• Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off
Reading...
Front

Card Range To Study

through

image

Play button

image

Play button

image

Progress

1/150

Click to flip

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