Final Review For Econ 104

Front 1

What is the Federal Reserve? Which state has 2 FR banks?

Back 1

Acts as a national clearing house for checks. 12 Banks, 2 in MO.

Front 2

What counts as money?

Back 2

Cash, checks, and deposit acounts. Anything widely used and generally accepted as a medium of excange. NOT BONDS.

Front 3

What is the Paradox of Thrift?

Back 3

If everyone saves more, then the economy saves less. Because savings = leakages.

Front 4

What is Say's Law?

Back 4

Supply creates its own demand.

Front 5

What is the equation of exchange, can you use it?

Back 5

MV=PV solve for P

Front 6

What is an inflationary gap?

Back 6

If actual expenditure > full employment expenditures => an excess of total spending over what is necessary to have full employment (gvm't will take out money)

Front 7

What is a deflationary gap?

Back 7

If actual expenditure < full employment expendiures => the amount of money necessary to bring the actual expenditures up to full employment expenditures (gvm't will pump in money)

Front 8

How does the multiplier affect the gap?

Back 8

Fe-Ae/multiplier= amount of money needed to cover gaps. So if Fe-Ae=$150 and K=3 => 150/3= $50 will be spent

Front 9

What are leakages to the circular flow model?

Back 9

Savings, taxes, and imports. When money leaves the system and cannot continue on in the circular flow model.

Front 10

What are injections to the circular flow model?

Back 10

Investments (stocks/bonds), Government Expenditures, and Exports

Front 11

What does GDP equal? Know what each piece means.

Back 11

GDP= C+G+I+NX c=consumption
g=government spending i=investment nx= net exports
nx=exp-imp i=in new capital

Front 12

What is NOT included in GDP?

Back 12

US citizens working abroad, household production, can you track the amount of money?, illegal drugs/prostitution

Front 13

What is the value added approach to GDP?

Back 13

Used to avoid double counting. Only final goods and services prices are used.

Front 14

What is the difference between GDP and GNP?

Back 14

GDP=condisers only total consumption/production of goods and services in our society. Ex: wages from worker from iraq in us.

GNP=measure of output for Americans her AND abroad
ex: wages from US citizen working in iraq.

Front 15

What is a transfer payment?

Back 15

Any payment made from the gvm't to individual for non-labor reason.
-redistribution of income
-any $ for not doing work
-included in disposable income

Front 16

What is the difference between the national debt and national defecit? About how much is the national debt?

Back 16

National debt=> total amount that USA owes right now it's about 10.7 trilion.
National defecit=> amount added to debt over one year

Front 17

Who benefits from inflation?

Back 17

Debtors

Front 18

What are the qualitative monetary policies?

Back 18

Margin buying requirements

Front 19

What are the quantitative monetary policies?

Back 19

Discount rate policy
Reserve requirement
Open Market Policy

Front 20

How does the reserve requirment policy fight inflation?

Back 20

Raising the Reserve Requirement forces the banks to hold more money, can't loan out as much, trying to lower amount of money in circulation.

Front 21

How does the Open Market Policy fight inflation?

Back 21

By selling bonds, money will be taken out of the economy=> less inflation.

Front 22

How does the Discount Rate fight inflation?

Back 22

General raising and lowering of interest rates.

Front 23

What are the fiscal policies used to fight unemployment and inflation?

Back 23

Taxing and Government Spending

Front 24

How do taxing and goverment spending fight inflation and unemployment?

Back 24

Taxing: cutting taxes fights unemployment
Taxing: raising taxes fight inflation
Gvm't Spending: raising spending fights unemployment
Gvm't Spendig: lowering fights inflation

Front 25

What is a built in stabilizer? What are some examples?

Back 25

Unemployment insurance, contracts, when $ starts coming out of economy at good times for use at bad times, trying to help the curve become more stable.

Front 26

What is the Philips curve?

Back 26

There is an inverse relationship between inflation and unemployment. "When high inflation, low unemployment" "When low inflation, high unemployment"

Front 27

What is Okun's Law?

Back 27

States for every 1% increase in unemployment rate=> 2-3% decrease in the GDP.

Front 28

What is inflation?

Back 28

Inflation is a general increase in prices. When savings<investment

Front 29

What is stagflation?

Back 29

High levels of Inflation and high levels of Unemployment at same time.

Front 30

What is the Goldilocks era?

Back 30

aka Clinton. Low levels of inflation simultaneously with low levels of unemployment!

Front 31

Name the 5 different types of unemployment:

Back 31

Frictional
Seasonal
Structural
Cyclical
Hidden

Front 32

Explain Frictional Unemployment

Back 32

Caused by mismatch of available jobs and the location of the worker. ex: transitional workers/ first enetering job marker(graduates)

Front 33

Explain Seasonal Unemployment

Back 33

Caused by changing seasonal demand supploy of labor force.
Lifeguard, ski instructors, migrant workers.

Front 34

Explain Structural Unemployment

Back 34

Caused by permanent displacement of workers due to shifting product demand or changes in technology, permanent decrease in employment. Ex: newspaper ad design sales, mechanical picking of tomatoes creates less demand for manual labor.

Front 35

Explain Cyclical Unemployment

Back 35

Caused by decreaded demand for labor during economic recessions. Ex: people who ware losing jobs NOW due to recession.

Front 36

Explain Hidden Unemployment

Back 36

Not measured in the unemployment rate. Ex: discouraged workers, involuntary part time, under-employed.

Front 37

Whos is considered unemployed by the BLS? What is the BLS?

Back 37

Must be able to work but not working, must be actively looking for a job.

Front 38

What is the differnce between layoffs and downsizing?

Back 38

Downsizing is a mass firing of workers increasing workload per person. Downsizing permanently shrinks the size of a company forcing each worker to become more efficient. Layoffs are smaller in size and are reversible.

Front 39

What other factors in society are associated with rising unemployment?

Back 39

Increases in Unemployment Insurance.
Increase in Welfare Payments
Increase in Healthcare Costs
Increase in Law Enforcement Costs
Remember Okuns law, lower in GDP.

Front 40

What is the Laffer Curve?

Back 40

tax revenue in relation to tax rate. From 0-t* tax revenue is increasing. From t*-end tax revenue is decreasing.

Front 41

What are the 3 different types of Tax Structures?

Back 41

Progressive
Regressive
Proportional

Front 42

Explain the Proportional Tax Structure.

Back 42

Proportional- rich and poor taxed equally

Front 43

Explain the Progressive Tax Structure.

Back 43

Progressive- rich taxed more

Front 44

Explain the Regressive Tax Structure.

Back 44

Regressive- poor taxed more

Front 45

What are the Seven Taxes discussed in lecture?

Back 45

1.Income Tax
2.Property Tax
3.Sales Tax
4.Capital gains Tax
5.Inheritance/Death Tax
6.Excise Tax (luxury tax)
7.Corporate Income Tax (taxed on profits, double taxation)

Front 46

What did Derrick Darby cover (in general)?

Back 46

Poverty in the black community.

Front 47

How does secondary education system in the US prepare students?

Back 47

Funded by state and local spending, varies drastically in terms of financing and education among districts.

Front 48

Who is covered by health care in the US? How are we compared to other industrialized nations?

Back 48

87% of citizens are covered. Compared to others, we are the only industrialized nation without universal healthcare, we also pay more per person than another nation in the world.

Front 49

The Phillips Curve

Back 49

is the idea that when there is high unemployment there is low inflation

Front 50

Okuns law

Back 50

States for every 1% increase in the natural rate of unemployment there is a 2-3% decrease in GDP

Front 51

Since January 2008 the US has lost _________ jobs, with more than half of those being in Aug, Sept, and Oct.

Back 51

More than 1 million!

Front 52

Unemployment in the US

Back 52

Can effect everyone through unemployment insurance rates, crime, and the amount of work those who keep their job have to do.

Front 53

The secular trend of the GDP in the US over the last 50 years:

Back 53

Has alwyas been upward sloping.

Front 54

A business cycle describes?

Back 54

Describes economic growth and decline through expansion, growth, contraction, and recessions.

Front 55

An increase in the reserve ratio by the FED is probably

Back 55

Aimed at fighting inflation.

Front 56

A monetary qualitative control would be:

Back 56

Margin buying requirements

Front 57

If the FED BUYS gvm't bonds they are probably:

Back 57

Trying to pump more money into the economy and fight unemployment.

Front 58

What is the paradox of thrift?

Back 58

If everyone wants to save more, the nation as a whole may save less.

Front 59

A deflationary gap is:

Back 59

The amount of money necessary to bring the actual expenditures up to full employment expenditures.

Front 60

According to Keynes, if an economy needs $12.5 trillion for full employment expenditures but is actually spending $9 trillion and K=7, how much should the gvm't adjust the national budget?

Back 60

The gvm't will need to spend some amount less than 3.5 trillion because of the multiplier.

Front 61

The acceleration principle shows what happens to the demand for _____ goods due to an increase in the demand for ________ goods.

Back 61

capital; consumer

Front 62

The formula for the unemployment rate:

Back 62

is the number of unemployed divided by the labor force

Front 63

If the equation S+T+Imp=I+G+Exp is true, what is happening?

Back 63

Nothing because the nation is in equilibrium, or according to Keynes, full employment.

Front 64

A(n)________ in an economy is when money leaves the system and can not continue on in the circular flow model.

Back 64

Leakages

Front 65

An excess of total spending over what is necessary to have full employment is called:

Back 65

an inflationary gap

Front 66

According to the Keynesian multiplier, how much money would go into the economy if two dollars were spent and K=3.

Back 66

6

Front 67

Which of the following influences investment in new capital?

Back 67

Marginal Effiency of Capital

Front 68

Gross Domestic Product (GDP) includes

Back 68

The wages of a citizen of Pakistan working in the US

Front 69

Is government spending included in the circular flow model?

Back 69

Yes

Front 70

One must be careful when calculating the GDP

Back 70

to avoid double counting.

Front 71

Transfer payments are included in

Back 71

Disposable Income

Front 72

GDP only considers:

Back 72

Total consumption of goods and services in our society.

Front 73

Which of the following is not considered money: checks, anything widely used and generally accepted as a medium of excange, cash, bonds.

Back 73

BONDS.

Front 74

The Federal Reserve acts as....

Back 74

acts as a national clearing house for checks.

Front 75

An increase in the reserve ratio

Back 75

will decrease the amount of new money created.

Front 76

Inflation is good for whom?
Debtors, savers, retailers, individs holding gvm't bonds

Back 76

Debtors

Front 77

The consumer price index is regulated by...

Back 77

the federal reserve

Front 78

In terms of health care in the US

Back 78

we are the only industrialized, wealthy nation that does not offer universal health care, pays more per person than any other nation in the world, and has about 85% of it's population covered by form of health care.

Front 79

HMO stands for

Back 79

Health maintenance organization

Front 80

Professor Derrick Darby teaches

Back 80

Philosophy and Law

Front 81

In the US, public education is funded primarily through

Back 81

State and Local spending

Front 82

Public education in the US

Back 82

Varies drastically in terms of financing and quality of education among districts.

Front 83

What is the equation of exchange? Can you use it?

Back 83

MV=PT solve for p, and say what happens when m,v, and t change.