Economics, 3rd Edition

real money balances 

what money can actually buy given the 

ratio of the money supply to the price level 

M

P

 

real variables 

variables measured in physical units

real wages 

the money wage adjusted for inflation measured by 

the ratio of the wage rate to price 

W

P

recession 

a period of declining real incomes and rising 

unemployment. The technical definition gives recession 

occurring after two successive quarters of negative economic 

growth

refinancing rate 

the interest rate at which the European Central 

Bank lends on a short-term basis to the euro area banking sector

regressive tax 

a tax for which high-income taxpayers pay a 

smaller fraction of their income than do low-income taxpayers