Term
| When a good has external costs associated with its production the government should award a subsidy for the production of that good. |
|
Definition
|
|
Term
| When I purchase a new home that is classified as investment spending when we measure GDP. |
|
Definition
|
|
Term
| A Honda (Japanese Firm) Car produced in the US would be a part of GNP for Japan and GDP for the US. |
|
Definition
|
|
Term
| The price level increased by 4% between yr 1 and 2, while nominal GDP increase by 3%. Real output must have ___ by ___ percent |
|
Definition
|
|
Term
| When the supply of Good X increases and the price of a substitute to Good X also increases, we know the ___ of good X is expected to ___ |
|
Definition
|
|
Term
| the most important component (as an indicator of potentional recessions) of personal consumption expenditures (C) is... |
|
Definition
|
|
Term
| During which recession did the US experience the highest output gap since 1945? |
|
Definition
|
|
Term
| Suppose the CPI was 130 in year 1 and 169 in year 2. we know that prices increased by ___ percent from year 1 to 2. |
|
Definition
|
|
Term
|
Definition
| Current Output x current prices |
|
|
Term
|
Definition
| Current Output x base year or constant (chain weighted) prices |
|
|
Term
| Higher than expected inflation would benefit someone who borrowed money while harming the individual that loaned that money out. |
|
Definition
|
|
Term
| An increase in the CPI is a very strong indicator that the PPI will increase in about 6 months. The PPI increasing is not as good of an indicator as it relates to future CPI increases. |
|
Definition
|
|
Term
| According to the classical model changes in nominal variables such as spending or changes in aggregate demand are not expected to increase Real GDP. |
|
Definition
|
|
Term
| Because of the discouraged worker effect unemployment may not be as much of a problem as the official unemployment rate indicates. |
|
Definition
|
|
Term
| The most important factor in determining whether or not a nation has the potental to experience economic growth is the existence of a well defined property rights. |
|
Definition
| True. (if people can just take stuff, nobody will work hard) |
|
|
Term
| Type of unemployment that is most associated with a change in PRODUCTION TECHIQUES that makes some jobs OBSOLETE? |
|
Definition
|
|
Term
| the type of unemployment rate that is not a part of the natural rate of unemployment |
|
Definition
|
|
Term
| Ex. GDP = $2000. if there is constant 10% growth rate, what will GDP be after 2 years of growth? |
|
Definition
2000 x .10 = 200 -> 2220 x .10 = 220 ->
220 + 2200 = 2420 |
|
|
Term
| The Humphrey Hawkins Act told policy makers to focus on price stability only and not to worry about full employment of resources. |
|
Definition
|
|
Term
| According to KC Star's article, consumers were upset about the prospect of higher ATM fees so Bank of America had to abandon their plan to increase those fees. |
|
Definition
|
|
Term
| During the Great Depression the unemployment rate reached as high as 25%. the US has not experienced this high of an unemployment rate since then |
|
Definition
|
|
Term
| The aggregate supply curve slopes ___ |
|
Definition
| upward because businesses can generally purchase labor and other inputs at fixed costs for some period of time. |
|
|
Term
| the idea that wages may be extremely flexible means the aggregate supply curve will be ___ than they would be otherwise and this is most consistent with the __ belief about flexibility of wages |
|
Definition
| steeper (more vertical), classical |
|
|
Term
| because of a dramatic increase in oil prices we could show a __ shift in the __ curve if we were explaining how this affected the actual price level and real GDP. |
|
Definition
|
|
Term
| The US Federal Government is currently spending more moeny than they collect in tax revenue (running a budget deficit) |
|
Definition
|
|
Term
| the speculative demand for money is based off of the interest rate while the transactions demand for money is a function of income |
|
Definition
|
|
Term
| The biggest problem with the lag in fiscal policy is that people typically are not responsive to tax cuts and these policies do not have much of an effect |
|
Definition
|
|
Term
| One of the Fed. Reserve's job is to... |
|
Definition
| Determine the discount rate and potentially lend money to banks. This is part of MONETARY POLICY. |
|
|
Term
| Suppose macro consumption function is C = 100 + .8Yd. I = 80. G, T, NX all = 0. What is equilibrium level of spending/output? |
|
Definition
|
|
Term
| your personal checking account (demand deposits) is/are part of what type of money? |
|
Definition
|
|
Term
| what function of money deals with the fact that prices convey easily accessible information? By conveying the price of a good in a stable price system such as dollars we are able to compare the price of a pizza to the price of a new refrigerator or even a new car. |
|
Definition
|
|
Term
| What function of money is least affected by hyperinflation? We talked to some degree even in teh Survivor auction money did serve this function. |
|
Definition
|
|
Term
| Because of a dramatic increase in government spending we chould show a __ shift in the __ curve if we were explaining how this affected the actual price level and real GDP. |
|
Definition
|
|
Term
Higher inflation & higher unemployment
Negatie supply shock (1970's increase oil prices) |
|
Definition
|
|
Term
Higher inflation and Lower unemployment
increase in G or decrease in T (fiscal)
decrease interest rates (monetary)
EXPANSIONARY POLICY |
|
Definition
|
|
Term
Lower inflation but higher unemployment
CONTRADICTIONARY POLICY. ^ T or decrease G (fiscal) or ^ IR (mont) |
|
Definition
|
|
Term
| Lowerer inflation and lower unemployment. ^ land labor capital (1990s) decrease oil prices ^ technology |
|
Definition
|
|
Term
| mandated that economic (monetary) policy should "maintain LONG RUN GROWTH, FULL EMPLOYMENT, MINIMIZE INFLATION, AND PROMOTE PRICE STABILITY |
|
Definition
| Employment Act of 1946 & Humphrey-Hawkins Act. |
|
|
Term
| Which price model ignores aggregate supply? |
|
Definition
| simple Keynesian (fixed price) model |
|
|
Term
| why is the aggregate supple curve upward sloping? |
|
Definition
| because the prices firms recieve for output are going up by a larger amount than costs are such as wages and capital costs. |
|
|
Term
| What does the aggregate supply curve look like in the LONG RUN? |
|
Definition
| Vertical because in the long run wages are perfectly flexible and a change in price cannot effect output |
|
|
Term
| Who used Keynesian model of cutting taxes during periods of high unemployment? This is believed to have been effective |
|
Definition
|
|
Term
| Decreased taxes with the idea that it would increase aggregate supply. The immediate effect of these policies was however to increase aggregate demand but this was during a time of high budget deficits. Whether policies were effective is much debated today. |
|
Definition
|
|
Term
47% personal income taxes
12% corporate income taxes
35% social security |
|
Definition
|
|
Term
| increases in AD are caused by... |
|
Definition
expansionary (fiscal and monetary) policies, independent changes in consumer spending and business spending
Short run: increase inflation =( and decrease employment =) |
|
|
Term
| decreases in AD are caused by... |
|
Definition
Contractionary Policies and independent changes in consumer and business spending
Short Run: decrease inflation =) and increase unemployment =( |
|
|
Term
| higher inflation and higher unemployment occuring at the same time |
|
Definition
|
|
Term
| decrease in aggregate supply is caused by... |
|
Definition
| loss in natural resources (natural disaster) or "supply shock" (oil prices) |
|
|
Term
| incrase in AS is caused by... |
|
Definition
| technological breakthroughs, which decrease costs for firms... they hire more workers.. but still potentially lower prices. =) |
|
|
Term
| consists of actual currency and demand deposits (checking accounts) and other checkable deposits and travelers checks |
|
Definition
|
|
Term
| includes everything in M1 along with savings accounts, money market mutual funds and small deposits. many parts aren't "liquid" |
|
Definition
|
|
Term
| Customers checking deposits (demand deposits) |
|
Definition
|
|
Term
|
Definition
|
|
Term
|
Definition
|
|
Term
| US Gov't securities (bonds |
|
Definition
|
|
Term
| understanding money multiplier |
|
Definition
| creates increases or decreases in the money supply when deposits change. "money creation process" if people continue to spend money |
|
|
Term
| 1 / Reserve Requirement; shows POTENTIAL increase in the money supply that is created when deposits are added to a bank |
|
Definition
|
|
Term
| If Reserve Requirement is 10%... the money multiplier is... |
|
Definition
|
|
Term
If RR is 20%, the money multiplier is..
if the RR is 25%... |
|
Definition
|
|
Term
| Founded in 1913, must be politcally independent to look after the LONG TERM goals of the economy |
|
Definition
|
|
Term
| when too much money has been printed and currency loses all value |
|
Definition
| Currency Debasement (Germany, Bolivia, Yugoslavia, Zimbabwe |
|
|
Term
| Who implements MONETARY POLICY? |
|
Definition
|
|
Term
| What "lags" are the biggest concern with monetary policy? |
|
Definition
| chaning money supply to affect INTEREST RATES and therefore AGGREGATE DEMAND. there is very little of an INSIDE lag here. |
|
|
Term
|
Definition
| Non-policy Makers. The problem is getting people to spend thsi money when interest rates fall (Response Lag / Outside Lag) |
|
|
Term
|
Definition
1. banks bank (loan money/discount rate, clears checks)
2 set monetary policy: controls discount rate, open market operations- buying and selling of bonds, control reserve requirement)
3. regulates banks |
|
|
Term
|
Definition
| Federal Open Market Committee. 14 members. 12 voting members ( 7 governers + 5 central bank presidents) and 7 non voting members |
|
|
Term
|
Definition
| Fights unemployment by increasing Aggregate Demand and output produced. |
|
|
Term
|
Definition
wrote the general theory of employment, investment and money
-economic consequences of Great Depression |
|
|
Term
| "if consumers demanded a given level of output, it would be provided by business." |
|
Definition
|
|
Term
| compared the Great Depression the dark ages |
|
Definition
|
|
Term
| consumer spending, business investment spending, government spending, net exports. Y = C + I + G +NX + T |
|
Definition
|
|
Term
spending by individuals and households on both durable and non durable goods
- 70% of GDP |
|
Definition
|
|
Term
| Examples: food, clothes, entertainment |
|
Definition
|
|
Term
| Examples: Autos, appliances, electronics |
|
Definition
|
|
Term
percent of income that is consumed
(C / Y) |
|
Definition
| Average propensity to consume |
|
|
Term
| change in consumption associated with a given change in income (C / Y ) |
|
Definition
| marginal propensity to consume |
|
|
Term
| investment is positively related to income and households intend to save more, but they actually save less |
|
Definition
|
|
Term
| changes in government spending causes income and output to rise or fall by the spending change X the multiplier |
|
Definition
|
|
Term
|
Definition
| Disposable Income = income - taxes |
|
|
Term
| balanced budget multiplier = |
|
Definition
|
|
Term
| simple keynesian model ignores both gov't and foreign sector |
|
Definition
|
|
Term
| increase in aggregate spending needed to bring a DEPRESSED economy back to full employment |
|
Definition
recessionary gap
= to the GDP gap / the multiplier |
|
|
Term
| the spending reduction necessary to bring an overheated economy back to full employment |
|
Definition
|
|
Term
| the output of goods and services (real GDP) demanded at different price levels |
|
Definition
aggregate demand
AD Curve shows relationship between price levels and Real GDP |
|
|
Term
| AD curves negatively for 2 reasons: |
|
Definition
| 1. when price of a given product declines, consumers spendable income increases (less income buys same product)<-- income effect |
|
|
Term
| AD Curves negatively for 2 reasons: |
|
Definition
| 2. price of a product falls, consumers will purchase more of it. |
|
|
Term
| buying chicken instead of beef if cheaper |
|
Definition
|
|
Term
| families usually hold onto some of their wealth such as savings, bonds, cash and a rising aggregate price level means that purchasing power declines |
|
Definition
|
|
Term
| Curve shows the real GDP that firms will produce |
|
Definition
|
|
Term
| Short run- positivly sloped because not many input costs are slow to change |
|
Definition
|
|
Term
| long run- vertical at full employment, since economy has reached its capacity to product |
|
Definition
|
|
Term
| occurs at the intersection of short run aggregate supply and aggregate demand curves |
|
Definition
| macroeconomic equilibrium |
|
|
Term
| occurs when aggregate demand expands so much that equilibrium output exeeds full employment output and the price level rises |
|
Definition
|
|
Term
example. telecommunications- late 1990s
inflation starts slow/gradual, but then quickly increasees |
|
Definition
|
|
Term
| occurs when a supply shock hits the economy shifting the short run aggregate supply curve leftward |
|
Definition
|
|
Term
example. reduces output and increases the price level.
1973 oil shock effects a lot of other things |
|
Definition
|
|
Term
| part of the budget that works its way through the appropriations process of Congrfess each year |
|
Definition
|
|
Term
| includes programs like national defense, trasportation, science, environment, income security |
|
Definition
|
|
Term
| spending authorized by pernament laws that does not go through the same appropriations as discretionary |
|
Definition
|
|
Term
| includes social securty, medicare, and interest on national debt |
|
Definition
|
|
Term
| involves adjusting government spending and tax policies with the express short run goal of moving economy to full employment, expanding econ grown and control inflation |
|
Definition
| discretionary fiscal policy |
|
|
Term
| tax cuts meant to exand economy in short run and long run |
|
Definition
| discretional fiscal policy |
|
|
Term
| example. tax cuts from Kennedy, Reagan, George W |
|
Definition
| discretional fiscal policy |
|
|
Term
| involved INCREASING GOVT SPENDING, increasing transfer payments or decrease taxes ALLLLL to increase AD to expand output and the economy |
|
Definition
| expansionary fiscal policy |
|
|
Term
| Example. Social Security, Unemployment, Welfare |
|
Definition
| expansionary fiscal policay |
|
|
Term
| involved increasing withrdraws from the economy by REDUCING govt spending, transfer payments, ORRR raising taxes ALLLL to decrease aggregate demand to contract output and the economy |
|
Definition
| contractionary fiscal policy |
|
|
Term
| focus on shifting the long run aggregate supply curve to the right, expanding the economy without increasing inflatory pressures |
|
Definition
| supply-side fiscal policy |
|
|
Term
| unlike policies to increase AD, ____ policies take ____ to impact economy |
|
Definition
|
|
Term
| plots hypothetical tax revenues at various income tax rates. if tax rates are 0, tax revenues are 0. if rates are 100%, revunes will also be 0 |
|
Definition
|
|
Term
| as tax rates rise from 0, revenues will RISE, reach a MAXIMUM, and then DECLINE again. |
|
Definition
|
|
Term
| _____ policies take a longer time to have an impact |
|
Definition
|
|
Term
| tax revenues and transfer payments automatically expand or contract in ways that reduce the intensity of business fluctuations without any overt action by congress or other policy makers |
|
Definition
|
|
Term
| the time for economic data to be collected and processed |
|
Definition
|
|
Term
| most macroecon data aren't available until at least one quarter later |
|
Definition
|
|
Term
| the time it akes for POLICY MAKERS to CONFIRM that the economy is trending in or out of a recesscion |
|
Definition
|
|
Term
| time take Congress to DECIDE |
|
Definition
|
|
Term
| turn fiscal policy into law and eventually have an IMPACT on the economy |
|
Definition
|
|
Term
| when deficit spending requiring the government to borrow, which drives up interest rates, which reduced consumer spending and business investment |
|
Definition
|
|
Term
| public debt owed by US banks, corporations, mutual funds, pension plans and individuals |
|
Definition
|
|
Term
| public debt held by foreigners, roughly equal to half of the outstanding US debt held by public |
|
Definition
|
|
Term
| anything that is accepted in exchange for other goods and services for PAYMENT of debt |
|
Definition
|
|
Term
| good and servies are sold for money, then money is used to purchase other good and services |
|
Definition
| medium of exchange. money is used |
|
|
Term
| money provides a yard stick for measuring and comparing the values of a wide variety of goods and services |
|
Definition
|
|
Term
| it eliminates the problem of double coincidence and wants associated with barter |
|
Definition
|
|
Term
| enable people to save the money they earn today and use it to buy the things they want tomorrow |
|
Definition
| store of value. the value is stored |
|
|
Term
| how quickly and easily and relaible an asset can be converted into cash |
|
Definition
|
|
Term
| narrowest definition of money |
|
Definition
|
|
Term
| type of money that includes currency (coins and paper money), stock markets, |
|
Definition
|
|
Term
| broader defition of money |
|
Definition
|
|
Term
includes "near monies", not as liquid as cash
savings deposits, etc and M1 |
|
Definition
|
|
Term
| Central bank of the US is called __ |
|
Definition
|
|
Term
____ member, board of governers
oversees open market operations |
|
Definition
| Federal Open Market Committee |
|
|
Term
| main tool of monetary money |
|
Definition
| Federal Open Market Committee |
|
|
Term
| required ration of funds that commercial banks and other depository institutions must hold in reserve against deposits |
|
Definition
|
|
Term
| the interest rate financial institions charge each other for over night laosn used as reserves |
|
Definition
|
|
Term
| the interest rate the Federal Reserve charges commercial banks and other depository institutions to borrow from a regional for bank |
|
Definition
|
|
Term
"An increase in tax on been will raise its price"
Normative/Positive |
|
Definition
|
|
Term
"Taxes should be increased on beer because college students drink too much"
Normative/Positive |
|
Definition
|
|
Term
| money payments made to owners of land, labor, captical, entrepeneurial ability are: |
|
Definition
| rent, wages, interest, and profits respectively |
|
|
Term
| the transactions demand for money will shift to the: |
|
Definition
| right when aggregate income increases |
|
|
Term
|
Definition
| money because the government asserts that it is |
|
|
Term
| if z is an inferior good, a decrease in money income will shift the ___ curve for Z to the ___ |
|
Definition
|
|
Term
| Graphically, cost-push inflation is shown as a: |
|
Definition
| leftward shift of the AS curve |
|
|
Term
| when economists say that money serves as a unit of account, they mean that is: |
|
Definition
| a monetary unit for measuring and comparing the relative values of goods |
|
|
Term
|
Definition
| notion that, under competition, decisions motivated by self-interest promote the social interest |
|
|
Term
| ceteribus paribus, if the national incomes of the major trading partners of the US were to rise, the US... |
|
Definition
| AD curve would shift to the right |
|
|
Term
| equal increase in demand and supply will ___ equilibrium price and ____ equilibrium quanity |
|
Definition
| LEAVE equilibrium price UNCHANGED and INCREASE equilibrium quantity. |
|
|
Term
| Milton Friedman was in favor of non-interventionist policies. He believed that monetary policies were not able to help predictablly control spending. |
|
Definition
|
|
Term
| When interest rates increase, bond prices tend to decrease. |
|
Definition
|
|
Term
| There are twelve governors that servce on the Fed Board of Governors. |
|
Definition
|
|
Term
| If the dollar appreciates against the yen we expect American consumers to relatively benefit and Japanese producers to relatively benefit. |
|
Definition
|
|
Term
| From 1981-83 inflation and unemployment rates in the US were much lower than they were from 1996-1998. |
|
Definition
|
|
Term
| If the US imposes a quote on Japan, that will create more revenue for US government than a tariff would have |
|
Definition
|
|
Term
| The Phillips Curve shows the expeced relationship between ____ and ___. |
|
Definition
| Inflation and Unemployment |
|
|
Term
| Suppose tax is placed on wheat, while at same time its discovered that eating wheat is even better for you than previously believed. we know for sure that.... |
|
Definition
| the price of wheat will increase |
|
|
Term
| the idea behind the Laffer Curve and supply side economics is... |
|
Definition
| by lowering tax rates, we can increase tax revenues. |
|
|
Term
| which type of unemployment is the largest concern if we are worried about a recession or economic slowdown? |
|
Definition
|
|
Term
| steelworkers laid off from their jobs as a result of a recession are considered: |
|
Definition
|
|
Term
| laissez-faire economy is also known as: |
|
Definition
|
|
