Macroeconomics

Marginal rate of substitution (MRS):

The rate

at which a consumer is willing to give up some of

one good in exchange for more of another; the slope

of the indifference curve.

Market-clearing model:

A model that assumes

that prices freely adjust to equilibrate supply and 

demand.

Medium of exchange:

The item widely accepted

in transactions for goods and services; one of the

functions of money. (Cf. store of value, unit of

account.)

Menu cost:

The cost of changing a price.

Microeconomics:

The study of individual markets

and decisionmakers. (Cf. macroeconomics.)

Model:

A simplified representation of reality, often

using diagrams or equations, that shows how vari-

ables interact.

Monetarism:

The doctrine according to which

changes in the money supply are the primary cause

of economic fluctuations, implying that a stable

money supply would lead to a stable economy.

Monetary base:

The sum of currency and bank

reserves; also called high-powered money.