|
|
SELF-CORRECTION, INFLATIONARY GAP: The automatic process through which the aggregate market achieves long-run equilibrium by eliminating an inflationary gap created by short-run equilibrium. With an inflationary gap short-run equilibrium real production is greater than full-employment real production, meaning resource markets have shortages, and in particular labor is overemployed. Self-correction is the process in which these temporary imbalances are eliminated through flexible prices as the aggregate market achieves long-run equilibrium. The key to this process is shifts of the short-run aggregate supply curve caused by changes in wages and other resource prices. The long-run result is lower wages and a decrease in short-run aggregate supply.
Visit the GLOSS*arama
|
|
|
|
|
Lesson 20: Federal Reserve System | Unit 4: Monetary Policy
|
Page: 15 of 20
|
The discount rate is the interest rate the Fed charges for reserve loans to commercial banks.- The Federal Funds rate is for loans between commercial banks.
- The discount rate is for loans from the Fed to commercial banks.
- Banks borrow from the Fed when the need reserves to stay in business. The price they pay is the discount rate.
Why don't troubled banks use the Federal Funds Market? - Other banks are probably reluctant to extend a loan.
- The entire banking system might be short of reserves.
- The discount rate is typically lower than the federal funds rate.
|
|
|
|
|
|
|
DECISION LAG The time lag that it takes government leaders and policy makers to determine the appropriate government action needed to address an economic problem. The decision lag arises because it takes time for policy makers to chose among the array of possible policy actions, each with assorted consequences that appeal differently to different political constituencies. This "inside lag" is one of four policy lags associated with monetary and fiscal policy. The other two "inside lags" are recognition lag and implementation lag, and one "outside lag" is implementation lag. All four policy lags can reduce the effectiveness of business-cycle stabilization policies and can even destabilize the economy.
Complete Entry | Visit the WEB*pedia |
|
|
|
Junk bonds are so called because they have a better than 50% chance of default, carrying a Standard & Poor's rating of CC or lower.
|
|
|
"Every man must decide whether he will walk in the light of creative altruism or in the darkness of destructive selfishness." -- Martin Luther King, Jr., clergyman
|
|
CLT
Central Limit Theorem
|
|
|
Tell us what you think about AmosWEB. Like what you see? Have suggestions for improvements? Let us know. Click the User Feedback link.
User Feedback
|
|
