Macroeconomics

Real money balances:

The quantity of money

expressed in terms of the quantity of goods and ser-

vices it can buy; the quantity of money divided by

the price level (M/P).

Recession:

A sustained period of falling real income.

Rental price of capital:

The amount paid to rent

one unit of capital.

Reserve requirements:

Regulations imposed on

banks by the central bank that specify a minimum

reserve–deposit ratio.

Reserves:

The money that banks have received

from depositors but have not used to make loans.

Residential investment:

New housing bought by

people to live in and by landlords to rent out.

Revaluation:

An action undertaken by the central

bank to raise the value of a currency under a system

of fixed exchange rates. (Cf. devaluation.)

Ricardian equivalence:

The theory according 

to which forward-looking consumers fully antici-

pate the future taxes implied by government debt,

so that government borrowing today coupled 

with a tax increase in the future to repay the debt

has the same effect on the economy as a tax in-

crease today.

Sacrifice ratio:

The number of percentage points

of a year’s real GDP that must be forgone to reduce

inflation by 1 percentage point.

Saving:

See national saving, private saving, and pub-

lic saving.