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Final Exam (STUDY!!)
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61
Economics
Undergraduate 2
12/03/2012

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Cards

Term

 

 

 

Aggregate Demand represents:

Definition

 

 

 

Total Spending= C+I+G+NX

Term

 

 

A decrease in AD(shift) would be cause by:

Definition

 

 

 

A decrease in total income.

Term

 

 

The Aggregate Supply (AS) is:

Definition

 

 

 

The relation between the overall price level and real GDP.

Term

 

 

 

In the classical model, unemployment can be solved by:

Definition

 

 

 

Lower Wages

Term

 

 

The loanable funds or financial market ensures that:

Definition

 

 

Savings=Investment

Term

 

 

According to Say's Law, if interest rates are flexible,

Definition

 

 

Total Income=Consumption+Savings

Term

 

 

According to the classical model, if Aggregate Demand declines, then

Definition

 

 

Wages will fall, and aggregate supply will increase

Term

 

 

In the long run, according to the classical model

Definition

 

 

Aggregate Supply will be a vertical line at full employment

Term

 

 

To cure a recession, the classical model would suggest:

Definition

 

 

Waiting until the market cures itself

Term

 

 

According to the Classical theory, the effect of government invtervention by increased AD would be:

Definition

 

 

Inflation

Term

 

 

According to the Classical Theory (Visualized by 3 Graphs), if there is a decline in AD, we would expect:

Definition

 

 

An increase in the quantity invested.

Term

 

 

THe Marginal Propensity to Consume equals:

Definition

 

 

The change in consumption divided by the change in income

Term

 

 

THe paradox of thrift refers to:

Definition

 

 

Increased savings reduces the level of equilibrium.

Term

 

 

John Maynard Kenyes was concerned that classical economics was:

Definition

 

 

1)A special case based upon narrow assumptions.

2)Was a long term theory that may not apply to the short-run.

3)May lead to wrong prescriptions for action.

Term
According to Kenyes, savings was primarily determined by      , while according to the classical model it was determined by      .
Definition

 

 

Income; interest rates

Term

 

 

If the MPS increases, the level of equilibrium income will:

Definition

 

 

 

Decrease

Term

 

 

According to Keynes, unemployment might last longer because:

Definition

 

 

Wages are relatively inflexible.

Term
Which of the following Presidents had the largest Deficit as a share of GDP:
Definition

 

 

 

Ronald Reagan

Term
Keynes was concerned about investment misbehaving. He worried that if consumption fell,
Definition

 

 

 

Investment might decrease due to negative expectations.

Term
Keynes was concerned that as an economy grew or people became wealthier, the MPC might decline. This caused him to believe:
Definition

 

 

Taxes on wealthier people should be higher.

 

Term

 

 

In the Keynesian cross model, if an economy is not at equilibrium because spending is lower than income:

Definition

 

 

 

It must be at a point to the right of equilibrium income.

Term

 

 

Counter Cyclical fiscal policy would suggest that if an economy was entering a period of inflation, the government should:

Definition

 

 

 

 Decrease Government spending.

Term

 

 

Keynes favored spending changes over tax changes because:

Definition

 

 

Spending has a more direct effect on the economy.

Term
According to the Keynesian theory (visualized in 3 graphs) if there is a decline in AD, we would expect:
Definition

 

 

No change in the overall price level.

Term

 

 

During the 2007 Great Recession, the MPC:

Definition

 

 

Decreased

Term

 

 

According to keynes, during a arecession he would expect:

Definition

 

 

 

Decreased interest rates and decreased investment.

Term

 

 

At the beginning of the great depression, Herbert Hoover raised taxes and decreased spending because:

Definition

1)He was worried about the danger of inclation.

2)He wanted to let prices and wages fall.

3)He believed the economy would naturally recover.

Term

 

 

Why did Douglas County Nevada want Walmart to relocate to a location in Douglas county?

 

Definition

 

 

Because it wanted a higher spending multiplier.

Term
Keynes was an economist during the Great Depression. During the Great Depression, there was:
Definition

 

 

High Unemployment and High Deflation.

Term
As defined in the book, automatic stabilizers lead to changes in taxes and government spending as economic output varies. How do automatic stabilizers impact tax revenue and government spending during a recession:
Definition
Taxes will decrease, spending will increase.
Term
The opportunity cost for a student of attending college for a year is measured by:
Definition
The vale of all opportunities foregone by attending college.
Term
Measureing GDP caused people to reconisder the cause of the depression because it showed that:
Definition
Spending determined income and production.
Term
If the avg. prices paid for a market basket of products goes up by 10% whole the quantity purchased rose by 3%
Definition
Real GDP would rise by 3%.
Term
Currently, the US economy is below potential GDP. Therefore,
Definition
The US needs to increase actual GDP.
Term

As noted in class, on 9/17 the Federal Reserve announced a new round of stimulus called Quantitative Easing III (QE3). The hope is that this will cause:

 

Definition
Increased money supply.
Term
As noted in class, on 9/25 the consumer confidence index increased by 9 points. THis is important because:
Definition
It indicates that total demand may increase.
Term

 

 

 

Adam Smith suggested that:

 

Definition

 

 

 

Barring obstacles, the economy tends to equilibrium.

Term

 

 

Say's Law says:

 

Definition

 

 

An increase in supply will cause an increase in demand.

Term

 

 

What is the definition of Recession:

Definition

 

 

A decline in real GDP lasting for six months or more.

 

Term

 

 

Crowding out refers to:

Definition

 

 

The government running a deficit and borrowing from the financial sector.

Term

 

 

Okun's Law:

Definition

 

 

 

Shows the relationship between GDP and unemployment.

Term

 

 

THe unemployment rate equals:

Definition

 

 

The number of unemployed divided by the labor force.

Term
Nominal GDP differs from Real GDP because nominal GDP calculates the value in terms of:
Definition

 

 

The current year's prices of goods with the current year's quantity.

Term
According to the Phillips Curve, reducing unemployment tends to:
Definition

 

 

Increase Inflation

Term

 

 

Inflation is defined as:

Definition

 

 

An increase in the price level.

Term

 

 

The consumer price index measures:

Definition

 

 

The price level of all goods and serives bought by a typical consumer.

Term

 

 

The target rate of unemployment is:

Definition

 

 

Between 4-6%

Term
As discussed and shown in class, the labor force participation rate has
Definition

 

 

 

Been going down over the past few years.

Term

 

 

Structural unemployment is caused by:

Definition

 

 

People losing a job because their skills are obsolete.

Term

 

 

If a person is a full-time student, they would be counted as:

Definition

 

 

 

Not in the labor force.

Term
If nominal wages rose by 10% while the price level rose by 15%, then real wages would:
Definition

 

 

Decrease by 5%

Term

 

 

An example of a cost push inflation would be:

Definition

 

 

Increased energy prices.

Term

 

 

Suppose a report on CNN says that there is an impending recession coming, as a result Bert's family as well as mony other likeminded families and individuals reduce their spending and instead start saving. THis is an example of:

Definition
The paradox of thrift.
Term

 

 

The importance of an economic model is that it allows us to:

Definition

 

 

Focus on the effects of one change at a time.

Term

 

 

The official unemployment rate ignores (doesn't count):

Definition

 

 

Discouraged workers who have given up looking for a job.

Term

 

 

Sarah has just graduated as a lawyer from an esteemed law school, she is looking for a job and confident of getting a job but doesn't yet have one. She would be classified as:

Definition

 

 

 

Frictionally Unemployed.

Term

 

 

An example of investment spending is:

Definition

 

 

The purchase of a freezer by an ice cream shop.

Term
Economists sometimes have very different ideas about the economy, which of the ideas is most consistent with the classical idea of an economy as oppsed to the Keynesian:
Definition

 

 

Government involvement in an economy is often more harful than beneficial.

Term

 

 

 

Structural Employment:

Definition

 

 

Can be a result of natural job creation and destruction.

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