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41 Cards in this Set
- Front
- Back
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productivity
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amount of goods and services produced
helps determine standard of living |
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physical capital
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the stock of equipment and structures that are used to produce goods and services
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human capital
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the knowledge and skills that workers acquire through education, training, and experience
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natural resources
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inputs into the production of goods and services that are provided by nature
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technological knowledge
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society's understanding of the best ways to produce goods and services
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diminishing returns
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the property whereby the benefit from an extra unit of an input declines as the quantity of the input increases
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diminishing returns in the long run
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a higher saving rate lead to a higher level of productivity and income but not to higher growth
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foreign direct investment
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a capital investment that is owned and operated by a foreign entity
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foreign portfolio investment
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an investment that is financed with foreign money but operated by domestic residents
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Ways to increase productivity
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save/invest more, foreign investment, higher education, better health and nutrition, political stability, free trade, research and development, population growth,
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inward vs outward policies
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inward- increase living standards by avoiding interaction with the rest of the world
outward- integrate these countries into the world economy |
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financial system
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match a person's saving with another person's investment
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financial markets
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institutions through which savers can directly provide funds to borrowers
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bond
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certificate of indebtedness
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stock
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ownership in a firm
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equity finance vs debt finance
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equity= sale of stock
debt= sale of bonds |
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stock index
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is a computed average of a group of stock prices
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financial intermediaries
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institutions through which saves can indirectly provide funds to borrowers ( Banks, mutual funds)
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mutual fund
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an institution that sells shares to the public and uses the proceeds to buy a portfolio of stocks and bonds
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closed economy
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y=C+I+G
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open economy
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Y=C+I+G+NX
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private savin
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the income that households have left afyer paying for taxes and consumption
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public saving
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the tax revenue that the government has left after paying for its spending
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budget surplus
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an excess of tax revenue over government spending
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budget deficit
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a shortfall of tax revenue from government spending
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Market for Loanable funds
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the market in which those who want to save suppply funds and those who want to borrow to invest demand funds
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in the market for loanable funds what is the source of the supply of loanable funds
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saving
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in the market for loanable funds what is the source of the demand for loanable funds
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investment
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as the interest rate rises what happens to the demand of loanable funds
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decreases
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as the interest rate rises what happens to the quantity of loanable funds supplied
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increases
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interest rate
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the cost of taking out a loan or the return on savings
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finance
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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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frictional unemployment
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unemployment that results because it takes time for workers to search for the jobs that best situ their tastes and skill
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structural unemployment
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unemployment that results because the number of jobs available in some labor maker is insufficient to provide a job for everyone who wants one
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efficiency wages
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above-equilibrium wages paid by firms to increase worker productivity
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benefits of efficiency wages
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worker health, worker turnover, worker quality, worker effort
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3 functions of money
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medium of exchange, store of value, unit of account
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commodity money
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intrinsic value
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fiat money
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money due to government decree
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M1
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demand deposits traveler's check checkable deposits and currency
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M2
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everything in M1 and savings deposits small time deposits money market mutual funds
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