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Excess reserves are capital reserves held by a bank or financial institution in excess of what is required by regulators, creditors, or internal controls. These are often used to lend more money to stimulate economic activity.

The consumption function is an economic formula representing the functional relationship between total consumption and gross national income.

Natural unemployment, also known as the natural rate of unemployment, is the level of unemployment consistent with a stable rate of inflation. It is the sum of frictional and structural unemployment.

The Lorenz Curve is a graphical representation of the distribution of income or wealth within a society. It illustrates the degree of income or wealth inequality.

The Phillips Curve represents the inverse relationship between the rate of inflation and the unemployment rate. However, this relationship can break down over certain periods, as experienced during stagflation.

Aggregate demand is the total demand for final goods and services in an economy at a given time. It can be represented as the sum of all consumption, investment, government spending, and net exports (exports minus imports).

The trade balance is the difference between a country's exports and imports of goods and services. A positive balance indicates a trade surplus, while a negative balance indicates a trade deficit.

The liquidity preference theory suggests that people prefer to hold their assets in a liquid form and will demand higher interest to invest in non-liquid assets, such as bonds.

Monetary policy involves the management of money supply and interest rates by central banks to control inflation and stabilize currency. It also aims to contribute to the economy's growth and stability.

Real values are measured in terms of purchasing power, taking inflation into account, while nominal values are measured in current prices without adjusting for inflation.

Okun's Law approximately quantifies the relationship between unemployment and GDP, indicating that for every 1% increase in the unemployment rate, a country's GDP will be an additional roughly 2% lower than its potential GDP.

Purchasing power parity is an economic theory that compares different currencies through a basket of goods approach. When purchasing power is the same between two currencies, there is parity.

Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. Central banks aim to maintain inflation at a moderate level to ensure economic stability.

The unemployment rate is the percentage of the labor force that is jobless and actively looking for employment. A low unemployment rate is associated with a healthy economy, whereas a high rate may indicate economic distress.

Comparative advantage is the ability of a party to produce a particular good or service at a lower opportunity cost than another. It is the basis for trade and specialization.

Automatic stabilizers are economic policies and programs that balance fluctuations in a nation's economic activity without intervention by policymakers, such as the progressive tax system and welfare.

GDP is the total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period. It is a comprehensive measure of a nation’s overall economic activity and an indicator of economic health.

A budget deficit occurs when government expenditures surpass the revenue it generates. It is often covered by borrowing through the issuance of government bonds.

The Quantity Theory of Money states that the general price level of goods and services is directly proportional to the amount of money in circulation, or money supply.

The marginal propensity to consume represents the increase in personal consumer spending (consumption) that occurs with an increase in disposable income (income after taxes and transfers).

National savings is the sum of public and private savings. It is an important indicator of an economy's ability to invest in its future productive capacity and is equal to the nation's income minus consumption and government spending.

Fiat money is currency that a government has declared to be legal tender, but it is not backed by a physical commodity. Its value comes from the relationship between supply and demand and the stability of the issuing government.

Opportunity cost refers to the loss of potential gain from other alternatives when one particular alternative is chosen.

The crowding out effect refers to the reduction in private investment due to increased government borrowing in the money market, leading to higher interest rates.

Stagflation is a situation in which the inflation rate is high, the economic growth rate slows, and unemployment remains steadily high. It presents a dilemma for economic policy, as measures to lower inflation may exacerbate unemployment.

The marginal efficiency of capital is the rate of return that is expected from an additional unit of capital (investment). It is a fundamental concept analyzing investment decisions.

Human capital is the economic value of the abilities and qualities of labor that influence productivity, such as education, experience, and skills.

Business cycles are fluctuations in economic activity, such as production and employment, characterized by periods of expansion and contraction. They can be influenced by monetary and fiscal policy.

Fiscal policy refers to the use of government spending and tax policies to influence economic conditions, including aggregate demand, employment, and inflation.

The time preference theory of interest suggests that interest rates are determined by people's preference to have goods sooner rather than later. The rates compensate savers for deferring their consumption.

The balance of payments is a statement that summarizes an economy's transactions with the rest of the world for a specified time period. It covers the trade balance, capital transfers, and financial exchanges.

Say's Law posits that the production of goods creates its own demand. In the long run, supply creates an equivalent demand, leading to a general equilibrium without overproduction or underconsumption issues.

Interest rates represent the cost of borrowing money or the compensation for the service and risk of lending money. They are a primary tool used by central banks to conduct monetary policy.

Aggregate supply is the total supply of goods and services that firms in an economy plan on selling during a specific time period. It is influenced by production capacity, input prices, and overall economic conditions.

The multiplier effect refers to the proportional amount of increase, or decrease, in final income that results from an injection, or withdrawal, of spending.

Ricardian Equivalence is an economic theory that suggests when a government finances higher spending through debt rather than taxes, demand remains unchanged because people save in anticipation of future tax increases.

The velocity of money measures the rate at which money is exchanged in an economy. It is used to estimate the rate of economic activity.

Capital formation is the process of constructing real capital goods that lead to increased productive capacity in an economy. It includes investments in both physical and human capital.