# Shared Flashcard Set

## Details

Test 3
For test 3
75
Economics
03/29/2011

Term
 A demand schedule is
Definition
 just a table which shows the amounts of a product that a buyer is willing (not actually purchasing) to buy at various prices…
Term
 QD stands for
Definition
 “Quantity Demanded” (such as “gallons of gasoline”)
Term
 The law of demand states
Definition
 that there is always an inverse relationship between price and quantity demanded, ceteris paribus.
Term
 [image]
Definition
 The entire Curve or graph is called "demand" Downward sloping inverse relationship The points on the curve are ????????The label D or D'(D'=prime) The “D” here is not referring to a particular point on the graph.The “D” here is just the “name tag” for the entire blue graph and it stands for “Demand” or “Demand Curve”
Term
 3rd varible is tempory voilation of
Definition
 ceteris paribus
Term
 [image]
Definition
 Decrease in demand Or a change in a third variable from one level to another level might cause “a decrease in demand”, which means that there is “a decrease in the quantity demanded AT EVERY possible PRICE”.
Term
 Note the difference between “demand” and “quantity demanded”.
Definition
 Demand is the entrie graph, chart or tble Quanities demanded are only the points on the demand curve
Term
 Each row in the table and each point in the graph represents
Definition
 a possible price and a possible quantity demanded.
Term
 As we move from row to row in the table and from point to point in the graph, we say there is “no change in demand”.
Definition
 Only a change in "Possible QUANTITIES demanded"
Term
 But as we move from row to row in the table and from point to point in the graph, we say there is a change
Definition
 in the quantity demanded as price changes.
Term
 Only when the entire graph moves to the right,or when the entire graph moves to the left,
Definition
 will we say there has been “a change in demand”.
Term
 So a change in a third variable from one level to another level
Definition
 might cause a inc/dec in demandThis might be different type of cars. A toyota as the third varible might cause the demand to decrease where a Hummer might cause it to increase. The point is it is not because of the price from one level to another it is because of the third varible.
Term
 Change in demand
Definition
 means the whole demand curves moves, not individual points(which would be changes is possible quantites demanded)
Term
 "an increase in demand”,
Definition
 which means that there is “an increase in the quantity demanded AT EVERY possible PRICE”.
Term
 “a decrease in demand”,
Definition
 which means that there is “a decrease in the quantity demanded AT EVERY possible PRICE”.
Term
 an increase in demand by the third varible will cause the demand curve to shift to the right or left?
Definition
 a shift of the demand curve to the right,
Term
 a decrease in demand by the third varible will cause the demand curve to shift to the right or left?
Definition
 a shift of the demand curve to the left,
Term
 A supply schedule is just a table which shows the amounts of a product that a producer or seller is willing & able to offer (not actually getting people to buy) to sell at various prices (whether or not buyers are willing to buy how much is offered is irrelevant and does not affect the willingness to sell):
Definition
 is just a table which shows the amounts of a product that a producer or seller is willing & able to offer (not actually getting people to buy) to sell at various prices (whether or not buyers are willing to buy how much is offered is irrelevant and does not affect the willingness to sell):
Term
 Various Amounts or Quantities Supplied…QS stands for “Quantity Supplied” (such as “gallons of gasoline”).(higher quantities supplied in each row of the table reflect a greater willingness to sell at the price in that row).
Definition
 This is an increase/ increase or decrease/decrease (direct) relationship
Term
 The law of supply states
Definition
 that there is always a direct relationship between possible prices and quantities supplied, ceteris paribus.
Term
 [image]
Definition
 Direct relationship as price inc supplier will supply moreas price decrease the supplier will offer less supply is upward sloping
Term
 As we move from point to point in the graph (as we move along the supply curve), “supply” is not changing, but
Definition
 “quantity supplied” is changing.
Term
 The entire Supply curve is known as supply and the points on the curve are
Definition
 Possible QUANTIES supplied
Term
 The law of supply
Definition
 states that there is always a direct relationship between possible prices and quantities supplied, ceteris paribus.
Term
 Diference between "Supply" and quantity supplied
Definition
 Note the difference between “supply” and “quantity supplied”.“Supply” abbreviated as “S” refers to the entire table and the entire graph.Each row in the table and each point in the graph represents a possible price and a possible quantity supplied.
Term
 As we move from row to row in the table and from point to point in the graph, we say there is “no change in supply”.But as we move from row to row in the table and from point to point in the graph, we say there is a change in the quantity supplied as price changes.
Definition
Term
 Only when the entire graph moves to the right,or when the entire graph moves to the left,will we say there has been “a change in supply”.
Definition
Term
 [image]
Definition
 Remember thst the entire Suply curve is the "supply" the points are only possible quantities supplied
Term
 A shift to the right means an increase "supply" at every possible price
Definition
 from one level to another might cause “an increase in supply”, which means that there is “an increase in the quantity willing to be suppliedAT EVERY possible PRICE”.
Term
 a decrease in supply
Definition
 (a shift of the supply curve to the left, which is being shown on this slide
Term
 We call total supply
Definition
 market supply,
Term
 We call total demand
Definition
 market demand
Term
 Three ingredients to have a market
Definition
 1. Potential Buyer (demand)2. Potietial Sellers (Supply) 3. interaction
Term
 Market Quantity Demanded Equal Market Quantity Supplied?
Definition
 At the equilibrium
Term
 Only at the equilibrium price does neither a shortage nor a surplus exist and therefore price will neither rise nor fall.
Definition
 It is because price will have no further tendency to change at a price of \$3 that we call it the equilibrium price.
Term
 Equilibruim also means
Definition
 price has no further tendancy to change
Term
 [image]
Definition
 At prices above the equilibrium price will cause a surplus and will cause the price to be forced down.
Term
 [image]
Definition
 All Prices below the the equilibrium price will cause a shortage and also cause the price to rise
Term
 Inflation
Definition
 A (persistent) rise in the price level.
Term
 The consumer price index (CPI)
Definition
 is considered to be a measure of the price level (we won’t say much more about the CPI, such as how it is calculated, etc.)
Term
 Price level
Definition
 A measure of the average level of the prices of goods and services in the economy.(we use CPI consumer price index on the graph)
Term
 “persistent” means
Definition
 that, technically, we have inflation only if the price level rises over and over again, not just once.But we are going to simplify things and just say that a rise in the price level is “inflation”.
Term
 [image]
Definition
 Consumer Price index Vs Real GDP
Term
 [image]
Definition
Term
 [image]
Definition
 Demand is remaining the same and the price increase is seller driven, caused by a decrease in supply
Term
 [image]
Definition
 When aggregate demand decreases while aggregate supply remains unchanged, it is called recession the price goes down, this is buyer driven.
Term
 [image]
Definition
 When aggregate demand increases while aggregate supply remains unchanged, this is buyer driven.
Term
 [image]
Definition
 Flow of Money C + Ig + G + Xn = GDP
Term
 [image]
Definition
 So, an increase in consumption due to something other than a change in the price level…or an increase in gross private domestic investment due to something other than a change in the price level…or an increase in government spending due to something other than a change in the price level…or an increase in net exports due to something other than a change in the price level…
Term
 [image]
Definition
 Decrease in the aggregate Demand = recession
Term
 An increase in aggraite demand
Definition
 caused by an increase in C or I(g) or G ect will cause us to return to equilibruim and full employement (cycical=0) at equilbiruim
Term
 [image]
Definition
 Reserve Ratio (intial cash investment)= Checking account Bal1000(1/10% or .1/1000)=10000
Term
 OPEN MARKET OPERATIONS (most often used by The Fed to change the money supply)
Definition
 The fed does this through buying and selling of T-bills
Term
 When The Fed’s Federal Open Market Committee (FOMC) uses cash to buy US Treasury Bills from banks, banks receive the cash and increase their bank reserves, so banks now have more reserves to back-up their checking account balances, allowing them to increase their checking account balances, which increases the money supply.
Definition
 Increase money supply lowers interest rate and increases consumer and I(g) spending causing expansion through monatary policy= expansionary monatary policy
Term
 When The Fed’s FOMC sells US Treasury Bills to banks, banks have to give-up some of their cash reserves to buy the Treasury Bills, so banks now have less bank reserves to back-up their checking account balances, forcing banks to decrease their checking account balances, which decreases the money supply.
Definition
 Fed sell t-bill to bank= decrease in reserve = decrease in checking account balance=decrease in money supply=increase in interest rate=decrease in consumer and I(g)= decrease in economy=contrationary monatary policy
Term
 Reserves
Definition
 The total amount of cash that a bank holds in its vault plus the total amount of cash a bank holds on deposit with the Federal Reserve Bank (note that reserves is how much cash a bank desires to hold, which is not the same as required reserves, which is how much cash banks must hold by law).
Term
 Reserve ratio
Definition
 The percentage of a bank’s total customer checking account balances that banks are required by law to keep as reserves. “RR” stands for “reserve ratio”. This is usually 10% of initial checking account deposit.
Term
 Required reserves
Definition
 Cash reserves that banks must hold as a percentage (that percentage is the reserve ratio) of their total customer checking account balances, orCash that a bank holds as reserves and cannot use for making a cash loan.
Term
 fractional reserve banking system,
Definition
 which allows banks to keep less than 100 percent of their cash deposits as reserves (they just convert their entire cash deposits into checking account balances and then turn around and lend-out almost all of the cash)…
Term
 Three defintions of money supply M1, M2, and M3 the definition for M1 is
Definition
 1.currency(bills and coins)2. Checking account balances3. travelrs checks
Term
 The Federal Reserve System (“The Fed”) is the central bank of the United States.
Definition
 The fed is the bankers bank and there are 12 fed reserve banks in the us
Term
 expansionary fiscal policy… Shifting AD to the right by increasing government spending and/or decreasing taxes is called expansionary fiscal policy…
Definition
 The government either decrease taxes (C) or increases (G) goverment spending to shift the demand to the right.
Term
 contractionary fiscal policy…
Definition
 Shifting AD to the left by decreasing government spending and/or increasing taxes
Term
 Money
Definition
 is anything that people are generally willing to accept in exchange for goods and services or for payment of debts.
Term
 Commodity money
Definition
 is a good used as money that happens to also have intrinsic value independent of its use as money. (use of cigerattes in the war)
Term
 paper money
Definition
 is not commodity money because if everyone decided to no longer accept dollar bills as payment, the dollar bills would be worthless
Term
 Fiat money
Definition
 is money, such as paper currency, that is authorized by a central bank or governmental body.
Term
 The Fed is practicing monetary policy.
Definition
 When The Fed changes the money supply, to change the equilibrium interest rate, which affects aggregate demand by affecting Ig and C,
Term
 Investment spending includes
Definition
Term
 [image]
Definition
 Expansionary Monatary Police done by the Fedral Reserve
Term
 [image]
Definition
 Contractionary monatary policy done by the fed reserve
Term
 [image]
Definition
 Expansionary when the quantity demanded goes up
Term
 [image]
Definition
 when the price level goes down we call it deflation, when the quantity goes down we call that recession
Term
 [image]
Definition
 When the quanity goes down we go into recession Decrease in Supply
Term
 [image]
Definition
 The rr ratio(the beging deposit)= chaecking account balance
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