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47 Cards in this Set

  • Front
  • Back
Frictional Unemployment
Exist because of Job Search
Structural Unemployment
Exist because of minimum wage laws, Union, efficiency wage theory. The amount of jobs available (Labor Demand) does not equal the amount of people who want jobs (Labor Supply)
Efficiency wage theory
Companies that will pay above minimum wage to attract better employees, and have a healthy work staff
The amount of jobs available
Labor Demand
The amount of people who want jobs
Labor Supply
QLS (workers) > QLD (jobs)
Structural Unemployment
Minimum wage laws
Laws instituted Federal and State Laws that employers have to give to their employees.
Union
Exist to create market power, you can't fire union employees.
Unskilled Workers
Teenagers, People entering entry level jobs
Efficiency wage theory
Companies will pay above minimum wage in order to attract
If minimum wage law is below equilibrium?
It is not binding it does not effect unemployment.
Unit Account
provides a yardstick that allows us to distinguished prices (tells what the value is, what is worth more)
Store of value
The item that people can use to transfer purchasing power from preset to future.
Intrinsic Value
The actual value of property you have, ex diamond. ( $100 bills paper is was made of is not worth $100)
Commodity Money
The money you have that has intrinsic value
Fiat Money
When money has no intrinsic value
Liquidity
Assets that can be turned to cash
Currency
The most liquid form of money, ex
1. dollar bills
2. coins
3. demand deposit checking accounts
M1 Money
1. dollar bills
2. coins
3. demand deposit checking accounts
4. travelers checks
(more liquid)
M2 Money
1. Savings Accounts
2. Small Time Deposits, CD's
(bigger dollar wise)
Federal Reserve
1. Monetary Policy
2. Lender of the last resort
3. Act as a bank for the Federal Government
4. Issuing Currency, The Federal Reserve decides the money should be printed by local Federal Reserve Branches
5. Regulates the bank Industry.
Owned locally but private
Monetary Policy
Controls the money supply
Full Employment
The type of unemployment we want to achieve that's not structural or frictional anything above is called Cyclical unemployment.
FOMC
Federal Open Market Committee
Federal Reserve Board of Governors
Make final decision on monetary policy. Allowed to serve 14 years.
Chairman of Board of Governor of Federal Reserve
Makes finally decision over board of governors. They can serve forever.
Depository Banks
Swiss Bank Account
Reserve ratio
The (10%) percentage of total deposit that you keep in our Reserves
Assets(Debit) and Liabilities(Credit) are equal? True or False
True
Money Multiplier
Mfs(Final Money Supply) = M0s(Original Money Supply x MU(Reserve ratio)
If the Reserve ratio goes up does the money supply increase or decrease?
Decrease, loan amount decreases therefore money supply falls.
Money Multiplier goes up the money Supply increases or decreases?
increases
If the Reserve ratio increase what happen to the Multiplier?
decrease
If you loan a depository bank $10,000 reserve and the reserve ratio is 25%, how much would bank loan out out
$10,000 depository banks do not have a reserve ratio
Federal reserve controlling the Money supply
1. Open Market Operation
2. Federal Funds rate
3. Reserve ratio
Common Securities
Stock, and Bonds
If purchasing power increases the value of money? increases or decreases
Decreases
Purchasing Power
Value of money, strength of your dollar
Money Demand
Your demand for M1(dollar bill, coins, checking account)
Monetary Equilibrium
1. Money Demand
2. Money Supply
If price increases what happens to value on money? increase or decrease
Decreases
If price increases what happens to the money supply? increase or decrease
It stays the same because it is constant giving by the Federal Reserve
What will cause money demand to change.
High interest rates
Classical Dichotomy
Separation between variables that relate to money and those that don't.
Nominal Variables
(Money)
nominal interest rate
nGDP
M1
Price
Inflation
Real Variables
(Physical)
real interest
rGDP
Unemployment
i/p
relative prices
wages
(these effect the economy
Monetary Neutrality
Changes in the money supply or general nominal value don't effect the real variable
(in the long run)