Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
83 Cards in this Set
- Front
- Back
What is the Federal Reserve? Which state has 2 FR banks?
|
Acts as a national clearing house for checks. 12 Banks, 2 in MO.
|
|
What counts as money?
|
Cash, checks, and deposit acounts. Anything widely used and generally accepted as a medium of excange. NOT BONDS.
|
|
What is the Paradox of Thrift?
|
If everyone saves more, then the economy saves less. Because savings = leakages.
|
|
What is Say's Law?
|
Supply creates its own demand.
|
|
What is the equation of exchange, can you use it?
|
MV=PV solve for P
|
|
What is an inflationary gap?
|
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)
|
|
What is a deflationary gap?
|
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)
|
|
How does the multiplier affect the gap?
|
Fe-Ae/multiplier= amount of money needed to cover gaps. So if Fe-Ae=$150 and K=3 => 150/3= $50 will be spent
|
|
What are leakages to the circular flow model?
|
Savings, taxes, and imports. When money leaves the system and cannot continue on in the circular flow model.
|
|
What are injections to the circular flow model?
|
Investments (stocks/bonds), Government Expenditures, and Exports
|
|
What does GDP equal? Know what each piece means.
|
GDP= C+G+I+NX c=consumption
g=government spending i=investment nx= net exports nx=exp-imp i=in new capital |
|
What is NOT included in GDP?
|
US citizens working abroad, household production, can you track the amount of money?, illegal drugs/prostitution
|
|
What is the value added approach to GDP?
|
Used to avoid double counting. Only final goods and services prices are used.
|
|
What is the difference between GDP and GNP?
|
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. |
|
What is a transfer payment?
|
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 |
|
What is the difference between the national debt and national defecit? About how much is the national debt?
|
National debt=> total amount that USA owes right now it's about 10.7 trilion.
National defecit=> amount added to debt over one year |
|
Who benefits from inflation?
|
Debtors
|
|
What are the qualitative monetary policies?
|
Margin buying requirements
|
|
What are the quantitative monetary policies?
|
Discount rate policy
Reserve requirement Open Market Policy |
|
How does the reserve requirment policy fight inflation?
|
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.
|
|
How does the Open Market Policy fight inflation?
|
By selling bonds, money will be taken out of the economy=> less inflation.
|
|
How does the Discount Rate fight inflation?
|
General raising and lowering of interest rates.
|
|
What are the fiscal policies used to fight unemployment and inflation?
|
Taxing and Government Spending
|
|
How do taxing and goverment spending fight inflation and unemployment?
|
Taxing: cutting taxes fights unemployment
Taxing: raising taxes fight inflation Gvm't Spending: raising spending fights unemployment Gvm't Spendig: lowering fights inflation |
|
What is a built in stabilizer? What are some examples?
|
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.
|
|
What is the Philips curve?
|
There is an inverse relationship between inflation and unemployment. "When high inflation, low unemployment" "When low inflation, high unemployment"
|
|
What is Okun's Law?
|
States for every 1% increase in unemployment rate=> 2-3% decrease in the GDP.
|
|
What is inflation?
|
Inflation is a general increase in prices. When savings<investment
|
|
What is stagflation?
|
High levels of Inflation and high levels of Unemployment at same time.
|
|
What is the Goldilocks era?
|
aka Clinton. Low levels of inflation simultaneously with low levels of unemployment!
|
|
Name the 5 different types of unemployment:
|
Frictional
Seasonal Structural Cyclical Hidden |
|
Explain Frictional Unemployment
|
Caused by mismatch of available jobs and the location of the worker. ex: transitional workers/ first enetering job marker(graduates)
|
|
Explain Seasonal Unemployment
|
Caused by changing seasonal demand supploy of labor force.
Lifeguard, ski instructors, migrant workers. |
|
Explain Structural Unemployment
|
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.
|
|
Explain Cyclical Unemployment
|
Caused by decreaded demand for labor during economic recessions. Ex: people who ware losing jobs NOW due to recession.
|
|
Explain Hidden Unemployment
|
Not measured in the unemployment rate. Ex: discouraged workers, involuntary part time, under-employed.
|
|
Whos is considered unemployed by the BLS? What is the BLS?
|
Must be able to work but not working, must be actively looking for a job.
|
|
What is the differnce between layoffs and downsizing?
|
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.
|
|
What other factors in society are associated with rising unemployment?
|
Increases in Unemployment Insurance.
Increase in Welfare Payments Increase in Healthcare Costs Increase in Law Enforcement Costs Remember Okuns law, lower in GDP. |
|
What is the Laffer Curve?
|
tax revenue in relation to tax rate. From 0-t* tax revenue is increasing. From t*-end tax revenue is decreasing.
|
|
What are the 3 different types of Tax Structures?
|
Progressive
Regressive Proportional |
|
Explain the Proportional Tax Structure.
|
Proportional- rich and poor taxed equally
|
|
Explain the Progressive Tax Structure.
|
Progressive- rich taxed more
|
|
Explain the Regressive Tax Structure.
|
Regressive- poor taxed more
|
|
What are the Seven Taxes discussed in lecture?
|
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) |
|
What did Derrick Darby cover (in general)?
|
Poverty in the black community.
|
|
How does secondary education system in the US prepare students?
|
Funded by state and local spending, varies drastically in terms of financing and education among districts.
|
|
Who is covered by health care in the US? How are we compared to other industrialized nations?
|
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.
|
|
The Phillips Curve
|
is the idea that when there is high unemployment there is low inflation
|
|
Okuns law
|
States for every 1% increase in the natural rate of unemployment there is a 2-3% decrease in GDP
|
|
Since January 2008 the US has lost _________ jobs, with more than half of those being in Aug, Sept, and Oct.
|
More than 1 million!
|
|
Unemployment in the US
|
Can effect everyone through unemployment insurance rates, crime, and the amount of work those who keep their job have to do.
|
|
The secular trend of the GDP in the US over the last 50 years:
|
Has alwyas been upward sloping.
|
|
A business cycle describes?
|
Describes economic growth and decline through expansion, growth, contraction, and recessions.
|
|
An increase in the reserve ratio by the FED is probably
|
Aimed at fighting inflation.
|
|
A monetary qualitative control would be:
|
Margin buying requirements
|
|
If the FED BUYS gvm't bonds they are probably:
|
Trying to pump more money into the economy and fight unemployment.
|
|
What is the paradox of thrift?
|
If everyone wants to save more, the nation as a whole may save less.
|
|
A deflationary gap is:
|
The amount of money necessary to bring the actual expenditures up to full employment expenditures.
|
|
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?
|
The gvm't will need to spend some amount less than 3.5 trillion because of the multiplier.
|
|
The acceleration principle shows what happens to the demand for _____ goods due to an increase in the demand for ________ goods.
|
capital; consumer
|
|
The formula for the unemployment rate:
|
is the number of unemployed divided by the labor force
|
|
If the equation S+T+Imp=I+G+Exp is true, what is happening?
|
Nothing because the nation is in equilibrium, or according to Keynes, full employment.
|
|
A(n)________ in an economy is when money leaves the system and can not continue on in the circular flow model.
|
Leakages
|
|
An excess of total spending over what is necessary to have full employment is called:
|
an inflationary gap
|
|
According to the Keynesian multiplier, how much money would go into the economy if two dollars were spent and K=3.
|
6
|
|
Which of the following influences investment in new capital?
|
Marginal Effiency of Capital
|
|
Gross Domestic Product (GDP) includes
|
The wages of a citizen of Pakistan working in the US
|
|
Is government spending included in the circular flow model?
|
Yes
|
|
One must be careful when calculating the GDP
|
to avoid double counting.
|
|
Transfer payments are included in
|
Disposable Income
|
|
GDP only considers:
|
Total consumption of goods and services in our society.
|
|
Which of the following is not considered money: checks, anything widely used and generally accepted as a medium of excange, cash, bonds.
|
BONDS.
|
|
The Federal Reserve acts as....
|
acts as a national clearing house for checks.
|
|
An increase in the reserve ratio
|
will decrease the amount of new money created.
|
|
Inflation is good for whom?
Debtors, savers, retailers, individs holding gvm't bonds |
Debtors
|
|
The consumer price index is regulated by...
|
the federal reserve
|
|
In terms of health care in the US
|
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.
|
|
HMO stands for
|
Health maintenance organization
|
|
Professor Derrick Darby teaches
|
Philosophy and Law
|
|
In the US, public education is funded primarily through
|
State and Local spending
|
|
Public education in the US
|
Varies drastically in terms of financing and quality of education among districts.
|
|
What is the equation of exchange? Can you use it?
|
MV=PT solve for p, and say what happens when m,v, and t change.
|