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108 Cards in this Set

  • Front
  • Back
Political Process
The government refers to government command solving economic problems
Production Questions
The what to produce, how much,, and how to questions
Pure capitalism
Property is privately owned and the market proccess solves economic problems
Pure communism
An economic system that the political process solves and all economic probelems and all property is publicly owned
Demand side of product (goods) market
Supply side of product (goods) market
Demand side of labor markets
Supply side of labor markets
Injections in a circular flow diagram
Government purchases and investments
What types of flows are there for a circular flow diagram
Real flows and financial flows
What was the only type of inflation according to Milton Friedman
Who does the workforce include?
All able bodied adults and discouraged workers are not included in the labor force
Why is aggregrate demand downward sloping?
because of the real balance affect
What does the AD and AS hold constant
What was the money policy from 1791-1811
Tight monetary policy
Country Pay.
What and how stable?
Commodity money-tobacco, cows
The supply growth was very unstable
England let colonies isue their own coins??
Not for very long
Revolutaionary War what was the financial reaction
The continental Congress issued paper money called Continentals and this led to inflation
Alexander Hamilton and the 1st bank of the U.S.
Helped to fight in favor of the US 1st Bank
What was the financial and banking reaction to the 1st Bank of the US expiratioin in 1811?
The money supple sharply increase and the number of banks increased significantly
Nicholas Biddle as the President of the Second Bank of the Us pursued a/an blank monetary policy
Bank Notes and the beginning of the Civil War in 1861
There was a huge flow of bank notes as circulated paper money
What did the National Bank Act of 1863 due for the money forces
Helped tighten them
In 1865 when Congress levied a 10% tax on the issue of new state bank notes what happened to the # of state banks
Decrease Significantly
The crime of 1873
No longer minting silver dollars
In 1879 what happened to the backing of dollars
Silver nearly became extinct and the gold backing became prevelant we, not legally, went on a gold standard.
THe panic of 1907
U.S. banks did not have enough gold to apy off depositors.
J.P. Morgan lent the U.S. goc all his gold to serve as a lender of last resort.
Full, pure gold standard
Private citizens can own gold and they can melt down gold coins if they want. There are fixed exchange rates
All paper money as some gold backing
Citizens have the right to go the the mint/rteasury and have thir gold and paper money traded at a fixed price.
Foreigners can redeem paper money for gold
The Fed
Lender of last resort
12 district banks, owned by member banks
finish elastic currency
Federal Open Market Committe e consists of 12 voting memebers
The gold standard after WWI
Europe went off it
Monetary Policy from 1926-Crash of 1929
Tight Monetary Policy
Between the stock market crash 1929-1933
The fed decreased the money supply by 30%
U.S. Treasury blank after the 1929 stock market crash
Hoarded gold
The Roosevelt Administration did what to private citizens in 1933
They called in all gold coins and no one was allowed to own gold
1968 the Fed did what to the backing from Fed Reserval notes
They removed the gold backing
What was the average rate of real GDP and inflation rate during the Eisenhower years
It was lower and inflation was low
What was the unemployment rate under Eisenhower
Lower than the 100 year average
What was the expansion like under Kennedy and Johnson
It was the longest economic expansion i US history up to that time
What was M2 in 1961-1965?
M2 growth was above 5%
Johnson during the Vietnam war
He wanted war and great society between 1967-68 There was rising inflation
What was 1974 like?
It was a bad year poor growth and high inflation
What did Allen Greenspan become chair of in 1974?
Council of Economic Advisors
What did Greenspan do in 1976?
He brough about high GDP growth
What was the debate between republicans and democrats during the 1976 Presidential elections?
Rpublicans said the coutnry's problem was going to be inflation the democrats said it was going to be the unemployment
What happened to the unemployment rate btwn 1977-79
It went down
What did the Reagan administration do?
Lowered income taxes
What was it like in 1982?
It was a bad economic year and they had a negative GDP growth and high unemployment
What was war like under Reagan?
He had the longest peace time expansion in US history up to that point
What did Greenspan become the chair of in 1987?
He became the chair of the Fed
What type of Monetary policy did Greenspan follow during his years in the Fed?
A tight Monetary policy
What did Bush1 promise not to do but did?
Raise Taxes
What happened with the economy in his term?
They had a recession
What did Clinton say that was right about the first three years of Bush1's presidency?
The worst economically in the history of the US since the depression
Who did Bush1 blame for the economic problems?
What was the economic expansion under Clinton?
He had the longest economic expansion in history
What did Clinton do to the healthcare system in 1993?
He reformed it but did not invite doctors to the table
What was the GDP like during Clintons second term?
It was high
What happened to the Unemployment rate from 1996-2000
It went down each year
What did the Fed do to M2 during 1998?
It was at a high percentage (8.8%) which helped fuel the stock market
Whats the equation of exchange
Whats M in the EoE
What is V in the EoE
What is P in the EoE
GDP Deflator
What is Q in the EoE
Real DP
What is Friedmans view on the EoE equation
He believed that M is M2 and the Velocity of M2 was predictable. He said that that M2 should increase by 5% each year and that should be put into the constitution.
Q should be at a 4% growth rate each year.
Friedman wanted an amendment for a balanced budget and flat taxes.
He was in favor of free trade, legalizing drugs, and a voluntary army
Actual Reserves
Deposits at the Fed + Vault Cash
Reserve Requirements
-The reserve requirement times demand deposits
-10%=RR DD=12 Million
The Required Reserve= 1.2 Million
Excess Reserves
Actual Reserve-Required Reserve
The Economy from 2001-2005
Real GDP= 2.5 and M2= 6.8 and Unemployment= 5.5
The unemployemnt rate came down. He brought the US out of the recession by cutting taxes.
Keynes Graph
AD and AS cross in an X and Yfe is where they cross. They shift Demand
Friedman Graph
AS curve is diagnol and there is a Yfe straigh up the middle. There is a natural rate of unemployment. You can't trick people in the long run.
Rational Expectations (NeoClassical)
AD is diagnol and the AS is straight up. Short terma and long term. Shift Demand
Supply Siders
AS and AD cross in X. Shift supply outword you get more output without inflation
Did the Glass-Stegall Act of 1933 set up "firewalls" between commercial banks, savings and loans, and investment banks.
Did the Bretton Woods meetings in 1944 put the allies on a full gold standard?
Did the famous "accord" in 1951 remove the Fed from under the control of the Treasury and give the Fed far greater independence?
Did the Vietname War monetary increase?
In 1968 the gov. removed the gold backing for Federal Reserve notes and by 1973 the US was completely off the gold standard and had floating exchange rates
How often does the Fed change the Reserve Requirement?
What does the Fed do if it is to engage in open market operations while pursing tight monetary policy
It sells securities to banks
Has the Fed changed the Federal Funds since 2004?
Where does the Fed set the Federal Funds Rate
Below the Discount Rate
Were US citizens allowed to own gold again starting in 1975?
The Monetary Control (Reform) Act in 1980 began to deregulate the US banking system and break down some of the Glass-Steagall firewalls
The Riegle-Neil Act of 1994 outlawed interstate banking
Coins and currency in ciruculation, demand deposits, and traveler's checks
M1 + avngs accounts
defined as moneyzero maturity
Monetary Base
Consists of all coins and currency plus deposits at the fed
Contains morecomponents than m1 or m2
What is GDP?
-Flow Variable
-Final Production (NOT CONSUMPTION)
-Based on the principle of consumer sovereignty
-Does not include illegal activities
-Measure in monetary terms with individual prices used as weights ot indicate how much society values particular goods
Does GDP deal with changes in desire for more leisure and less work well?
Are housewives included in GDP
Are international comparisons easy to make with GDP?
Are pollution clean-up costs subtracted from GDP
Does GDP include Depreciation?
Is Say's Law true if interest rates, wages, and prices are flexible?
According to Marshall Pigou and Fisher should we use a full gold standard?
Accordign to Marshall Pigou and Fisher how is the velocity of money?
Very unstable
What should you not do in recessions according to Marshall Pigou and Fisher
run budget defecits
What is the Fisher equation?
that the nominl interest rate equals the real interest rate (real rate of return) plus inflationary expectations
What is the fundamental problem in mature capatilistic economy according to Keynes General Theory?
A surplus of labor
According to Keynes General Theory what should be done during a depression and what does he think about wages and price controls?
Depression there should be defecit spending and wages and prce controls are okay to use.
According to Keynes General Theory what is the velocity of money
What does friedman want a constitutional amendment for
a balance budget and M2 grows at 5% each year
What does friedman want for tax and trade
Simple flat tax and free trade
What does Friedman say was the primary cause of the Great Depression?
The Fed failure to increase the money supply.
What does Friedman say about the velocity of money
It is stable