VWL 1, FFHS, Semester 3

the quantity of money available in the economy

a market structure in which many firms sell products that are similar but not identica

 a firm that is the sole seller of a product without close substitutes

the tendency of a person who is imperfectly monitored to engage in dishonest or otherwise undesirable behaviour

the additional shifts in aggregate demand that result when expansionary fiscal policy increases income and thereby increases consumer

a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen

 the total income in the economy that remains after paying for consumption and government purchases

a monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms

the claim that unemployment eventually returns to its normal, or natural, rate, regardless of the rate of inflation

 the normal rate of unemployment around which the unemployment rate fluctuates

the inputs into the production of goods and services that are provided by nature, such as land, rivers and mineral deposits

a tax system that collects revenue from high-income households and gives transfers to lowincome households

the purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners

the value of a nation’s exports minus the value of its imports; also called the trade balance

the rate at which a person can trade the currency of one country for the currency of another

the production of goods and services valued at current prices

 the interest rate as usually reported without a correction for the effects of inflation

variables measured in monetary units

 a good for which, other things equal, an increase in income leads to an increase in demand

claims that attempt to prescribe how the world should be

a market structure in which only a few sellers offer similar or identical products

an economy that interacts freely with other economies around the world

the purchase and sale of non-monetary assets from and to the banking sector by the central bank

whatever must be given up to obtain some item

a group of countries for which it is optimal to adopt a common currency and form a currency union

the outright sale or purchase of nonmonetary assets to or from the banking sector by the central bank without a corresponding agreement to reverse the transaction at a later date

two goods with right-angle indifference curves

 two goods with straight-line indifference curves

 a person’s normal income

a curve that shows the short-run trade-off between inflation and unemployment

the stock of equipment and structures that are used to produce goods and services

a tax enacted to correct the effects of a negative externality

 claims that attempt to describe the world as it is

the amount of money today that would be needed to produce, using prevailing interest rates, a given future amount of money