Final Econ Exam

Front 1

Aggregate Demand is the function of what 3 variables?

Back 1

1. interest rates
2. real income Y
3. price level P

Front 2

Why is the Aggregate demand curve downward sloping?

Back 2

because there is a negative relationship between P and real income Y due to the interaction between the money and goods markets, assuming G,T,Ms remains constant

Front 3

What is true along the AD curve?

Back 3

1. all points are equilibrium points in both $ and goods markets
2. we assume there is no change in fiscal or monetary policy to change P, and Ms, T, G are all constant

Front 4

What shifts the AD curve?
Which way?

Back 4

1. change in fiscal policy
2. change in monetary policy

expansionary shifts R
contractionary shifts L

a change in C or I unrelated to policy also shifts AD

Front 5

Who tracks the capacity utilization rate?
What is the average over last 25 yrs?

Back 5

the Fed
81%

Front 6

Why is full capacity utilization not healthy for the economy?

Back 6

1. work cannot be sustained
2. wages will increase and put presusre on prices leading to inflation

Front 7

What shifts aggregate supply?

Back 7

1. cost shocks
2. economic growth/deterioration
3. supply side economic policies
4. natural disasters/good weather

Front 8

what shifts aggregate supply to the right?

Back 8

1. lower costs (input prices, wages)
2. economic growth (more capital, labor, tech)
3. Public policy (tax cuts, deregulation)
4. good weather

Front 9

what shifts aggregate supply to the left?

Back 9

1.higher costs
2.stagnation(capial deterioration)
3.public policy(waste, inefficitency, overregulation)
4.bad weather, natural disasters, destruction from wars

Front 10

when is the Long run aggregate supply curve vertical?

Back 10

if wage reates and other costs fully adjust to changes in P
(potential GDP- sustainable GDP in the long-run)

Front 11

how long are policy lags for monetary policies vs. fiscal policies

Back 11

inside(monetary=short, fiscal=long)
outside(monetary=long)

Front 12

what is inflation initiated by aggregate demand?

Back 12

Demand-Pull inflation (an increase in Ms or Consumer confidence)

Front 13

what is inflation initiated by aggregate supply?

Back 13

Cost-push or supply-side inflation (increase in costs or stagflation which is decreased output with increase in P) pg 276

Front 14

What must increase to sustain long run growth?

Back 14

1.number of hours worked and/or more workers
2.amount of capital or quality of capital
3.productivity

Front 15

what is compartive advantage?

Back 15

Neoclassical economic theory=all parties benefit from free trade and specialization

Front 16

what are the three trade barriers?

Back 16

1.tariffs
2.export subsidies
3.quotas

Front 17

what is the goal of tariffs?

Back 17

to make imports domestically more expensive, reduce demand for imported goods

Front 18

who pust out tariffs rates on all products?

Back 18

International Trade Commission ITC

Front 19

What is dumping?

Back 19

when a firm/industry sells product on world market at or below cost in order to drive out competition and then raise prices

Front 20

who considers dumping illegal?

Back 20

GATT general agreement on tariffs and trade

US + 22 countries

Front 21

what are three reasons a country would impose protectionist measures

Back 21

1.save domestic jobs
2.other country's usage of unfair trade practices like dumping
3.protection to allow infant industries to survive

Front 22

who are the demanders of a currency

Back 22

1.tourists
2.importers
3.purchasers of stocks and bonds
4.investors
5.traders who anticipate a depreciation

Front 23

factors that affect exchange rates/ shift S and D curves

Back 23

1.change in price level
2.change in interest rates

Front 24

how are inflation and currency value related?

Back 24

inversely

inflation=depreciation
deflation=appreciation

Front 25

how are interest rates and currency value related?

Back 25

directly

higher r=appreciation
lower r=depreciation

Front 26

who measures and reports GDP?
how often?

Back 26

quarterly by BEA

Front 27

when does crowding out occur?

Back 27

expansionary fiscal policy

Front 28

who measures UE and how often reported?

Back 28

BLS monthly

Front 29

what does the natural rate of unemployment correspond to?

Back 29

potential GDP-level of output at LRAS

Front 30

What two things measure inflation?

Back 30

GDP deflator and CPI

Front 31

GDP deflator

Back 31

nominal GDP/real GDP X 100

Front 32

Who measures and reports inflation rate changes?

Back 32

BLS monthly

Front 33

the largest public holder of us debt is

Back 33

the social security trust fund

Front 34

link from money to goods market

Back 34

r

Front 35

is the discount rate greater or less than fed funds rate

Back 35

greater