Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
150 Cards in this Set
- Front
- Back
changes in taxes and govt spending occur without action from congree
|
nondiscretionary
|
|
Federal budget deficit is calculated by
|
subtracting spending from revenue
|
|
mPC in .8, govt could shift the aggregate demand curve rightward by $100 billion by
|
decreasing taxes by $25 billion
|
|
set of fiscal policies that would be most contractionary would be a(n)
|
decrease in govt spending
and increase in taxes |
|
Price level is fixed, MpC is .5, GDP gap is negative $100 billion. To achieve full employment output, govt should
|
increase expenditures by $50 billion
|
|
financing of govt deficit increases interest rates and as a result, reduces investment spending . This statement describes
|
the crowding-out-effect
|
|
public debt is
|
total of all past deficits minus all past surpluses
|
|
foreigners held roughly how much % of U.S. federal debt in 2009?
|
30%
|
|
Potential consequnces of the public debt is that it may
|
lead to additional future taxes that reduce economic incentives
|
|
Social Security Program is designed to pay
|
current retirees using funds from current contributions
|
|
functions of money are to serve as a
|
unit of account, store of value, and medium of exchange
|
|
Most liquid item
|
checkable deposits
|
|
currency or money of the U.s, like other countries, is
|
token money
|
|
Joe Rodgers deposits $200 in currency in his checking account at a bank, the deposit is treated as
|
no change in the money supple bc the $200 in currency has been converted to a $200 increase in checkable deposits
|
|
difference between M1 and M2 is that
|
M2 includes small-denominated time deposits, non checkable savings accounts, money market deposit accounts, and money market mutual fund balance
|
|
credit cards
|
are not money
|
|
What "backs" the money supply of the U.s.??
|
the U.s. ability to keep the value of money relatively stable
|
|
Basic economic policy function of the Federal Reserve bank?
|
controlling the supply of money
|
|
The FOMC of the Federal Reserve is primarily for
|
setting the Fed's monetary policy and directing the purchase and sale of govt securities
|
|
Cause of the skyrocketing mortgage default rates that triggered the financial crises of 07-08 include:
|
mortage lending became very lax, many ppl took mortgages they were incapable of paying, real eatate values started declining after having risen
|
|
Fractional reserve system began when goldsmiths began
|
issuing paper receipts in excess of the amy of gold held
|
|
In a fractional reserve system,
|
banks can create money through the lending process
|
|
a banks net worth is equal to its
|
assets-liabilities
|
|
checkable deposit at a commercial bank is a(n)
|
asset to the depositor and liabilit to the bank
|
|
reserve ratio is equal to
|
required reserves/checkable deposit liabilities
|
|
reserve requirement is 20%. If a bank has checkable deposits of $4 million and actual reserves of $1 million, it can safely lend out:
|
$1.2 million
|
|
primary purpose of reserve requirement is
|
prevent commerical banks from earning excess profit
|
|
banks can lend their excess reserves to other banks in
|
federal funds market
|
|
money multiplier is 6, reserve ratio must be
|
.167
|
|
establishment of FDIC resulted from
|
bank panics of 1930-1933
|
|
Consumption schedule
|
MPS constant, APC declindes as income rises
|
|
Investment demand relates
|
planned investment to real interest rates
|
|
invesmtent expenditures relates
|
planned investment to GDP or Income
|
|
Saving is $15 billion at $125 billion equlibrium level of output in a closed private economy, so actualy investment must be
|
15 billion
|
|
Mpc=.8
Equilibrium Gdp will increase by $30 billion if aggregate expenditures rise by |
6 billion
|
|
Amount by which agg expenditures exceed those with full employment level of domestic output can be described as
|
inflationary expenditure gap
|
|
investment increases by 10 billion and economys mpc is .8 aggregate demand will shift
|
rightward by $50 billion at each price level
|
|
Increase in personal income tac rates will cause
|
decrease in aggregate demand
|
|
Graphically: Demand pull inflation is
|
rightward shift of Aggregate demand along unsloping aggregate supply curve
|
|
Cost push inflation is
|
decrease in aggregate suppy and no change in Aggregate demand
|
|
economics is basically the study of
|
the problem of scarce resources relative to human wants
|
|
Which one of the following expressions BEST states the idea of opportunity cost?
|
there is no such thing as a free lunch
|
|
Economics is primarily the study of
|
the problem of scarce resources relative to human wants
|
|
Expression best states the idea of opportunity cost
|
there is no such thing as a free lunch
|
|
Person should consume more of something when it marginal
|
benefit exceeds the marginal cost
|
|
Latin term
"ceteris paribus" |
other things equal
|
|
positive statement is one which is
|
objective and based on facts
|
|
economizing problem in one of deciding how to make the best use of
|
limited resources to satisfy virtually limited wants
|
|
refer tlo budjet line shown in diagram above. if consumers income is $20 which is the following combinations of goods is unattainable?
|
4 units of c, 6 units of d
|
|
four factors of production are
|
-land, labor, capital, and entrepreneurial ability
|
|
assume a change in govt policy results in greater production of both consumer goods and investment goods. we can conclude that
|
economy was not employing all of its resources before policy change
|
|
statement is correct?
|
all of the above
|
|
Real GDp measures
|
value of final goods and services produced within the borders of a country, corrected for price changes
|
|
Nominal gross domestic product
|
measures value of final goods and services produced within the borders of a country during a certain given time given the current prices
|
|
Familys income increases by 5%, the same time as inflation is 3.5 %, then the
|
family will need to spend more in order to maintain its standard of living
|
|
macroeconomics models help to clarify important questions such as the following, except:
|
how will opec manipulate and maintain the price of crude oil in the world market?
|
|
modern economic growth
|
makes a countrys output per person rise at a compounded rate
|
|
which would an economist consider to be an investment
|
boeing buying a new factory
|
|
unexpected drop in consumer spending would be classified as a
|
negative demand shock
|
|
increase in worker productivity will lead to
|
positive supply shock
|
|
techno tv procudes lcd at a price of 2000$, techno determines that optimal output is 3000 tvs per week. If prices are sticky and fears of recession reduce demand for lcd tvs, what would techno do
|
rduce ouput in the short run
|
|
computerized inventory tracking has enabled businesses to do the following
|
wait a longer period before adjusting production levels to change in demand.
|
|
final good or service ?
|
haircut purchased for son
|
|
sale of a used automobile would not be included in gdp of the current year bc it is a
|
nonproduction transaction
|
|
Refer to data above, expenditures approach to gdp calculation can be shown by adding:
|
8 through 11
|
|
refer to data above, income or allocation approach to national income calculation can be shown by
|
adding 2 through 11
|
|
in an economy that is ecperiencing a shrinking production capacity
|
depreciation exceeds gross investment
|
|
national income measures
|
total of all sources private income and government revenue from taxes on production and imports
|
|
best defines disposable income
|
income received by households less personal taxes
|
|
GDP deflator or price index equals
|
nominal gdp divided by real gdp
|
|
price index is rising over a period of time, then the real gdp in years
|
prior to the base year will be less than nominal gdp
|
|
gdp excludes most nonmarket transactions . therefore, gdp tends to
|
underestimate the amount of production in the economy
|
|
nations gdp was 250 billion in 2009 and 265 billion in 2010. its population was 122 million in 2009 and 125 million in 2010. What is growth rate of real gdp per capita in 2010
|
3.4%
|
|
for a nations real gdp per capita to rise during a year
|
real gdp must increase more rapidly than population
|
|
one major aspect of socio-cultural political environment of the united states which has generally been conductive to economic growth is the
|
favorable attitude toward work and risk taking
|
|
supply factors in economic growth include the following except
|
increases in purchases of output
|
|
economic growth can best be portrayed as a
|
rightward shift of the production possibilities curve
|
|
real gdp or total output in any year is equal to
|
number of worker-hours multiplied by labor productivity
|
|
other things equal, which of the following would increase the rate of economic growth as a measured by changes in real gdp
|
an increase in the size of the working age population
|
|
largest contributpr to increases in the productivity of American labor
|
technology advance
|
|
in the us economic growth experience
|
most capital is complementary to labor
|
|
one major economic benefit of global competition
|
pressure to innovate
|
|
recession is a decline in
|
real gdp that last six months or longer
|
|
great recession that started in 2007 was triggered by shocks in which of economic section
|
real estate and financial markets
|
|
kyle is temporarily unemployed but has voluntarily quit his job with company a and will begin a better job next week with company b
|
frictionally unemployment
|
|
cyclical unemployment
|
deficiency of spending on goods and services
|
|
natural rate of unemployment
|
that rate of unemployment occurring when the economy is at its potential growth
|
|
Gdp gap measures the amt by which
|
potential gdp exceeds actual
|
|
consumer price index for a certain yr is 120, this means avg price of consumer items in that year were
|
20% higher than the avg price in the base period 1982-1984
|
|
statement used to describe demand pull inflation
|
too much money chasing too few goods
|
|
when oil and energy prices rise, economy experiences
|
cost push inflation
|
|
consumer holds money to meet spending needs is example of
|
transaction demand for money
|
|
increase in the money supply is likely to reduce
|
interest rates
|
|
you bought a bond with no expiration/ fixed annual interest rate payment of $1000. if interest rate in the economy is now 12.5% and you want to sell the bond, max price you can get is?
|
8000
|
|
four main tools of monetary policy
|
discount rate, reserve ratio, auction facility, open market operation
|
|
increase in legal reserve ratio
|
decreases money supply by decreasing excess reserves and decreasing monetary multiplier
|
|
lowerin reserve ratio
|
turns required reserves into excess reserves
|
|
projecting that might temporarily fall short of legally required reserves in the coming days, the bank decides to borrow money for fed. interest rate on the loan Is called
|
discount rate
|
|
most frequently used tool for achieving price stability
|
open market operation
|
|
fed reserve could redce the money supply by
|
selling govt bonds in the open mARKET
|
|
economic investment
|
making new additions to the nations capital stock
|
|
financial investment
|
purchasing an asset for monetary gain
|
|
present value is best defined
|
worth today of future expected returns or cost
|
|
investments proper current price should equal
|
sum of all present valves of all future payments it is ecpected to make
|
|
feature of all investments
|
give owners a chance to receive future payment
|
|
primary risk bondholders face
|
bond issure will default
|
|
best describes mutual fund
|
company manages portfolio that is purchased by pooling money or investors
|
|
risk in finance means
|
has future payments that are uncertain
|
|
us federal govt is ulikely to default on its bonds payments bc
|
if necessary, it can print money needed to make payment on time
|
|
Katie buys house 20000$ and rents for $1000 per month. annual rate of return
|
6 percent
|
|
short run nominal wages and other input prices are assumed to be
|
unresponsive to price level changes, but in long run they are assumed to be responsive
|
|
in graph above decrease in price level from p1 to p3 will lead to
|
decrease in profits, decrease in output, increase in unemployment
|
|
rquilibrium in the long run occurs
|
ad intersects the short run and the long run As curves at same point
|
|
short run, demand pull inflation increases
|
real output and price level, but in long run only the price level
|
|
cost push model inflation, increase in nominal wages that exceed increase in productivity of labor
|
decrease AS and increase price level
|
|
Phillips curve suggest tradeoff bw
|
level of unemployment and inflation
|
|
inflation + failing real output and unemployment=
|
stagflation
|
|
misery index is a measure of national economic discomfort that adds together a nations
|
unemployment and inflation rate
|
|
congress rep who calls for decrease in tax rates to increase savings, work effort, and economic growth would likelt be
|
supply side of fiscal policy
|
|
supply side economist Arthur lafleur
|
large reduction in personal and corporate income taxes will increase aggregate supply much more than AD
|
|
Mainsteam perspective, instability in the economy is due to
|
inflexible prices, shocks to either AD or AS
|
|
equation exchange, change in the money supply can affect
|
price level and real output
|
|
view that changes in the money supply is the primary cause of change in real output and the price level is most closely associate with
|
monetarism
|
|
real business cycle theory
|
technology and resources affect productivity and thus in the long run growth of AS
|
|
economy diverges from full employment output new classical economist would suggest that
|
INTERNAL MECHANISMS WITHIN THE ECONOMY WOULD AUTOMATICALLY RETURN TO ITS FULL EMPLOYMENT OUTPUT
|
|
RATIONAL EXPRECTATIONS THEORY INDICATES
|
LONG RUN AS CURVE IS HORIZONTAL
|
|
MAINSTREAM ECONOMIST THINKS THAT
|
DOWNWARD INFLEXIBILITHY OF WAGES NAD PRICES MAY LEAVE THE ECONOMY STUCK IN A COSTLY RECESSION FOR LONG PERIODS
|
|
MILTON FRIEDMAN, A MAJOR REASON FOR MACROECONOMICS INSTABILITY IS DUE TO
|
DISCRETIONARY MONETARY POLICT OF THE FEDS
|
|
MAINSTEAM ECONOMIST SUPPORT
|
use of discretionary monetary and fiscal policy for achieving major economic goals
|
|
PROPOSED MONETARY RULE THAT WOULD SPECIFY HOW THE FED SHOULD RESPONDE TO CHANGES IN GDP AND INFLATION RATES IS CALLED
|
KEYNESIAN RULE
|
|
TRADE DEFICIT REFERS TO A SITUATION WHERE
|
EXPORTS ARE LESS THAN IMPORTS
|
|
u.S. LARGEST TRADING PARTNER IN TERMS OF VOLUME OF TRADE
|
CANADAE
|
|
IF COUNTY A CAN PRODUCE BOTH GOODS FOR X AND y MORE EFFICIENTLY, WITH SMALLER ABSOLUTE AMOUNTS OF RESOURCES THAN CAN COUNTRY B
|
MUTUALLY ADVANATAGEOUS SPECIALIZATION AND TRADE B/W COUNTRY A AND B MAY STILL BE POSSIBLE
|
|
IN A TWO NATION WORLD, COMPARATIVE ADV MEANS THAT ONE NATION CAN PRODUCE
|
A PRODUCT AT A LOWER DOEMSTIC OPP. COST THAN THE OTHER NATION
|
|
GERMANY HAS COMPARATIVE ADV OVER FRANCE FOR STEEL
|
:)
|
|
SPECIALIZATION ADN TRADE B/W INDIVIDUALS OR BETWEEN NATIONS LEAD TO
|
HIGHER TOTAL OUTPUT
|
|
LAW OF INCREASING OPP. COS
|
MAY LIMIT EXTENT TO WHICH A NATION SPECIALIZES IN PRODUCING A PARTICULAR PRODUCT
|
|
bUY American CMAPIAGN IS EQUIVALENT TO
|
QUOTA
|
|
IN EFFECT, TARIFFS ON IMPORTS
|
SUBSIDIES FOR DOMESTIC PRODUCERS
|
|
LIKELY RESULT OF IMPOSING TARIFFS TO INCREASE DOMESTIC EMPLOYMENT
|
INCREASE IN POSSIBILTY OF RELATIONARY TARIFFS
|
|
NATIONS CURRENT ACOUNT BALANCE IS EQUAL TO ITS EXPORTS-IMPORTS OF
|
GOODS AND SERVICES , PLUS NET INVESTMENT AND NET TRANSFERS
|
|
WILL DIRECTLY ALTER U.S. BALACNE OF TRADE
|
DECREASE IN US GOOD EXPORTS
|
|
OFFICIAL RESERVES USED TO ACHIEVE A BALACNE OF PAYMENT BETWEEN NATIONS ENGAGING IN INTERNATIONAL TRADE AR EHELD BY
|
CENTRAL BANKS OF NATION ENGAGED IN TRADE
|
|
DOLLAR PRICE OF YEN RISES, THEN
|
DOLLAR DEPRECIATES RELATIVE TO YEN
|
|
EXCHANGE RATE US $1=.7841 EURO, FRENCH DV PRICE AT 20 EUROS WOULD COST TO AMERICAN BUYER
|
C 25.51
|
|
REAL INTEREST RATES FALL IN THE US COMPARED TO OTHER NATIONS, OTHER THINGS BEING EQUAL, WE WOULD EXPECT THE DOLLAR TO
|
DEPRECIATION
|
|
CURRENCY DEPRECIATES ON THE FOREIGN EXCHANGE MARKET
|
WILL DISCOURAGES IMPORTS TO THE COUNTRY WHERE CURRENCY HAS DEPRECIATED
|
|
CURRENT SYSTEM OF EXCHANGE RATES CAN BE BEST DESCRIBED AS
|
MANAGED FLOATING ECHANGE RATES
|
|
US GERMANY JAPAN FRANCE BRITAIN ITALY CANADA RUSSIA
|
G8 NATIONS
|
|
EFFFECTS ON US IMPORTS AND EXPORTS WHEN THE US EXPERIENCES STRNGER ECONOMIC GROWTH THAN MAJOR TRADING PARTNERS
|
US IMPORTS WILL INCREASE MORE THAN US EXPORTS
|