Economics

Front 1

Macroeconomics deals with the economy as a what?

Back 1

whole

Front 2

The market value of all final goods and services produced within a country in a given period of time

Back 2

Gross Domestic Product (GDP)

Front 3

___ = C+I+G+NX

Back 3

Y (or GDP)

Front 4

In the equation for GDP, C stands for what and what percentage of GDP does it make up?

Back 4

consumption, 69%

Front 5

In the equation for GDP, I stands for what and what percentage does it make up?

Back 5

investment, 16%

Front 6

In the equation for GDP, G stands for what and what percentage does it make up?

Back 6

government spending, 18%

Front 7

In the equation for GDP, NX stands for what and what percentage does it make up?

Back 7

net exports, -3%

Front 8

The percentage GDP components of C+I+G can be greater than 100% if ____ is greater than X

Back 8

M

Front 9

A measure of the overall cost of the goods and services bought by a typical customer

Back 9

Consumer Price Index (CPI)

Front 10

How many steps does it take to calculate CPI?

Back 10

5

Front 11

What are the steps to calculate CPI?

Back 11

1. Fix the basket
2. Find the price of each good in each year
3. Compute the cost of the basket in each year
4. Choose one year as the base year and compute the CPI for each year
5. Use the CPI to compute inflation rate from previous year

Front 12

______ = (CPI year x - CPI base year)/CPI base year *100

Back 12

rate of inflation

Front 13

What are three problems with CPI?

Back 13

substitution bias, introduction of new goods, unmeasured quality change

Front 14

GDP deflator reflects the prices of all goods and services produced domestically, while CPI reflects the prices of all goods and services _______________.

Back 14

bought by consumers

Front 15

CPI compares the price of a FIXED basket of goods and services to the price of the basket in the base year, while GDP deflator compares the price of ________ _________ goods and services to the price of the same goods and services in the base year.

Back 15

currently produced

Front 16

This is the equation for inflation adjustment.

Back 16

dollars in year x = dollars in year y * (CPI year x/CPI year y)

Front 17

automatic correction of a dollar aount for the effects of inflation by law or contract

Back 17

indexation

Front 18

Indexation is important for ______, _________, ________, and ____________.

Back 18

long-term contracts
cost-of-living allowance
social security
federal income tax brackets

Front 19

rule of 70 is:

Back 19

# of years required to double = 70/growth rate

Front 20

certificate of indebtedness that specifies the obligations of the borrower to the holder of the bond (like an IOU)

Back 20

bond

Front 21

represents ownership in a firm and is claim to the profits that a firm makes

Back 21

stock

Front 22

financial institutions through which savers can DIRECTLY provide funds to borrowers

Back 22

financial markets

Front 23

financial institutions through which savers can INDIRECTLY provide funds to borrowers

Back 23

financial intermediaries

Front 24

saving is what:

Back 24

putting money into a bond or stock

Front 25

investing is what:

Back 25

purchase of new capital

Front 26

what are three functions of money

Back 26

medium of exchange, unit of account, store of value

Front 27

what is liquidity

Back 27

the ease with which an asset can be converted into the economy's medium of exchange

Front 28

what is the difference between commodity money and fiat money?

Back 28

commodity money takes the form of a commodity with intrinsic value (has value even if not used as money, i.e. gold coins), and fiat money has no intrinsic value

Front 29

Federal Reserve System has ___ members with ___ year terms, a chair with a __ year term, and ___ regional Federal Reserve Banks in major US cities.

Back 29

7, 14, 4, 12

Front 30

Jobs of ________________ include: regulate banks and ensure the health of the banking system, and control quantity of money in economy through the FOMC

Back 30

Federal Reserve System

Front 31

Which group has the power to increase or decrease the number of dollars in the economy?

Back 31

Federal Open Market Committee

Front 32

money multiplier =

Back 32

reciprocal of reserve ration (if ration is 1/10, multiplier = 10)

Front 33

Open-Market Operations are what?

Back 33

purchase and sale of US government bonds by the Fed

Front 34

What are reserve requirements?

Back 34

regulations on the minimum amount of reserves that banks must hold against deposits

Front 35

What is discount rate?

Back 35

interest rate on the loans that Fed makes to banks

Front 36

When depositors suspect that a bank may go bankrupt and go to the bank to withdraw their deposits, it is called a ___________.

Back 36

bank run

Front 37

What protects banks from a bank run?

Back 37

FDIC

Front 38

M2 includes:

Back 38

certificates of deposit, checkable deposits, traveler's checks

Front 39

real interest rate = ?

Back 39

nominal interest rate - inflation rate

Front 40

when banks hold only a fraction of deposits in reserve, banks.....?

Back 40

create money