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Econ 102 Final
terms and graphs and shifters
53
Economics
Undergraduate 1
04/20/2010

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Term
Slope of the price line
Definition
(-Px/Py)
Term
Demand shifters
Definition
Change in price of related goods/services
Change in income
Change in tastes
Change in expectations
Change in the number of consumers
Term
Supply shifters
Definition
Change in input prices
Change in the prices of related goods/services
Change in technology
Change in expectations
Change in numbers of producers
Term
Sources of comparative advantage
Definition
Differences in climate
Differences in factor endowments
Differences in technology
Differences in institutions
Term
Effects of imports (who is helped/hurt?)
Definition

ONLY IMPORT WHEN Pw<Pa

CS increases, PS decreases

Term
Effects of exports (who is helped/hurt?)
Definition
ONLY EXPORT WHEN Pw>Pa
Producers are helped, consumers are hurt
TS increases
Term
Effects of a tariff, quota
Definition
Imports decrease
Total surplus decreases
DWL is created
Term
GDP: Value-added approach
Definition
Sum of all the value added in production minus intermediate inputs
Term
GDP: Income approach
Definition
GDP=income+interest+rent+profits
Term
GDP: Expenditure approach
Definition
GDP= C+I+G+NX
Term
GDP Deflator
Definition
(Nominal/Real) * 100
Term
Real GDP (in terms of the deflator?)
Definition
(Nominal/Deflator) * 100
Term
Frictional unemployment
Definition
Unemployment because workers take time in a job search
Term
Structural unemployment
Definition
Unemployment that occurs when there are more people searching for a job than at the current wage. This is the result of minimum wages and typically occurs in a single market (auto workers)
Term
Cyclical unemployment
Definition
Deviation of actual unemployment from natural unemployment
Term
Natural unemployment
Definition
Frictional + structural unemployment
Term
Shifters of the natural rate of unemployment?
Definition
Changes in labor force characteristics (women, children)
Changes in labor market institutions (unions)
Changes in government policies (min wage)
Term
Costs of inflation
Definition
Unit-of-account costs
Shoe leather costs
Menu costs
Term
Factors leading to different growth rates between countries
Definition
Rates of investment in physical capital
Rates of investment in human capital (education)
Rates of technological improvement
Different levels of infrastructure
Political (in)stability
Term
Convergence hypothesis
Definition
Differences in rGDP per capita tend to narrow overtime because less developed countries have higher growth rates than more developed countries
Term
Gini coefficient
Definition
Amount between 45degree line and Lorenz curve / .5
Term
National Savings
Definition
Private savings + budget balance
Term
Private savings
Definition
Disposable income - consumption
Term
Rate of return
Definition
(revenue-costs)/costs
Term
Shifters of DEMAND for LOANABLE FUNDS
Definition
Changes in perceived business opportunities
Changes in govt borrowing
Term
Shifters of SUPPLY of LOANABLE FUNDS
Definition
Changes in private savings behavior
Changes in public savings
Changes in capital inflows
Changes in expected profitability of lending
Term
Real interest rate
Definition
Nominal interest rate - inflation
Term
Fischer effect
Definition
The expected real interest rate is unaffected by changes in the expected inflation rate
Term
Aggregate expenditure shifters
Definition
Changes in expected future disposable income Changes in aggregate wealth Changes in price level
Term
Shifters of AGGREGATE DEMAND
Definition
Changes in expectations
Changes in wealth
Changes in capital stock
Changes in fiscal/monetary policy
Term
Shifters of SR AGGREGATE SUPPLY
Definition
Anything that affects productivity!:
Changes in input/commodity prices
Changes in nominal wages
Changes in productivity
Term
Money Supply
Definition
Currency in circulation, checkable deposits, and travelers checks
Term
Monetary Base
Definition
Bank reserves and currency in circulation
Term
Potential Money Multiplier
Definition
1/required reserve ratio
Term
Actual money multiplier
Definition
Ratio of money supply to monetary base
Term
Shifters of money demand
Definition
Changes in aggregate price level (inflation)
Changes in rGDP
Changes in technology (of money)
Changes in institutions
Term
Shifters of money supply
Definition
Just the Fed (it is fixed)
Term
Increase the money supply
Definition
the Fed purchases bonds
Term
Decrease the money supply
Definition
The Fed sells bonds
Term
Decrease in interest rate leads to:
Definition

Increase in I

Shifts AEp UP

Increases rGDP

Increases C

Shifts AD right

Term
Taylor rule for monetary policy
Definition
-FFR= 1+ (1.5*inflation rate) +(.5*output gap)
Term
Money's effect in the LR
Definition
NONE!
Term
Inflation tax
Definition
The reduction in value of money held in cash as a result of inflation
Term
Unemployment below the NAIRU leads to
Definition
accelerating inflation
Term
Liquidity Trap
Definition
The Fed can no longer use monetary policy effectively because interest rates are close to zero (the zero bound)
Term
Classical economics
Definition
SRAS is vertical, changes in AD have no effect on output
Term
Keynesian economics
Definition
SRAS is upward sloping
Term
Balance of payments on the current account
Definition
Balance of all trade in goods and services plus net international transfer payments and factor income
Term
Balance of payments on the financial account
Definition
Domestic assets bought by foreigners - foreign assets bought by domestic citizens
Term
More people want to invest in the US
Definition
Demand for dollars increases
Term
More Americans want to invest abroad
Definition
Supply of dollars increases on the international market
Term
Ways to fix an exchange rate
Definition
Buy/sell domestic currency on the foreign market using foreign exchange reserves
Use monetary policy
Term
Purchasing Power Parity
Definition
Exchange rate that makes a given basket of goods equally expensive in two countries.
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