Macroeconomics Midterm 1

Front 1

The value of production when all inputs are fully employed ___________

Back 1

Potential Output

Front 2

The bottom of the business cycle

Back 2

Trough

Front 3

Times of economic weakness and contractions

Back 3

Recessions

Front 4

Economic policies that involve changes in government spending and taxes

Back 4

Fiscal Policy

Front 5

The difference between production with fully employed inputs and actual production

Back 5

Output Gap

Front 6

Economic policies that involve changing the money supply or interest rates

Back 6

Monetary Policy

Front 7

GDP and unemployment are related through

Back 7

Okun's law

Front 8

Monetary and fiscal policies are examples of

Back 8

Stabilization Policies

Front 9

Unemployment and inflation are related through

Back 9

Phillips Curve

Front 10

Equilibrium output and prices are determined by the intersection of

Back 10

Aggregate Demand and Aggregate Supply Curves

Front 11

Consumption (C) plus Investment (I) plus Government Expenditures (G) plus Net Exports (NX) is defined as

Back 11

Gross Domestic Product (GDP)

Front 12

Gross income (Y) plus transfers (TR) less taxes (TA) is defined as

Back 12

Sources of Disposable Income

Front 13

The ratio of nominal GDP to real GDP

Back 13

GDP deflator

Front 14

Percentage rate of increase in the level of prices during a given period

Back 14

Inflation

Front 15

The value of the stock of assets held (such as equities, bonds, money) evaluated at a point in time is

Back 15

Wealth

Front 16

The flow of value of payments to factors of production such as capital and labor during a particular period of time is

Back 16

Income

Front 17

The difference between government spending and taxes is the

Back 17

budget deficit

Front 18

The ratio of nominal money to the price level

Back 18

real balances

Front 19

When planned and actual spending are equal, the economy is in

Back 19

equilibrium

Front 20

The relation between consumption and income is

Back 20

Consumption function

Front 21

The difference between tax receipts at full employment and government expenditure

Back 21

full employment budget surplus

Front 22

The LM curve represents equilibrium in the

Back 22

money or asset market

Front 23

The IS curve represents equilibrium in the

Back 23

Goods market

Front 24

A program, such as the income tax, that reduces the effect of shocks to the economy without any direct government action is an

Back 24

automatic stabilizer

Front 25

Increasing the money supply in order to offset the increase in interest rates from an expansionary fiscal policy is

Back 25

monetary accommodation

Front 26

Size of an increase in the equilibrium level of income from an increase in the money supply

Back 26

monetary policy multiplier

Front 27

The effect of an increase in interest rates on investment, following expansionary fiscal policy is defined as

Back 27

crowding out

Front 28

Shows how much an increase in government spending changes the equilibrium level of income, holding real money supply unchanged

Back 28

Fiscal policy multiplier

Front 29

The decision on the form in which to hold assets is a

Back 29

Portfolio decision

Front 30

The flow value of payments to factors of production such as capital and labor during a particular period of time is

Back 30

income

Front 31

The value of the stock of assets held (such as equities, bonds, money) evaluated at a point in time is

Back 31

Wealth

Front 32

AD = C + Ibar + Gbar + NXbar

Back 32

Aggregate Demand

Front 33

YD = Y + TRbar - TA

Back 33

Disposable Income

Front 34

C = Cbar + c(Y + TRbar - TA)

Back 34

Consumption

Front 35

TA = t * Y

Back 35

Tax Receipts

Front 36

What are the admissible values for the marginal propensity to consume (c)?

Back 36

0 < c < 1

Front 37

What is the signifiance of the admissable values for (c) and of the positive intercept in the consumption equation (C)?

Back 37

0 < c < 1 and cbar > 0 together ensure the existence of an equilibrium level of output

Front 38

2 assumptions:
1. prices
2. behavior of producers

Back 38

1. prices are fixed
2. producers are willing to produce and sell all of the output demanded at prevailing prices

Front 39

What are the three primary measures that we use to judge macroeconomic performance?

Back 39

1. GDP growth rate
2. Inflation rate on CPI or PCE
3. Unemployment rate

Front 40

Why do we use GDP growth rate as a measure?

Back 40

Implies a measure of the increase in our standard of living

Front 41

Why do we use Inflation rate as a measure?

Back 41

Implies a measure of the uncertainty regarding the purchasing power of income

Front 42

Why do we use unemployment rate as a measure?

Back 42

a measure of the uncertainty regarding the continuation of income