government transfers, or government purchases of goods and services to stabilize the economy.

• Fixed exchange rate policy is one that pegs the exchange rate at a value decided by the  government or central bank and that blocks the unregulated forces of demand and supply by direct intervention in the foreign exchange market

• Foreign exchange market is the market in which the currency of one country is exchanged for the currency of another.

• Free Trade international trade free of government interference.

• Flexible exchange rate policy is one that permits the exchange rate to be determined by demand and supply with no direct intervention in the foreign exchange market by the central bank

• GDP is the market value of all officially recognized final goods and services produced within a country in a given period of time.

• Gross Domestic Product - The total market value of all final goods and services produced annually within the boundaries of the US or foreign supplied resources

• Gross private domestic investment is the measure of investment used to compute GDP in economic measurement of nations. This is an important component of GDP because it provides an indicator of the future productive capacity of the economy.

• Government Purchases - Expenditures by government for goods and services that government consumes in providing public goods and for public capital that has a long lifetime; the expenditures of all governments in the economy for those final goods and services.

• Hyperinflation - inflation is high or extremely high rates.

• Implicit costs- the opportunity cost equal to what a firm must give up in order using factors which it neither purchases nor hires. It is the opposite of an explicit cost, which is borne directly

• Inclusive unionism- practice of a labor union of including all members as workers employed in an industry it will enhance the wage level to a point that above the market equivalent level and there for someone get paid more while others lose their jobs.

• Inflation is a rise in the general level of prices of goods and services in an economy over a period of time.

• Inflexible prices (“sticky prices”) - The proposition that some prices adjust slowly in response to market shortages or surpluses.

• Interest-rate effect-is one of three basic effects that indicate why aggregate expenditures are inversely related to the price level.

• Intermediate goods are goods used as inputs in the production of other goods, such as partly finished goods.

• Income Approach - The method that adds all the income generated by the production of final goods and services to measure the GDP.

• Inflationary expenditure gap - the amount by which the aggregate expenditures schedule must shift downward to decrease the nominal GDP to its full-employment noninflationary level (causes demand pull inflation)

• Inflationary gap when aggregate output is above potential output.

• Inflation targeting Conducting monetary policy so as to commit the central bank to achieving a publicly announced level of inflation.

• Imports effect The higher the exchange rate, the cheaper are foreign-produced goods to Canadians, and the greater the level of imports, the greater the quantity of Canadian dollars supplied on the foreign exchange market.

• Imports foreign goods and services that are purchased from sellers in other nations.

• Insider-outsider theory The hypothesis that nominal wages are inflexible downward because firms are aware that workers ("insiders") who retain employment during recession may refuse to work cooperatively with previously unemployed workers ("outsiders") who offer to work for less than the current wage

• Injection - an addition of spending to the income-expenditure stream: investment, goverment purchases, and net exports.

• Investment demand curve - a curve that shows the amounts of investment demanded by an economy at a series or real interest rates.

• Investment schedule - a curve or schedule that shows the amounts firms plan to invest at various possible values of real GDP.

• Laffer Curve A curved graph that illustrates the theory that, if tax rates rise beyond a certain level, they discourage economic growth, thereby reducing government revenues.