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