248853
Description
Mind Map by byungsung21, updated more than 1 year ago
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Created by byungsung21
over 11 years ago
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(HW)MACRO
ECONOMICS:
DEFINITIONS
- Interest elasticity
of demand
- The interest elasticity of demand for
investment is the responsiveness of
investment to changes in interest rates. If as
a result of interest rates changing there is
almost no change in investment we would
describe it as interest-inelastic. If however, a
change in interest rates brought about a
significant change in investment we would
describe it as interest-elastic.
- The interest elasticity of demand for
investment is the responsiveness of
investment to changes in interest rates. If as
a result of interest rates changing there is
almost no change in investment we would
describe it as interest-inelastic. If however, a
change in interest rates brought about a
significant change in investment we would
describe it as interest-elastic.
- Loosening of
monetary
policy
- Monetary policy describes the
management of a nation's money
supply by the government or
central bank. A loose monetary
policy occurs when the money
supply is expanded and is easily
accessible to citizens to
encourage economic growth.
- Monetary policy describes the
management of a nation's money
supply by the government or
central bank. A loose monetary
policy occurs when the money
supply is expanded and is easily
accessible to citizens to
encourage economic growth.
- Tightening of
monetary policy
- A course of action undertaken by the
Federal Reserve to constrict spending in
an economy that is seen to be growing too
quickly, or to curb inflation when it is rising
too fast. The Fed will "make money tight" by
raising short-term interest rates (also
known as the Fed funds, or discount rate),
which increases the cost of borrowing and
effectively reduces its attractiveness.
- A course of action undertaken by the
Federal Reserve to constrict spending in
an economy that is seen to be growing too
quickly, or to curb inflation when it is rising
too fast. The Fed will "make money tight" by
raising short-term interest rates (also
known as the Fed funds, or discount rate),
which increases the cost of borrowing and
effectively reduces its attractiveness.
- real interest rate
- An interest rate that has been adjusted to remove the effects
of inflation to reflect the real cost of funds to the borrower,
and the real yield to the lender. The real interest rate of an
investment is calculated as the amount by which the nominal
interest rate is higher than the inflation rate. Real Interest Rate
= Nominal Interest Rate - Inflation (Expected or Actual)
- An interest rate that has been adjusted to remove the effects
of inflation to reflect the real cost of funds to the borrower,
and the real yield to the lender. The real interest rate of an
investment is calculated as the amount by which the nominal
interest rate is higher than the inflation rate. Real Interest Rate
= Nominal Interest Rate - Inflation (Expected or Actual)
- Effective
disposable income
- The amount of money that households
have available for spending and saving
after income taxes have been accounted
for. Disposable personal income is often
monitored as one of the many key
economic indicators used to gauge the
overall state of the economy. Calculated
as: Disposable Income: Personal income -
personal income taxespayment
- The amount of money that households
have available for spending and saving
after income taxes have been accounted
for. Disposable personal income is often
monitored as one of the many key
economic indicators used to gauge the
overall state of the economy. Calculated
as: Disposable Income: Personal income -
personal income taxespayment
- policy rate
- in economics, the policy rate (policy interest
rate) is the short-term interest rate that the
central bank manipulates through open-market
operations. Open-market operations include the
sale and purchase of bonds. During times of
recession, the central bank favors a low policy
rate that would help close the GDP gap. When a
country is experiencing heavy economic
growth, the central bank tends to favor a higher
policy rate that would curb inflation.
- in economics, the policy rate (policy interest
rate) is the short-term interest rate that the
central bank manipulates through open-market
operations. Open-market operations include the
sale and purchase of bonds. During times of
recession, the central bank favors a low policy
rate that would help close the GDP gap. When a
country is experiencing heavy economic
growth, the central bank tends to favor a higher
policy rate that would curb inflation.
- Transmission
mechanism of
monetary policy
- Definition: The transmission mechanism of
monetary policy is the way in which interest rate
changes affect economic activity and inflation.
The main impact is through the level of
aggregate demand. Higher interest rates limit
people's ability to spend and so reduce
aggregate demand. However, there are a variety
of other effects as well through expectations,
asset prices and the exchange rate
- Definition: The transmission mechanism of
monetary policy is the way in which interest rate
changes affect economic activity and inflation.
The main impact is through the level of
aggregate demand. Higher interest rates limit
people's ability to spend and so reduce
aggregate demand. However, there are a variety
of other effects as well through expectations,
asset prices and the exchange rate
- time lags
- time during which some action
is awaited; "instant replay
caused too long a delay"; "he
ordered a hold in the action"
- time during which some action
is awaited; "instant replay
caused too long a delay"; "he
ordered a hold in the action"
- quantitive easing
- A government monetary policy occasionally used to
increase the money supply by buying government
securities or other securities from the market.
Quantitative easing increases the money supply by
flooding financial institutions with capital, in an
effort to promote increased lending and liquidity.
- A government monetary policy occasionally used to
increase the money supply by buying government
securities or other securities from the market.
Quantitative easing increases the money supply by
flooding financial institutions with capital, in an
effort to promote increased lending and liquidity.
- exchange rate
- The price of one country's currency expressed
in another country's currency. In other words, the
rate at which one currency can be exchanged
for another. For example, the higher the
exchange rate for one euro in terms of one yen,
the lower the relative value of the yen.
- The price of one country's currency expressed
in another country's currency. In other words, the
rate at which one currency can be exchanged
for another. For example, the higher the
exchange rate for one euro in terms of one yen,
the lower the relative value of the yen.
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