Ap Macroeconomics Crash Course Vocabulary Study Guide Graded A+

Business Cycle {Ans: A model showing the short-run periods of contraction and expansion in output experienced by an economy over a period of time.}Bonds {Ans: A certificate of debt issued by a company or a government to an investor.}Capital Account {Ans: Also known as financial account. Measures the flow of funds for investment in real assets (such as factories or office buildings) or financial assets (such as stocks and bonds) between a nation and the rest of the world.}Contractionary Fiscal Policy {Ans: A demand-side policy whereby government increases taxes or decreases its expenditures in order to reduce aggregate demand. Could be used in a period of high inflation to bring down the inflation rate.}fractional reserve banking {Ans: a banking system in which banks hold only a fraction of deposits as required reserves and can lend some of the money deposited by their customers to other borrowers}Devaluation {Ans: When a government intervenes in the market for its own currency to weaken it relative to another currency. Usually achieved through direct intervention in the foreign exchange market or through the use of monetary policy that affects interest rates, and thereby affects international demand for the currency.}