AP Macroeconomics Vocabulary

Absolute advantage

When one country has more resources, more productive resources, or a natural endowment to produce a good compared to another country; when a country can produce more of a good compared to another country.

Example: "Country A can produce 100 units of steel per worker per day while Country B can produce only 60 units, giving Country A an          in steel production."

Example: "Country A can produce 100 units of steel per worker per day while Country B can produce only 60 units, giving Country A an          in steel production."

Example: "Country A can produce 100 units of steel per worker per day while Country B can produce only 60 units, giving Country A an          in steel production."

AD-AS model

An economic model that shows the relationship between aggregate demand and aggregate supply to illustrate macroeconomic equilibrium and the effects of policy changes.

Example: "Using the         , economists can illustrate how an increase in government spending shifts the aggregate demand curve to the right, raising both the price level and real GDP in the short run."

Example: "Using the         , economists can illustrate how an increase in government spending shifts the aggregate demand curve to the right, raising both the price level and real GDP in the short run."

Example: "Using the         , economists can illustrate how an increase in government spending shifts the aggregate demand curve to the right, raising both the price level and real GDP in the short run."

Adaptive expectations

The theory that people look at past experience and gradually adapt their beliefs and behavior as circumstances change.

Example: "Workers who observed 5% inflation last year form          and negotiate for 5% wage increases this year, assuming past trends will continue."

Example: "Workers who observed 5% inflation last year form          and negotiate for 5% wage increases this year, assuming past trends will continue."

Example: "Workers who observed 5% inflation last year form          and negotiate for 5% wage increases this year, assuming past trends will continue."

Adjustable-rate mortgage (ARM)

A loan a borrower uses to purchase a home in which the interest rate varies with market interest rates.

Example: "A homebuyer who took out an adjustable-rate mortgage in 2021 saw her monthly payments rise significantly when the Federal Reserve increased interest rates in 2022."

Example: "A homebuyer who took out an adjustable-rate mortgage in 2021 saw her monthly payments rise significantly when the Federal Reserve increased interest rates in 2022."

Example: "A homebuyer who took out an adjustable-rate mortgage in 2021 saw her monthly payments rise significantly when the Federal Reserve increased interest rates in 2022."

Adjustment lag

The time it takes for the economy to respond and adjust to a monetary policy action after it has been implemented.

Example: "Due to the          associated with monetary policy, the Federal Reserve must act preemptively, because interest rate changes may take 12 to 18 months to fully affect output and inflation."

Example: "Due to the          associated with monetary policy, the Federal Reserve must act preemptively, because interest rate changes may take 12 to 18 months to fully affect output and inflation."

Example: "Due to the          associated with monetary policy, the Federal Reserve must act preemptively, because interest rate changes may take 12 to 18 months to fully affect output and inflation."

Aggregate demand

The total quantity of goods and services demanded across an entire economy at different price levels.

Example: "When consumer confidence falls sharply,          declines, leading to lower output and higher unemployment if the economy was previously at full employment."

Example: "When consumer confidence falls sharply,          declines, leading to lower output and higher unemployment if the economy was previously at full employment."

Example: "When consumer confidence falls sharply,          declines, leading to lower output and higher unemployment if the economy was previously at full employment."

Aggregate demand (AD)

The amount of total spending on domestic goods and services in an economy.

Example: "An increase in net exports caused by a weaker dollar raises aggregate demand, which can close a recessionary gap by pushing real GDP back toward its potential level."

Example: "An increase in net exports caused by a weaker dollar raises aggregate demand, which can close a recessionary gap by pushing real GDP back toward its potential level."

Example: "An increase in net exports caused by a weaker dollar raises aggregate demand, which can close a recessionary gap by pushing real GDP back toward its potential level."

Aggregate Demand curve

A graph showing the relationship between the price level and the quantity of goods and services demanded in an economy at all price levels.

Example: "The          slopes downward because at higher price levels, real wealth decreases, interest rates rise, and exports become less competitive, all of which reduce total spending."

Example: "The          slopes downward because at higher price levels, real wealth decreases, interest rates rise, and exports become less competitive, all of which reduce total spending."

Example: "The          slopes downward because at higher price levels, real wealth decreases, interest rates rise, and exports become less competitive, all of which reduce total spending."

Aggregate demand shock

A sudden, unexpected change in the total demand for goods and services in an economy, causing shifts in the AD curve.

Example: "The sudden collapse of consumer and business confidence during the 2008 financial crisis created a negative          that shifted the AD curve sharply to the left."

Example: "The sudden collapse of consumer and business confidence during the 2008 financial crisis created a negative          that shifted the AD curve sharply to the left."

Example: "The sudden collapse of consumer and business confidence during the 2008 financial crisis created a negative          that shifted the AD curve sharply to the left."

Aggregate demand/aggregate supply model

A model that shows what determines total supply or total demand for the economy, and how total demand and total supply interact at the macroeconomic level.

Example: "Using the         , economists predict that an increase in government spending will shift AD to the right, raising both the price level and real GDP in the short run."

Example: "Using the         , economists predict that an increase in government spending will shift AD to the right, raising both the price level and real GDP in the short run."

Example: "Using the         , economists predict that an increase in government spending will shift AD to the right, raising both the price level and real GDP in the short run."

Aggregate output

The total quantity of goods and services produced in an economy, typically measured as real GDP.

Example: "When          falls below its potential level for two consecutive quarters, the economy is typically defined as being in a recession."

Example: "When          falls below its potential level for two consecutive quarters, the economy is typically defined as being in a recession."

Example: "When          falls below its potential level for two consecutive quarters, the economy is typically defined as being in a recession."

Aggregate production function

The process whereby an economy as a whole turns economic inputs such as human capital, physical capital, and technology into output measured as GDP per capita.

Example: "According to the         , an economy that invests in education and technology will achieve higher GDP per capita over time."

Example: "According to the         , an economy that invests in education and technology will achieve higher GDP per capita over time."

Example: "According to the         , an economy that invests in education and technology will achieve higher GDP per capita over time."

Aggregate quantity of output demanded

The total amount of real output that all buyers in an economy are willing and able to purchase at different price levels.

Example: "At a lower price level, the          increases because consumers have greater real purchasing power and exports become more attractive to foreign buyers."

Example: "At a lower price level, the          increases because consumers have greater real purchasing power and exports become more attractive to foreign buyers."

Example: "At a lower price level, the          increases because consumers have greater real purchasing power and exports become more attractive to foreign buyers."

Aggregate quantity of output supplied

The total amount of real output that all producers in an economy are willing and able to supply at different price levels.

Example: "When input costs rise due to an oil price spike, the          decreases at every price level, shifting the AS curve to the left."

Example: "When input costs rise due to an oil price spike, the          decreases at every price level, shifting the AS curve to the left."

Example: "When input costs rise due to an oil price spike, the          decreases at every price level, shifting the AS curve to the left."

Aggregate supply

The total quantity of goods and services that producers are willing and able to supply at various price levels.

Example: "A significant increase in worker productivity raises         , allowing the economy to produce more output at each price level and reducing inflationary pressure."

Example: "A significant increase in worker productivity raises         , allowing the economy to produce more output at each price level and reducing inflationary pressure."

Example: "A significant increase in worker productivity raises         , allowing the economy to produce more output at each price level and reducing inflationary pressure."

Aggregate supply (AS)

The total quantity of output (i.e. real GDP) firms will produce and sell.

Example: "In the long run, aggregate supply is determined solely by the economy's productive capacity, meaning monetary policy cannot permanently increase real GDP beyond potential output."

Example: "In the long run, aggregate supply is determined solely by the economy's productive capacity, meaning monetary policy cannot permanently increase real GDP beyond potential output."

Example: "In the long run, aggregate supply is determined solely by the economy's productive capacity, meaning monetary policy cannot permanently increase real GDP beyond potential output."

Aggregate supply (AS) curve

The total quantity of output (i.e. real GDP) that firms will produce and sell at each price level.

Example: "A rise in oil prices shifts the aggregate supply curve to the left, causing the economy to produce less real GDP at every price level."

Example: "A rise in oil prices shifts the aggregate supply curve to the left, causing the economy to produce less real GDP at every price level."

Example: "A rise in oil prices shifts the aggregate supply curve to the left, causing the economy to produce less real GDP at every price level."

Aggregate supply shock

An unexpected event that causes a sudden shift in the aggregate supply curve, affecting the economy's ability to produce goods and services.

Example: "A devastating hurricane that destroys oil refineries creates a negative         , simultaneously pushing the price level up and real GDP down—a phenomenon known as stagflation."

Example: "A devastating hurricane that destroys oil refineries creates a negative         , simultaneously pushing the price level up and real GDP down—a phenomenon known as stagflation."

Example: "A devastating hurricane that destroys oil refineries creates a negative         , simultaneously pushing the price level up and real GDP down—a phenomenon known as stagflation."

Allocative efficiency

When the mix of goods produced represents the mix that society most desires.

Example: "In a perfectly competitive market at long-run equilibrium,          is achieved because price equals marginal cost, ensuring resources flow to their highest-valued uses."

Example: "In a perfectly competitive market at long-run equilibrium,          is achieved because price equals marginal cost, ensuring resources flow to their highest-valued uses."

Example: "In a perfectly competitive market at long-run equilibrium,          is achieved because price equals marginal cost, ensuring resources flow to their highest-valued uses."

Ample reserves

When banks are holding an amount of reserves significantly above the minimum required amount; generally a choice made by banks during and after the Great Recession.

Example: "Following the 2008 financial crisis, many commercial banks held          far exceeding reserve requirements, limiting the effectiveness of traditional open-market operations."

Example: "Following the 2008 financial crisis, many commercial banks held          far exceeding reserve requirements, limiting the effectiveness of traditional open-market operations."

Example: "Following the 2008 financial crisis, many commercial banks held          far exceeding reserve requirements, limiting the effectiveness of traditional open-market operations."

Anti-dumping laws

Laws that block imports sold below the cost of production and impose tariffs that would increase the price of these imports to reflect their cost of production.

Example: "Domestic steel producers lobbied Congress to enforce          after foreign competitors began selling steel in the U.S. market at prices below their cost of production."

Example: "Domestic steel producers lobbied Congress to enforce          after foreign competitors began selling steel in the U.S. market at prices below their cost of production."

Example: "Domestic steel producers lobbied Congress to enforce          after foreign competitors began selling steel in the U.S. market at prices below their cost of production."

Appreciating

When a currency is worth more in terms of other currencies; also called “strengthening”.

Example: "When the U.S. dollar is          relative to the euro, American goods become more expensive for Europeans, which tends to decrease U.S. exports and widen the trade deficit."

Example: "When the U.S. dollar is          relative to the euro, American goods become more expensive for Europeans, which tends to decrease U.S. exports and widen the trade deficit."

Example: "When the U.S. dollar is          relative to the euro, American goods become more expensive for Europeans, which tends to decrease U.S. exports and widen the trade deficit."

Arbitrage

The process of buying a good and selling goods across borders to take advantage of international price differences.

Example: "A trader exploits          by buying wheat in a low-price market and immediately selling it in a higher-price market, profiting from the price difference until prices equalize."

Example: "A trader exploits          by buying wheat in a low-price market and immediately selling it in a higher-price market, profiting from the price difference until prices equalize."

Example: "A trader exploits          by buying wheat in a low-price market and immediately selling it in a higher-price market, profiting from the price difference until prices equalize."

Asset–liability time mismatch

Customers can withdraw a bank’s liabilities in the short term while customers repay its assets in the long term.

Example: "A bank faces an          because depositors can withdraw funds on demand, but the bank's mortgage loans are repaid over 30 years."

Example: "A bank faces an          because depositors can withdraw funds on demand, but the bank's mortgage loans are repaid over 30 years."

Automatic stabilizers

Tax and spending rules that have the effect of slowing down the rate of decrease in aggregate demand when the economy slows down and restraining aggregate demand when the economy speeds up, without any additional change in legislation.

Example: "During a recession,          such as unemployment insurance increase government spending without new legislation, helping to cushion the fall in aggregate demand."

Example: "During a recession,          such as unemployment insurance increase government spending without new legislation, helping to cushion the fall in aggregate demand."

Example: "During a recession,          such as unemployment insurance increase government spending without new legislation, helping to cushion the fall in aggregate demand."

Autonomous expenditures

Spending that is independent of income levels and initiates changes in total expenditures and output.

Example: "An increase in         , such as a surge in business investment driven by technological optimism, can trigger a multiplied increase in national income through the spending multiplier."

Example: "An increase in         , such as a surge in business investment driven by technological optimism, can trigger a multiplied increase in national income through the spending multiplier."

Example: "An increase in         , such as a surge in business investment driven by technological optimism, can trigger a multiplied increase in national income through the spending multiplier."

Balance of payments

A comprehensive accounting record of all economic transactions between a country and the rest of the world, including the current account and capital and financial account.

Example: "A country's          must always sum to zero, meaning that a deficit in the current account must be offset by a surplus in the capital and financial account."

Example: "A country's          must always sum to zero, meaning that a deficit in the current account must be offset by a surplus in the capital and financial account."

Example: "A country's          must always sum to zero, meaning that a deficit in the current account must be offset by a surplus in the capital and financial account."

Balance of trade

The difference between a country's exports and imports; the net exports component of the current account.

Example: "When a country's imports exceed its exports, it runs a negative         , which represents a deficit in the current account of its balance of payments."

Example: "When a country's imports exceed its exports, it runs a negative         , which represents a deficit in the current account of its balance of payments."

Example: "When a country's imports exceed its exports, it runs a negative         , which represents a deficit in the current account of its balance of payments."

Balance sheets

Financial statements that show a bank's assets, liabilities, and equity at a specific point in time, used to analyze the effects of banking system changes.

Example: "By examining a bank's         , economists can determine how an open market purchase by the Federal Reserve increases reserves on the asset side and raises the money supply."

Example: "By examining a bank's         , economists can determine how an open market purchase by the Federal Reserve increases reserves on the asset side and raises the money supply."

Example: "By examining a bank's         , economists can determine how an open market purchase by the Federal Reserve increases reserves on the asset side and raises the money supply."

Bank reserves

Money held by banks that is not loaned out, including reserves required by the Federal Reserve and excess reserves.

Example: "When the Federal Reserve lowers the reserve requirement, banks can hold fewer         , enabling them to make more loans and expand the money supply through the money multiplier."

Example: "When the Federal Reserve lowers the reserve requirement, banks can hold fewer         , enabling them to make more loans and expand the money supply through the money multiplier."

Example: "When the Federal Reserve lowers the reserve requirement, banks can hold fewer         , enabling them to make more loans and expand the money supply through the money multiplier."

Bank run

When depositors race to the bank to withdraw their deposits for fear that otherwise they would be lost.

Example: "When rumors spread that First City Bank was insolvent, depositors rushed to withdraw their savings, triggering a          that forced the institution to close."

Example: "When rumors spread that First City Bank was insolvent, depositors rushed to withdraw their savings, triggering a          that forced the institution to close."

Example: "When rumors spread that First City Bank was insolvent, depositors rushed to withdraw their savings, triggering a          that forced the institution to close."

Banking system

The network of financial institutions, including commercial banks and central banks, that facilitate the creation and circulation of money in an economy.

Example: "The          amplifies the money supply through the process of fractional reserve banking, where each dollar of deposits supports multiple dollars of loans."

Example: "The          amplifies the money supply through the process of fractional reserve banking, where each dollar of deposits supports multiple dollars of loans."

Example: "The          amplifies the money supply through the process of fractional reserve banking, where each dollar of deposits supports multiple dollars of loans."

Barter

Literally, trading one good or service for another, without using money.

Example: "In economies without a reliable medium of exchange, individuals must resort to         , which is highly inefficient because it requires a double coincidence of wants between trading partners."

Example: "In economies without a reliable medium of exchange, individuals must resort to         , which is highly inefficient because it requires a double coincidence of wants between trading partners."

Example: "In economies without a reliable medium of exchange, individuals must resort to         , which is highly inefficient because it requires a double coincidence of wants between trading partners."

Base year

Arbitrary year whose value as an index number economists define as 100; inflation from the base year to other years can easily be seen by comparing the index number in the other year to the index number in the base year—for example, 100; so, if the index number for a year is 105, then there has been exactly 5% inflation between that year and the base year.

Example: "If the CPI equals 100 in the          and rises to 115 ten years later, prices have increased by exactly 15% over that period."

Example: "If the CPI equals 100 in the          and rises to 115 ten years later, prices have increased by exactly 15% over that period."

Example: "If the CPI equals 100 in the          and rises to 115 ten years later, prices have increased by exactly 15% over that period."

Basket of goods and services

A hypothetical group of different items, with specified quantities of each one meant to represent a “typical” set of consumer purchases, used as a basis for calculating how the price level changes over time.

Example: "The Bureau of Labor Statistics updates the          used to calculate the CPI periodically to reflect changes in typical consumer spending patterns."

Example: "The Bureau of Labor Statistics updates the          used to calculate the CPI periodically to reflect changes in typical consumer spending patterns."

Example: "The Bureau of Labor Statistics updates the          used to calculate the CPI periodically to reflect changes in typical consumer spending patterns."

Bond price

The market value of a bond at any given time, which fluctuates inversely with changes in interest rates.

Example: "When the Federal Reserve raises interest rates,          fall, because existing bonds paying lower fixed rates become less attractive compared to newly issued bonds."

Example: "When the Federal Reserve raises interest rates,          fall, because existing bonds paying lower fixed rates become less attractive compared to newly issued bonds."

Example: "When the Federal Reserve raises interest rates,          fall, because existing bonds paying lower fixed rates become less attractive compared to newly issued bonds."

Bonds

Interest-bearing financial assets that represent a loan to a borrower, typically a government or corporation.

Example: "When the federal government runs a budget deficit, it finances the shortfall by issuing          to the public, which represents borrowing in the loanable funds market."

Example: "When the federal government runs a budget deficit, it finances the shortfall by issuing          to the public, which represents borrowing in the loanable funds market."

Example: "When the federal government runs a budget deficit, it finances the shortfall by issuing          to the public, which represents borrowing in the loanable funds market."

Borrowers

Individuals or entities that demand loanable funds by taking loans in the loanable funds market.

Example: "As the real interest rate rises,          find credit more expensive and reduce their demand for loanable funds, causing investment spending to fall and aggregate demand to decrease."

Example: "As the real interest rate rises,          find credit more expensive and reduce their demand for loanable funds, causing investment spending to fall and aggregate demand to decrease."

Example: "As the real interest rate rises,          find credit more expensive and reduce their demand for loanable funds, causing investment spending to fall and aggregate demand to decrease."

Budget constraint

All possible consumption combinations of goods that someone can afford, given the prices of goods, when all income is spent; the boundary of the opportunity set.

Example: "With an income of $60 and prices of $3 for pizza and $6 for sandwiches, a consumer's          limits them to combinations such as 20 pizzas and 0 sandwiches, or 10 pizzas and 5 sandwiches."

Example: "With an income of $60 and prices of $3 for pizza and $6 for sandwiches, a consumer's          limits them to combinations such as 20 pizzas and 0 sandwiches, or 10 pizzas and 5 sandwiches."

Example: "With an income of $60 and prices of $3 for pizza and $6 for sandwiches, a consumer's          limits them to combinations such as 20 pizzas and 0 sandwiches, or 10 pizzas and 5 sandwiches."

Budget deficit

When the federal government spends more money than it receives in taxes in a given year.

Example: "A          occurs when the government's spending on programs and interest payments exceeds its tax revenues, requiring the Treasury to borrow funds by issuing bonds."

Example: "A          occurs when the government's spending on programs and interest payments exceeds its tax revenues, requiring the Treasury to borrow funds by issuing bonds."

Example: "A          occurs when the government's spending on programs and interest payments exceeds its tax revenues, requiring the Treasury to borrow funds by issuing bonds."

Budget surplus

When the government receives more money in taxes than it spends in a year.

Example: "During the late 1990s, the U.S. experienced a          that allowed the federal government to pay down a portion of its outstanding national debt."

Example: "During the late 1990s, the U.S. experienced a          that allowed the federal government to pay down a portion of its outstanding national debt."

Example: "During the late 1990s, the U.S. experienced a          that allowed the federal government to pay down a portion of its outstanding national debt."

Burden of the national debt

The economic and fiscal consequences and challenges that result from a large national debt, including effects on interest payments, economic growth, and future fiscal policy.

Example: "Critics of deficit spending argue that the          is shifted to future generations, who will face higher taxes or reduced government services to pay the interest on borrowed funds."

Example: "Critics of deficit spending argue that the          is shifted to future generations, who will face higher taxes or reduced government services to pay the interest on borrowed funds."

Example: "Critics of deficit spending argue that the          is shifted to future generations, who will face higher taxes or reduced government services to pay the interest on borrowed funds."

Business cycle

Fluctuations in aggregate output and employment caused by changes in aggregate supply and/or aggregate demand.

Example: "The          illustrates how real GDP fluctuates around its long-run trend, moving through phases of expansion, peak, contraction, and trough before recovering again."

Example: "The          illustrates how real GDP fluctuates around its long-run trend, moving through phases of expansion, peak, contraction, and trough before recovering again."

Example: "The          illustrates how real GDP fluctuates around its long-run trend, moving through phases of expansion, peak, contraction, and trough before recovering again."

Capital

A factor of production consisting of tools, equipment, and infrastructure used to produce goods and services.

Example: "A bakery invests in new ovens and mixers, increasing its stock of          and allowing it to produce more bread at a lower average cost."

Example: "A bakery invests in new ovens and mixers, increasing its stock of          and allowing it to produce more bread at a lower average cost."

Example: "A bakery invests in new ovens and mixers, increasing its stock of          and allowing it to produce more bread at a lower average cost."

Capital and financial account

The component of the balance of payments that records transactions involving the purchase and sale of assets, including financial investments and capital transfers between a country and the rest of the world.

Example: "When foreign investors purchase U.S. Treasury bonds, the transaction is recorded as a credit in the         , offsetting the country's current account deficit."

Example: "When foreign investors purchase U.S. Treasury bonds, the transaction is recorded as a credit in the         , offsetting the country's current account deficit."

Example: "When foreign investors purchase U.S. Treasury bonds, the transaction is recorded as a credit in the         , offsetting the country's current account deficit."

Capital deepening

An increase by society in the average level of physical and/or human capital per person.

Example: "Countries that invest heavily in education and infrastructure experience         , which raises labor productivity and promotes long-run economic growth."

Example: "Countries that invest heavily in education and infrastructure experience         , which raises labor productivity and promotes long-run economic growth."

Example: "Countries that invest heavily in education and infrastructure experience         , which raises labor productivity and promotes long-run economic growth."

Cash

Physical currency in the form of bills and coins, representing the most liquid form of money.

Example: "         held outside of banks is the most liquid asset in the economy, but it earns no interest, which is why households and businesses prefer to hold most of their wealth in interest-bearing accounts."

Example: "         held outside of banks is the most liquid asset in the economy, but it earns no interest, which is why households and businesses prefer to hold most of their wealth in interest-bearing accounts."

Example: "         held outside of banks is the most liquid asset in the economy, but it earns no interest, which is why households and businesses prefer to hold most of their wealth in interest-bearing accounts."

Central bank

A financial institution responsible for implementing monetary policy and managing a country's money supply and banking system.

Example: "As the          of the United States, the Federal Reserve controls the money supply and sets the federal funds rate target to achieve its dual mandate of price stability and maximum employment."

Example: "As the          of the United States, the Federal Reserve controls the money supply and sets the federal funds rate target to achieve its dual mandate of price stability and maximum employment."

Example: "As the          of the United States, the Federal Reserve controls the money supply and sets the federal funds rate target to achieve its dual mandate of price stability and maximum employment."

Circular flow diagram

A diagram that views the economy as consisting of households and firms interacting in a goods and services market and a labor market.

Example: "The          shows that households supply labor to firms in the factor market and, in turn, use the wages they earn to purchase goods in the product market."

Example: "The          shows that households supply labor to firms in the factor market and, in turn, use the wages they earn to purchase goods in the product market."

Example: "The          shows that households supply labor to firms in the factor market and, in turn, use the wages they earn to purchase goods in the product market."

Closed economy

An economy that does not engage in international borrowing, lending, or trade with other countries.

Example: "In a         , national saving must equal investment, because there is no option to borrow from or lend to foreign nations."

Example: "In a         , national saving must equal investment, because there is no option to borrow from or lend to foreign nations."

Example: "In a         , national saving must equal investment, because there is no option to borrow from or lend to foreign nations."

Coins and currency in circulation

The coins and bills that circulate in an economy that are not held by the U.S Treasury, at the Federal Reserve Bank, or in bank vaults.

Example: "         count as part of the M1 money supply because they are held by the public and readily used for transactions."

Example: "         count as part of the M1 money supply because they are held by the public and readily used for transactions."

Example: "         count as part of the M1 money supply because they are held by the public and readily used for transactions."

Command economy

An economy where economic decisions are passed down from government authority and where the government owns the resources.

Example: "In a         , central planners determine how much steel and wheat each factory must produce, rather than allowing prices to coordinate production decisions."

Example: "In a         , central planners determine how much steel and wheat each factory must produce, rather than allowing prices to coordinate production decisions."

Example: "In a         , central planners determine how much steel and wheat each factory must produce, rather than allowing prices to coordinate production decisions."

Commodity money

An item that is used as money, but which also has value from its use as something other than money.

Example: "Gold served as          in early economies because it had intrinsic value for jewelry and industrial uses, independent of its role as a medium of exchange."

Example: "Gold served as          in early economies because it had intrinsic value for jewelry and industrial uses, independent of its role as a medium of exchange."

Example: "Gold served as          in early economies because it had intrinsic value for jewelry and industrial uses, independent of its role as a medium of exchange."

Commodity-backed currencies

Dollar bills or other currencies with values backed up by gold or another commodity.

Example: "Under the gold standard, the U.S. dollar was a commodity-backed currency, meaning that every dollar in circulation was redeemable for a fixed quantity of gold held by the government."

Example: "Under the gold standard, the U.S. dollar was a commodity-backed currency, meaning that every dollar in circulation was redeemable for a fixed quantity of gold held by the government."

Example: "Under the gold standard, the U.S. dollar was a commodity-backed currency, meaning that every dollar in circulation was redeemable for a fixed quantity of gold held by the government."

Common market

Economic agreement between countries to allow free trade in goods, services, labor, and financial capital between members while having a common external trade policy.

Example: "The European Union operates as a         , allowing workers, goods, services, and capital to move freely across member-state borders without tariffs or quotas."

Example: "The European Union operates as a         , allowing workers, goods, services, and capital to move freely across member-state borders without tariffs or quotas."

Example: "The European Union operates as a         , allowing workers, goods, services, and capital to move freely across member-state borders without tariffs or quotas."

Comparative advantage

When a country can produce a good at a lower cost in terms of other goods; or, when a country has a lower opportunity cost of production.

Example: "Even though Brazil can produce both coffee and soybeans more efficiently than Argentina, Argentina should specialize in soybeans if it has a lower opportunity cost in soybean production, reflecting         ."

Example: "Even though Brazil can produce both coffee and soybeans more efficiently than Argentina, Argentina should specialize in soybeans if it has a lower opportunity cost in soybean production, reflecting         ."

Example: "Even though Brazil can produce both coffee and soybeans more efficiently than Argentina, Argentina should specialize in soybeans if it has a lower opportunity cost in soybean production, reflecting         ."

Complements

Goods that are often used together so that consumption of one good tends to enhance consumption of the other.

Example: "Because printers and ink cartridges are         , an increase in the price of printers will reduce the quantity demanded of ink cartridges, as reflected in a negative cross-price elasticity."

Example: "Because printers and ink cartridges are         , an increase in the price of printers will reduce the quantity demanded of ink cartridges, as reflected in a negative cross-price elasticity."

Example: "Because printers and ink cartridges are         , an increase in the price of printers will reduce the quantity demanded of ink cartridges, as reflected in a negative cross-price elasticity."

Compound growth rate

The rate of growth when multiplied by a base that includes past GDP growth.

Example: "At a          of 2 percent per year, an economy's real GDP will approximately double in 35 years, illustrating the powerful long-run effects of even modest annual growth."

Example: "At a          of 2 percent per year, an economy's real GDP will approximately double in 35 years, illustrating the powerful long-run effects of even modest annual growth."

Example: "At a          of 2 percent per year, an economy's real GDP will approximately double in 35 years, illustrating the powerful long-run effects of even modest annual growth."

Constant opportunity costs

A situation where the opportunity cost of producing one good remains the same regardless of the quantity produced, resulting in a linear PPC.

Example: "If a country faces          between producing cars and computers, its production possibilities curve is a straight line with a constant slope."

Example: "If a country faces          between producing cars and computers, its production possibilities curve is a straight line with a constant slope."

Example: "If a country faces          between producing cars and computers, its production possibilities curve is a straight line with a constant slope."

Constant prices

Prices from a fixed base year used to measure output across different time periods while removing the effect of inflation.

Example: "To calculate real GDP, economists measure output using          from a base year, which removes the distorting effect of inflation and allows for accurate comparisons across time periods."

Example: "To calculate real GDP, economists measure output using          from a base year, which removes the distorting effect of inflation and allows for accurate comparisons across time periods."

Example: "To calculate real GDP, economists measure output using          from a base year, which removes the distorting effect of inflation and allows for accurate comparisons across time periods."

Constant unitary elasticity

When a given percent price change in price leads to an equal percentage change in quantity demanded or supplied.

Example: "A demand curve exhibits          when a 10% increase in price is exactly offset by a 10% decrease in quantity demanded at every point on the curve, leaving total revenue unchanged."

Example: "A demand curve exhibits          when a 10% increase in price is exactly offset by a 10% decrease in quantity demanded at every point on the curve, leaving total revenue unchanged."

Example: "A demand curve exhibits          when a 10% increase in price is exactly offset by a 10% decrease in quantity demanded at every point on the curve, leaving total revenue unchanged."

Consumer income

The total earnings and resources available to consumers, which influences their ability and willingness to purchase goods and services.

Example: "Rising          typically shifts the demand curve for normal goods to the right, as households have more purchasing power and are willing to buy more at every price level."

Example: "Rising          typically shifts the demand curve for normal goods to the right, as households have more purchasing power and are willing to buy more at every price level."

Example: "Rising          typically shifts the demand curve for normal goods to the right, as households have more purchasing power and are willing to buy more at every price level."

Consumer Price Index

A measure of the average change in prices paid by consumers for goods and services over time.

Example: "The          rose from 260 to 273 over the past year, indicating an annual inflation rate of approximately 5 percent."

Example: "The          rose from 260 to 273 over the past year, indicating an annual inflation rate of approximately 5 percent."

Example: "The          rose from 260 to 273 over the past year, indicating an annual inflation rate of approximately 5 percent."

Consumer Price Index (CPI)

A measure of inflation that U.S. government statisticians calculate based on the price level from a fixed basket of goods and services that represents the average consumer's purchases.

Example: "If the Consumer Price Index rises from 250 to 262.5 over one year, the annual inflation rate is 5%, meaning consumers must spend 5% more to maintain the same standard of living."

Example: "If the Consumer Price Index rises from 250 to 262.5 over one year, the annual inflation rate is 5%, meaning consumers must spend 5% more to maintain the same standard of living."

Example: "If the Consumer Price Index rises from 250 to 262.5 over one year, the annual inflation rate is 5%, meaning consumers must spend 5% more to maintain the same standard of living."

Consumer surplus

The extra benefit consumers receive from buying a good or service, measured by what the individuals would have been willing to pay minus the amount that they actually paid.

Example: "A buyer who was willing to pay $80 for a concert ticket but purchases one at the market price of $50 receives          of $30."

Example: "A buyer who was willing to pay $80 for a concert ticket but purchases one at the market price of $50 receives          of $30."

Example: "A buyer who was willing to pay $80 for a concert ticket but purchases one at the market price of $50 receives          of $30."

Consumption

Spending by households on goods and services, which is affected by changes in tax revenues and disposable income.

Example: "When the government cuts personal income taxes, households experience an increase in disposable income, which raises          and shifts the aggregate demand curve to the right."

Example: "When the government cuts personal income taxes, households experience an increase in disposable income, which raises          and shifts the aggregate demand curve to the right."

Example: "When the government cuts personal income taxes, households experience an increase in disposable income, which raises          and shifts the aggregate demand curve to the right."

Consumption opportunities

The range of goods and services that can be consumed, which may extend beyond what a producer can make alone through specialization and trade.

Example: "Through specialization and trade, a country can expand its          beyond what its own production possibilities curve would allow, consuming combinations of goods it could not produce on its own."

Example: "Through specialization and trade, a country can expand its          beyond what its own production possibilities curve would allow, consuming combinations of goods it could not produce on its own."

Example: "Through specialization and trade, a country can expand its          beyond what its own production possibilities curve would allow, consuming combinations of goods it could not produce on its own."

Contractionary fiscal policy

Fiscal policy that decreases the level of aggregate demand, either through cuts in government spending or increases in taxes.

Example: "To cool an overheating economy with high inflation, the government implemented          by raising income taxes and cutting infrastructure spending."

Example: "To cool an overheating economy with high inflation, the government implemented          by raising income taxes and cutting infrastructure spending."

Example: "To cool an overheating economy with high inflation, the government implemented          by raising income taxes and cutting infrastructure spending."

Contractionary monetary policy

Central bank actions that decrease the money supply and raise interest rates to reduce inflation and cool down an overheating economy.

Example: "The Federal Reserve pursued          in the early 1980s by dramatically raising the federal funds rate, which reduced the money supply and successfully brought down double-digit inflation at the cost of a deep recession."

Example: "The Federal Reserve pursued          in the early 1980s by dramatically raising the federal funds rate, which reduced the money supply and successfully brought down double-digit inflation at the cost of a deep recession."

Example: "The Federal Reserve pursued          in the early 1980s by dramatically raising the federal funds rate, which reduced the money supply and successfully brought down double-digit inflation at the cost of a deep recession."

Contractual rights

The rights of individuals to enter into agreements with others regarding the use of their property providing recourse through the legal system in the event of noncompliance.

Example: "A firm's          to enforce supplier agreements through the court system reduce transaction costs and encourage long-term business relationships."

Example: "A firm's          to enforce supplier agreements through the court system reduce transaction costs and encourage long-term business relationships."

Example: "A firm's          to enforce supplier agreements through the court system reduce transaction costs and encourage long-term business relationships."

Convergence

Pattern in which economies with low per capita incomes grow faster than economies with high per capita incomes.

Example: "Economists observe          as developing nations with low per capita incomes, such as South Korea in the 1960s, grow faster than wealthy nations by adopting existing technologies."

Example: "Economists observe          as developing nations with low per capita incomes, such as South Korea in the 1960s, grow faster than wealthy nations by adopting existing technologies."

Example: "Economists observe          as developing nations with low per capita incomes, such as South Korea in the 1960s, grow faster than wealthy nations by adopting existing technologies."

Converging economy

Economy of a country that has demonstrated the ability to catch up to the technology leaders by investing in both physical and human capital.

Example: "China is often cited as a          because it has rapidly adopted foreign technologies and invested heavily in human and physical capital to close the income gap with high-income countries."

Example: "China is often cited as a          because it has rapidly adopted foreign technologies and invested heavily in human and physical capital to close the income gap with high-income countries."

Example: "China is often cited as a          because it has rapidly adopted foreign technologies and invested heavily in human and physical capital to close the income gap with high-income countries."

Coordination argument

Downward wage and price flexibility requires perfect information about the level of lower compensation acceptable to other laborers and market participants.

Example: "The          suggests that even if all workers agreed to accept lower wages during a recession, no individual worker would cut wages first without assurance that others would do the same."

Example: "The          suggests that even if all workers agreed to accept lower wages during a recession, no individual worker would cut wages first without assurance that others would do the same."

Example: "The          suggests that even if all workers agreed to accept lower wages during a recession, no individual worker would cut wages first without assurance that others would do the same."

Core inflation index

A measure of inflation typically calculated by taking the CPI and excluding volatile economic variables such as food and energy prices to better measure the underlying and persistent trend in long-term prices.

Example: "Because energy prices fluctuate sharply with weather and geopolitical events, the Federal Reserve monitors the         , which strips out food and energy, to assess underlying price trends."

Example: "Because energy prices fluctuate sharply with weather and geopolitical events, the Federal Reserve monitors the         , which strips out food and energy, to assess underlying price trends."

Example: "Because energy prices fluctuate sharply with weather and geopolitical events, the Federal Reserve monitors the         , which strips out food and energy, to assess underlying price trends."

Cost-of-living adjustments (COLAs)

A contractual provision that wage increases will keep up with inflation.

Example: "Many union contracts include          that automatically increase wages whenever the CPI rises by a specified amount, protecting workers from the erosion of real purchasing power."

Example: "Many union contracts include          that automatically increase wages whenever the CPI rises by a specified amount, protecting workers from the erosion of real purchasing power."

Example: "Many union contracts include          that automatically increase wages whenever the CPI rises by a specified amount, protecting workers from the erosion of real purchasing power."

Cost-push inflation

Inflation caused by a decrease in aggregate supply due to rising production costs, pushing prices upward.

Example: "The 1973 OPEC oil embargo triggered          in the United States, as rising energy costs increased production expenses across the economy, shifting the short-run AS curve to the left and driving up the price level."

Example: "The 1973 OPEC oil embargo triggered          in the United States, as rising energy costs increased production expenses across the economy, shifting the short-run AS curve to the left and driving up the price level."

Example: "The 1973 OPEC oil embargo triggered          in the United States, as rising energy costs increased production expenses across the economy, shifting the short-run AS curve to the left and driving up the price level."

Countercyclical

Moving in the opposite direction of the business cycle of economic downturns and upswings.

Example: "Automatic stabilizers such as unemployment insurance are          because government spending on these programs automatically increases during recessions and decreases during expansions without any deliberate policy action."

Example: "Automatic stabilizers such as unemployment insurance are          because government spending on these programs automatically increases during recessions and decreases during expansions without any deliberate policy action."

Example: "Automatic stabilizers such as unemployment insurance are          because government spending on these programs automatically increases during recessions and decreases during expansions without any deliberate policy action."

Credit

A transaction in the balance of payments that causes money to flow into a country.

Example: "When a foreign company purchases American-made aircraft, the transaction is recorded as a          in the U.S. current account because it causes money to flow into the United States."

Example: "When a foreign company purchases American-made aircraft, the transaction is recorded as a          in the U.S. current account because it causes money to flow into the United States."

Example: "When a foreign company purchases American-made aircraft, the transaction is recorded as a          in the U.S. current account because it causes money to flow into the United States."

Credit card

Immediately transfers money from the credit card company’s checking account to the seller, and at the end of the month the user owes the money to the credit card company; a credit card is a short-term loan.

Example: "When a consumer uses a          to buy groceries, she receives a short-term loan from the card issuer and must repay the balance at the end of the billing cycle, potentially with interest."

Example: "When a consumer uses a          to buy groceries, she receives a short-term loan from the card issuer and must repay the balance at the end of the billing cycle, potentially with interest."

Example: "When a consumer uses a          to buy groceries, she receives a short-term loan from the card issuer and must repay the balance at the end of the billing cycle, potentially with interest."

Cross-price elasticity of demand

The percentage change in the quantity of good A that is demanded as a result of a percentage change in the price of good B.

Example: "If a 10% increase in the price of coffee leads to an 8% increase in the quantity demanded of tea, the          is +0.8, confirming that coffee and tea are substitutes."

Example: "If a 10% increase in the price of coffee leads to an 8% increase in the quantity demanded of tea, the          is +0.8, confirming that coffee and tea are substitutes."

Example: "If a 10% increase in the price of coffee leads to an 8% increase in the quantity demanded of tea, the          is +0.8, confirming that coffee and tea are substitutes."

Crowding out

The phenomenon where increased government borrowing leads to higher interest rates, which reduces private investment spending.

Example: "Critics of deficit-financed fiscal stimulus argue that          may offset its benefits, because government borrowing raises interest rates and reduces the private investment spending it was meant to stimulate."

Example: "Critics of deficit-financed fiscal stimulus argue that          may offset its benefits, because government borrowing raises interest rates and reduces the private investment spending it was meant to stimulate."

Example: "Critics of deficit-financed fiscal stimulus argue that          may offset its benefits, because government borrowing raises interest rates and reduces the private investment spending it was meant to stimulate."

Currency

Money issued by a country or economic union that serves as a medium of exchange for goods and services.

Example: "Countries that adopt a common         , like the euro, surrender the ability to use exchange rate adjustments as a tool to address trade imbalances or economic shocks."

Example: "Countries that adopt a common         , like the euro, surrender the ability to use exchange rate adjustments as a tool to address trade imbalances or economic shocks."

Example: "Countries that adopt a common         , like the euro, surrender the ability to use exchange rate adjustments as a tool to address trade imbalances or economic shocks."

Currency appreciation

An increase in the value of a country's currency relative to other currencies, making exports more expensive and imports cheaper.

Example: "         makes a country's exports more expensive and its imports cheaper; as a result, net exports typically fall, reducing aggregate demand and putting downward pressure on real GDP."

Example: "         makes a country's exports more expensive and its imports cheaper; as a result, net exports typically fall, reducing aggregate demand and putting downward pressure on real GDP."

Example: "         makes a country's exports more expensive and its imports cheaper; as a result, net exports typically fall, reducing aggregate demand and putting downward pressure on real GDP."

Currency depreciation

A decrease in the value of a country's currency relative to other currencies, making exports cheaper and imports more expensive.

Example: "         can help a country eliminate a trade deficit by making its exports cheaper for foreign buyers and its imports more expensive for domestic consumers, thereby increasing net exports."

Example: "         can help a country eliminate a trade deficit by making its exports cheaper for foreign buyers and its imports more expensive for domestic consumers, thereby increasing net exports."

Example: "         can help a country eliminate a trade deficit by making its exports cheaper for foreign buyers and its imports more expensive for domestic consumers, thereby increasing net exports."

Currency in circulation

Physical money (coins and paper bills) that is in use by the public and businesses.

Example: "During periods of financial uncertainty, households tend to increase their          by withdrawing cash from banks, which reduces the money multiplier and can contract the broader money supply."

Example: "During periods of financial uncertainty, households tend to increase their          by withdrawing cash from banks, which reduces the money multiplier and can contract the broader money supply."

Example: "During periods of financial uncertainty, households tend to increase their          by withdrawing cash from banks, which reduces the money multiplier and can contract the broader money supply."

Currency valuation

The process by which the relative worth or price of one currency is determined compared to other currencies.

Example: "Some countries intervene in foreign exchange markets to manage their         , selling their own currency to keep it weak and maintain a competitive advantage for their export industries."

Example: "Some countries intervene in foreign exchange markets to manage their         , selling their own currency to keep it weak and maintain a competitive advantage for their export industries."

Example: "Some countries intervene in foreign exchange markets to manage their         , selling their own currency to keep it weak and maintain a competitive advantage for their export industries."

Current account

The component of the balance of payments that records transactions in goods, services, income, and current transfers between a country and the rest of the world.

Example: "A country's          records the trade of goods and services with the rest of the world, and a persistent          deficit indicates that it is importing more than it is exporting."

Example: "A country's          records the trade of goods and services with the rest of the world, and a persistent          deficit indicates that it is importing more than it is exporting."

Example: "A country's          records the trade of goods and services with the rest of the world, and a persistent          deficit indicates that it is importing more than it is exporting."

Current account balance

A broad measure of the balance of trade that includes trade in goods and services, as well as international flows of income and foreign aid.

Example: "The United States runs a persistent          deficit, importing far more goods, services, and income payments than it exports each year."

Example: "The United States runs a persistent          deficit, importing far more goods, services, and income payments than it exports each year."

Example: "The United States runs a persistent          deficit, importing far more goods, services, and income payments than it exports each year."

Current account deficit

A situation where a country's current account debits exceed its credits, indicating more money flowing out than in from current account transactions.

Example: "The United States runs a          because Americans spend more on imported goods and services than foreigners spend on U.S. exports, with the difference financed by foreign investment in U.S. assets."

Example: "The United States runs a          because Americans spend more on imported goods and services than foreigners spend on U.S. exports, with the difference financed by foreign investment in U.S. assets."

Example: "The United States runs a          because Americans spend more on imported goods and services than foreigners spend on U.S. exports, with the difference financed by foreign investment in U.S. assets."

Current account surplus

A situation where a country's current account credits exceed its debits, indicating more money flowing in than out from current account transactions.

Example: "Germany's          reflects its strong export sector, meaning the country earns more from selling goods and services abroad than it spends on imports."

Example: "Germany's          reflects its strong export sector, meaning the country earns more from selling goods and services abroad than it spends on imports."

Example: "Germany's          reflects its strong export sector, meaning the country earns more from selling goods and services abroad than it spends on imports."

Current prices

The market prices of goods and services in the time period being measured.

Example: "Nominal GDP is calculated using         , which means it can rise simply due to inflation even if the actual quantity of goods and services produced has not changed."

Example: "Nominal GDP is calculated using         , which means it can rise simply due to inflation even if the actual quantity of goods and services produced has not changed."

Example: "Nominal GDP is calculated using         , which means it can rise simply due to inflation even if the actual quantity of goods and services produced has not changed."

Cyclical unemployment

Unemployment that fluctuates with the business cycle, increasing during recessions and decreasing during expansions due to changes in aggregate demand.

Example: "The sharp rise in          during the 2008 recession reflected the dramatic fall in aggregate demand that left millions of workers jobless even though they were willing and able to work."

Example: "The sharp rise in          during the 2008 recession reflected the dramatic fall in aggregate demand that left millions of workers jobless even though they were willing and able to work."

Example: "The sharp rise in          during the 2008 recession reflected the dramatic fall in aggregate demand that left millions of workers jobless even though they were willing and able to work."

Deadweight loss

The loss in social surplus that occurs when a market produces an inefficient quantity.

Example: "A monopolist that restricts output below the competitive level creates a          equal to the area of the triangle between the demand curve, marginal cost curve, and the monopoly quantity."

Example: "A monopolist that restricts output below the competitive level creates a          equal to the area of the triangle between the demand curve, marginal cost curve, and the monopoly quantity."

Example: "A monopolist that restricts output below the competitive level creates a          equal to the area of the triangle between the demand curve, marginal cost curve, and the monopoly quantity."

Debit

A transaction in the balance of payments that causes money to flow out of a country.

Example: "When an American tourist spends money in France, the transaction is recorded as a          in the U.S. current account because it causes money to flow out of the United States."

Example: "When an American tourist spends money in France, the transaction is recorded as a          in the U.S. current account because it causes money to flow out of the United States."

Example: "When an American tourist spends money in France, the transaction is recorded as a          in the U.S. current account because it causes money to flow out of the United States."

Debit card

Like a check, is an instruction to the user’s bank to transfer money directly and immediately from your bank account to the seller.

Example: "Unlike a credit card, when a consumer uses a          to pay for a meal, funds are immediately transferred from her checking account to the restaurant, with no short-term loan involved."

Example: "Unlike a credit card, when a consumer uses a          to pay for a meal, funds are immediately transferred from her checking account to the restaurant, with no short-term loan involved."

Example: "Unlike a credit card, when a consumer uses a          to pay for a meal, funds are immediately transferred from her checking account to the restaurant, with no short-term loan involved."

Decreasing opportunity costs

A situation where the opportunity cost of producing one good decreases as more of that good is produced, resulting in a bowed-in PPC.

Example: "If resources are not perfectly adaptable between two goods, a country may face         , resulting in a production possibilities curve that bows inward toward the origin."

Example: "If resources are not perfectly adaptable between two goods, a country may face         , resulting in a production possibilities curve that bows inward toward the origin."

Example: "If resources are not perfectly adaptable between two goods, a country may face         , resulting in a production possibilities curve that bows inward toward the origin."

Deflation

A sustained decrease in the general price level of goods and services in an economy over time.

Example: "         can be harmful to an economy because falling prices encourage consumers to delay purchases in anticipation of even lower prices, further reducing aggregate demand and deepening a recession."

Example: "         can be harmful to an economy because falling prices encourage consumers to delay purchases in anticipation of even lower prices, further reducing aggregate demand and deepening a recession."

Example: "         can be harmful to an economy because falling prices encourage consumers to delay purchases in anticipation of even lower prices, further reducing aggregate demand and deepening a recession."

Demand

The quantity of a good or service that consumers are willing and able to buy at various price levels.

Example: "An increase in household income raises the          for normal goods, shifting the          curve to the right and resulting in a higher equilibrium price and quantity."

Example: "An increase in household income raises the          for normal goods, shifting the          curve to the right and resulting in a higher equilibrium price and quantity."

Example: "An increase in household income raises the          for normal goods, shifting the          curve to the right and resulting in a higher equilibrium price and quantity."

Demand curve

A graphic representation of the relationship between price and quantity demanded of a certain good or service, with quantity on the horizontal axis and the price on the vertical axis.

Example: "The          for gasoline slopes downward, indicating that consumers purchase fewer gallons per week as the price per gallon rises, holding all other factors constant."

Example: "The          for gasoline slopes downward, indicating that consumers purchase fewer gallons per week as the price per gallon rises, holding all other factors constant."

Example: "The          for gasoline slopes downward, indicating that consumers purchase fewer gallons per week as the price per gallon rises, holding all other factors constant."

Demand deposit

Checkable deposit in banks that is available by making a cash withdrawal or writing a check.

Example: "         held in checking accounts are included in the M1 money supply because account holders can access these funds immediately by writing a check or making an electronic transfer."

Example: "         held in checking accounts are included in the M1 money supply because account holders can access these funds immediately by writing a check or making an electronic transfer."

Example: "         held in checking accounts are included in the M1 money supply because account holders can access these funds immediately by writing a check or making an electronic transfer."