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Classical Macroeconomics |
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Definition of Classical MacroeconomicsClassical MacroeconomicsThe school of macroeconomic thought prior to the rise of Keynesianism.
Related Terms:MacroeconomicsThe study of the determination of economic aggregates such as total output and the price level. New ClassicalsEconomists who, like classical economists, believe that wages and prices are sufficiently flexible to solve the unemployment problem without help from government policy. Guaranteed RenewalA promise that a life insurance policy will be renewed without penalty or medical examination after the term has expired. The renewal rate can also be guaranteed. New-issues marketThe market in which a new issue of securities is first sold to investors. New KeynesiansEconomists who, like Keynes, believe that for good reason wages and prices are sticky and so prolong recessions, suggesting a need for government policy. New moneyIn a Treasury auction, the amount by which the par value of the securities offered exceeds that of New York Stock Exchange (NYSE)Also known as the Big Board or The Exhange. More than 2,00 common ![]() Seasoned new issueA new issue of stock after the company's securities have previously been issued. A Yearly Renewable Term InsuranceSometimes, simply called YRT, this is a form of term life insurance that may be renewed annually without evidence of insurability to a stated age. Absolute priorityRule in bankruptcy proceedings whereby senior creditors are required to be paid in full accepted quality level (AQL)the maximum limit for the number of defects or errors in a process Accomodating PolicyA monetary policy of matching wage and price increases with money supply increases so that the real money supply does not fall and push the economy into recession. Accounting insolvencytotal liabilities exceed total assets. A firm with a negative net worth is insolvent on Agency problemConflicts of interest among stockholders, bondholders, and managers. agency problemsConflicts of interest between the firm’s owners and managers. Allocation base A measure of activity or volume such as labourhours, machine hours or volume of production ![]() Arm's length priceThe price at which a willing buyer and a willing unrelated seller would freely agree to Ask priceA dealer's price to sell a security; also called the offer price. Asset substitution problemArises when the stockholders substitute riskier assets for the firm's existing Bargain-purchase-price optionGives the lessee the option to purchase the asset at a price below fair market Basis priceprice expressed in terms of yield to maturity or annual rate of return. batch-level costa cost that is caused by a group of things Beggar-My-Neighbor PolicyA policy designed to increase an economy's prosperity at the expense of another country's prosperity. Bid priceThis is the quoted bid, or the highest price an investor is willing to pay to buy a security. Practically Call priceThe price, specified at issuance, at which the issuer of a bond may retire part of the bond at a Call priceThe price for which a bond can be repaid before maturity under a call provision. Clean priceBond price excluding accrued interest. ![]() Coefficient of determinationA measure of the goodness of fit of the relationship between the dependent and coefficient of determinationa measure of dispersion that Cold-Turkey PolicyDecreasing inflation by immediately decreasing the money growth rate to a new, low rate. Contrast with gradualism. Collection policyProcedures followed by a firm in attempting to collect accounts receivables. collection policyProcedures to collect and monitor receivables. Confidence levelThe degree of assurance that a specified failure rate is not exceeded. Consumer Price Index (CPI)The CPI, as it is called, measures the prices of consumer goods and services and is a Consumer Price Index (CPI)An index calculated by tracking the cost of a typical bundle of consumer goods and services over time. It is commonly used to measure inflation. Conversion parity priceRelated:Market conversion price Convertible priceThe contractually specified price per share at which a convertible security can be credit policyStandards set to determine the amount and nature of credit to extend to customers. Cyclical Unemploymentunemployment that increases when the economy enters a recession and decreases when the economy enters a boom. Delivery policyA company’s stated goal for how soon a customer order will be Delivery priceThe price fixed by the Clearing house at which deliveries on futures are in invoiced; also the Demand Management PolicyFiscal or monetary policy designed to influence aggregate demand for goods and services. Devaluation A decrease in the spot price of the currency
Dirty priceBond price including accrued interest, i.e., the price paid by the bond buyer. Discretionary PolicyA policy that is a conscious, considered response to each situation as it arises. Contrast with policy rule. Dividend policyAn established guide for the firm to determine the amount of money it will pay as dividends. Dividend PolicyThis policy governs Canada Life's actions regarding distribution of dividends to policyholders. It's goal is to achieve a dividend distribution that is equitable and timely, and which gives full recognition of the need to ensure the ongoing solidity of the company. It also specifies that distribution to individual policyholders must be equitable between dividend classes and policyholder generations, and among policyholders within any class. Dollar price of a bondPercentage of face value at which a bond is quoted. Earnings surprisesPositive or negative differences from the consensus forecast of earnings by institutions Economic assumptionseconomic environment in which the firm expects to reside over the life of the economic components modelAbrams’ model for calculating DLOM based on the interaction of discounts from four economic components. Economic defeasanceSee: in-substance defeasance. Economic dependenceExists when the costs and/or revenues of one project depend on those of another. Economic earningsThe real flow of cash that a firm could pay out forever in the absence of any change in Economic exposureThe extent to which the value of the firm will change because of an exchange rate change. Economic incomeCash flow plus change in present value. economic integrationthe creation of multi-country markets Economic lifeThe period over which a company expects to be able to use an asset. economic order quantityOrder size that minimizes total inventory costs. Economic order quantity (EOQ)The order quantity that minimizes total inventory costs. economic order quantity (EOQ)an estimate of the number economic production run (EPR)an estimate of the number Economic rentsProfits in excess of the competitive level. Economic riskIn project financing, the risk that the project's output will not be salable at a price that will Economic surplusFor any entity, the difference between the market value of all its assets and the market Economic unionAn agreement between two or more countries that allows the free movement of capital, Economic Value Added (EVA)Operating profit, adjusted to remove distortions caused by certain accounting rules, less a charge economic value added (EVA)a measure of the extent to which income exceeds the dollar cost of capital; calculated economic value added (EVA)Term used by the consulting firm Stern Stewart for profit remaining after deduction of the cost economically reworkedwhen the incremental revenue from the sale of reworked defective units is greater than EconomicsThe study of the allocation and distribution of scare resources among competing wants. Effective call priceThe strike price in an optional redemption provision plus the accrued interest to the enterprise resource planning (ERP) systema packaged software program that allows a company to Enterprise resource planning systemA computer system used to manage all company Equilibrium market price of riskThe slope of the capital market line (CML). Since the CML represents the Escalating Price OptionA nonqualified stock option that uses a sliding scale for Event studyA statistical study that examines how the release of information affects prices at a particular time. Exercise priceThe price at which the underlying future or options contract may be bought or sold. Exercise priceThe price set for buying an asset (call) or selling an asset (put). Fair market priceAmount at which an asset would change hands between two parties, both having Fair priceThe equilibrium price for futures contracts. Also called the theoretical futures price, which equals Fair price provisionSee:appraisal rights. Federal Unemployment Tax Act (FUTA)A federal Act requiring employers to pay a tax on the wages paid to their employees, which is then used to create a Fiscal policyThe use of government spending and taxing for the specific purpose of stabilizing the economy. Fiscal PolicyA change in government spending or taxing, designed to influence economic activity. Fixed price basisAn offering of securities at a fixed price. Fixed-price tender offerA one-time offer to purchase a stated number of shares at a stated fixed price, Flat price (also clean price)The quoted newspaper price of a bond that does not include accrued interest. Flat price riskTaking a position either long or short that does not involve spreading. Flexible budgetA method of budgetary control that flexes, i.e. adjusts the original budget by applying standard flexible budgeta presentation of multiple budgets that Flexible Exchange RateAn exchange rate whose value is determined by the forces of supply and demand on the foreign exchange market. flexible manufacturing system (FMS)a production system in which a single factory manufactures numerous variations Flexible Spending AccountA form of cafeteria plan allowing employees to pay Flexible TermOptional periods of time which the conditions of a contract will be carried out. Frictional Unemploymentunemployment associated with people changing jobs or quitting to search for new jobs. Full-Employment OutputThe level of output produced by the economy when operating at the natural rate of unemployment. Full priceAlso called dirty price, the price of a bond including accrued interest. Related: flat price. Futures priceThe price at which the parties to a futures contract agree to transact on the settlement date. Government bondSee: government securities. Government National Mortgage Association (Ginnie Mae)A wholly owned U.S. government corporation Government securitiesNegotiable U.S. Treasury securities. Government sponsored enterprisesPrivately owned, publicly chartered entities, such as the Student Loan High priceThe highest (intraday) price of a stock over the past 52 weeks, adjusted for any stock splits. Incomes PolicyA policy designed to lower inflation without reducing aggregate demand. Wage/price controls are an example. input-output coefficienta number (prefaced as a multiplier Input-output tablesTables that indicate how much each industry requires of the production of each other Insolvency riskThe risk that a firm will be unable to satisfy its debts. Also known as bankruptcy risk. 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