Macroeconomics

Floating exchange rate:

An exchange rate that

the central bank allows to change in response to

changing economic conditions and economic poli-

cies. (Cf. fixed exchange rate.)

Flow:

A variable measured as a quantity per unit of

time. (Cf. stock.)

Fractional-reserve banking:

A system in which

banks keep only some of their deposits on reserve.

(Cf. 100-percent-reserve banking.)

Frictional unemployment:

The unemployment

that results because it takes time for workers to

search for the jobs that best suit their skills and tastes.

(Cf. structural unemployment.)

Full-employment budget deficit:

See cyclically

adjusted budget deficit.

GDP:

See gross domestic product.

GDP deflator:

The ratio of nominal GDP to real

GDP; a measure of the overall level of prices that

shows the cost of the currently produced basket of

goods relative to the cost of that basket in a base year.