Page 904 - Krugmans Economics for AP Text Book_Neat

G-8 GLOSSARY

market share the fraction of the total real effects on the economy in the long movement along the demand curve a
industry output accounted for by a run and only result in a proportional change in the quantity demanded of a
firm’s output. (p. 569) change in the price level. (p. 317) good that results from a change in the
mean household income the average monetary policy the central bank’s use price of that good. (p. 51)
income across all households. (p. 765) of changes in the quantity of money movement along the supply curve a
means-tested program a program in or the interest rate to stabilize the change in the quantity supplied of a
which benefits are available only to economy (p. 177) good that results from a change in the
individuals or families whose incomes monetary policy rule a formula that price of that good. (p. 60)
fall below a certain level. (p. 768) determines the central bank’s actions. multiplier the ratio of total change in
median household income the income (p. 349) real GDP caused by an autonomous
of the household lying in the middle money any asset that can easily be change in aggregate spending to the size
of the income distribution. (p. 765) used to purchase goods and services. of that autonomous change. (p. 160)
medium of exchange an asset that (p. 231) mutual fund a financial intermediary
individuals acquire for the purpose of money demand curve a graphical rep- that creates a stock portfolio by buy-
trading for goods and services rather resentation of the negative relation- ing and holding shares in companies
than for their own consumption. ship between the quantity of money and then selling shares of this portfo-
(p. 232) demanded and the interest rate. The lio to individual investors. (p. 228)
menu cost the real cost of changing a money demand curve slopes down- Nash equilibrium in game theory, the
listed price. (p. 137) ward because, other things equal, a equilibrium that results when all players
higher interest rate increases the choose the action that maximizes their
merchandise trade balance (trade bal- opportunity cost of holding money. payoffs given the actions of other play-
ance) the difference between a coun- (p. 270) ers, ignoring the effect of that action
try’s exports and imports of goods on the payoffs of other players; also
alone—not including services. (p. 412) money multiplier the ratio of the
money supply to the monetary base; known as noncooperative equilibrium.
microeconomics the branch of econom- indicates the total number of dollars (p. 646)
ics that studies how people make deci- created in the banking system by each national income and product accounts
sions and how those decisions inter- $1 addition to the monetary base. an accounting of consumer spending,
act. (p. 5)
(p. 250) sales of producers, business investment
midpoint method a technique for cal- money supply the total value of finan- spending, and other flows of money
culating the percent change in which cial assets in the economy that are con- between different sectors of the econo-
changes in a variable are compared sidered money. (p. 231) my; also referred to as national
with the average, or midpoint, of the accounts. Calculated by the Bureau of
starting and final values. (p. 462) money supply curve a graphical repre- Economic Analysis. (p. 102)
sentation of the relationship between
minimum-cost output the quantity of the quantity of money supplied by the national savings the sum of private
output at which average total cost is Federal Reserve and the interest rate. savings and the government’s budget
lowest—the bottom of the U-shaped (p. 273) balance; the total amount of savings
average total cost curve. (p. 555) generated within the economy.
monopolist a firm that is the only
minimum wage a legal floor on the producer of a good that has no close (p. 223)
wage rate. The wage rate is the market substitutes. (p. 571) natural monopoly a monopoly that
price of labor. (p. 82) exists when increasing returns to scale
monopolistic competition a market
model a simplified representation of a structure in which there are many provide a large cost advantage to having
real situation that is used to better competing firms in an industry, each all output produced by a single firm.
understand real-life situations. (p. 14) (p. 571)
firm sells a differentiated product, and
monetarism a theory of business cycles, there is free entry into and exit from the natural rate hypothesis the hypothesis
associated primarily with Milton industry in the long run. (p. 575) that the unemployment rate is stable
Friedman, that asserts that GDP will monopoly an industry controlled by a in the long run at a particular natural
grow steadily if the money supply grows monopolist. (p. 571) rate. According to this hypothesis,
steadily. (p. 348) attempts to lower the unemployment
monopsonist a single buyer in a rate below the natural rate of unem-
monetary aggregate an overall meas- market. (p. 701)
ure of the money supply. The most ployment will cause an ever-rising
common monetary aggregates in the monopsony a market in which there is inflation rate. (p. 350)
United States are M1, which includes only one buyer. (p. 701) natural rate of unemployment the
currency in circulation, traveler’s moral hazard the situation that can unemployment rate that arises from
checks, and checkable bank deposits, and exist when an individual knows more the effects of frictional plus structural
M2, which includes M1 as well as about his or her own actions than unemployment. (p. 130)
near-moneys. (p. 234) other people do. This leads to a distor- near-money a financial asset that can’t
monetary base the sum of currency in tion of incentives to take care or to be directly used as a medium of
circulation and bank reserves. (p. 249) exert effort when someone else bears exchange but can be readily converted
the costs of the lack of care or effort. into cash or checkable bank deposits.
monetary neutrality the concept that (p. 785)
changes in the money supply have no (p. 235)