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Economics > 291 final > Flashcards

291 final Flashcards

1
Q

What are government services valued at when trying to determine National income?

A

Cost of production

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2
Q

What are the 4 categories of consumption and what do they include?

A

Consumer durables: Cars, Tvs, furniture, major appliances etc
Semi-durables: Clothing etc
Non-durables: Food, electricity, fuel etc
Services: Education, healthcare, financial, transportation etc,

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3
Q

What are the 4 categories of consumption and what do they include?

A

Consumer durables: Cars, Tvs, furniture, major appliances etc
Semi-durables: Clothing etc
Non-durables: Food, electricity, fuel etc
Services: Education, healthcare, financial, transportation etc,

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4
Q

What factors can shift the FE line?

A

Supply shock, change in labour supply or change in capital

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5
Q

What is the user cost equation?

A

(r x price of K) + (dep x price of capital)

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6
Q

What is the user cost equation?

A

(r x price of K) + (dep x price of capital)

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7
Q

What factors shift the IS curve up via change in S?

A

Increase in expected future output, increase in wealth, temporary increase in government purchases, decline in taxes if the Ricardian equivalence doesn’t hold.

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8
Q

What factors shift the IS up via a change in I?

A

Increase in taxes, Decrease in effective capital tax, Decrease in deprecation rate.

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9
Q

What is the equation for the rate of return on bonds?

A

(future value - current value)/current value

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10
Q

What factors shift the LM curve down via change in Money supply?

A

Increase in nominal Money supply

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11
Q

What factors shift the LM curve Down via change in Money demanded?

A

Decrease in the price level, increase in expected inflation, a decrease in nominal interest rate on Money, A decrease in wealth, Decrease in risk of alternate assets, increase in the liquidity of alternate assets, Increase in the efficiency of payment tech

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12
Q

What factors shift the LM curve Down via change in Money demanded?

A

Decrease in the price level, increase in expected inflation, a decrease in nominal interest rate on Money, A decrease in wealth, Decrease in risk of alternate assets, increase in the liquidity of alternate assets, Increase in the efficiency of payment tech

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13
Q

What is the Keynesian version of the IS-LM model?

A

Believe in slow adjustment of price level (Up to several years), Money neutrality in the long run but not short. Output at general equilibrium is determined by the intersection of the IS and LM curves (AD) while the labour market is not in equilibrium. Believe monetary expansion is important to increase output, employment and drop interest rate to get out of recessions.

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14
Q

What is the Classical version of the IS-LM model?

A

Rapid change in price level, economy returns quickly to full employment after shocks. Firms change prices instead of output. Monetary expansion affects prices with little effect on output. Believe in money neutrality in long and short run.

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15
Q

What is the Classical version of the IS-LM model?

A

Rapid change in price level, economy returns quickly to full employment after shocks. Firms change prices instead of output. Monetary expansion affects prices with little effect on output. Believe in money neutrality in long and short run.

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16
Q

What factors shift the AD right?

A

Increase in future output, wealth, government purchases or expected margin productivity of capital (MPK). Or a decrease in taxes if the Ricardian equivalence does not hold up.

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17
Q

What factors shift the AD curve right via IS?

A

Increase in future output, wealth, government purchases or expected margin productivity of capital (MPK). Or a decrease in taxes if the Ricardian equivalence does not hold up.

18
Q

What is nominal exchange rate?

A

The rate at which a person can trade the currency of one country for the currency of another.

19
Q

What factors shift the AD curve right via LM?

A

Increase in nominal money supply or expected inflation, Decrease in nominal interest rate on money or increase in the real demand for money.

20
Q

What factors shift the AD curve right via LM?

A

Increase in nominal money supply or expected inflation, Decrease in nominal interest rate on money or decrease in the real demand for money.

21
Q

The LRAS is horizontal or vertical?

A

vertical

22
Q

Thr SRAS curve is horizontal or vertical?

A

Horizontal

23
Q

The LRAS is horizontal or vertical?

A

vertical

24
Q

Thr SRAS curve is horizontal or vertical?

A

Horizontal

25
Q

Factors that shift SRAS

A

Change in factors that increase/decrease cost of producing goods.

26
Q

Factors that shift LRAS curve?

A

Factors that shift output shifts the LRAS in the same direction

27
Q

Factors that shift LRAS curve?

A

Factors that shift output shifts the LRAS in the same direction

28
Q

In the AD- AS model what is general equilibrium?

A

When the AD LRAS and SRAS intersect

29
Q

In the AD- AS model what is general equilibrium?

A

When the AD LRAS and SRAS intersect

30
Q

What is the real exchange rate?

A

the rate at which currency trades in relation to the price level. the equation is (nominal exchange rate * domestic price)/foreign price

31
Q

What does purchase power parity state?

A

That a unit of any given currency should have the same purchasing power in any other country. Can help predict changes in exchange rate (E)

32
Q

Why is PPP not a perfect theory?

A

Many goods and services are not trade-able (haircuts and houses) or are not perfect substitutes. Also countries produce different goods.

33
Q

Factors that shift demand for Canadian goods?

A

Change in quality of goods

34
Q

What is the equation for the gross nominal return on foreign bonds?

A

(1+foreign interest rate) - (change in Nominal exchange rate)/Exchange rate

35
Q

What is the equation for the gross nominal return on foreign bonds?

A

(1+foreign interest rate) - (change in Nominal exchange rate)/Exchange rate

36
Q

What is the interest parity condition?

A

investors are impartial to similar domestic or foreign assets as long as returns are the same. This implies that domestic and foreign interest rates move in the same direction.

37
Q

What is the interest parity condition?

A

investors are impartial to similar domestic or foreign assets as long as returns are the same. This implies that domestic and foreign interest rates move in the same direction.

38
Q

What is the relationship between NX and the IS curve?

A

Factors that increase/decrease net exports shift the IS curve in the same way.

39
Q

For a given level of output and interest rate, what could increase net exports?

A

increase in foreign output which increases foreigners demand for domestic exports, An increase in the foreign interest rate which makes people want to buy foreign assets which causes net exports to rise, A shift in the worldwide demand for domestic goods because for example, quality improved.

40
Q

For a given level of output and interest rate, what could increase net exports?

A

increase in foreign output which increases foreigners demand for domestic exports, An increase in the foreign interest rate which makes people want to buy foreign assets which causes net exports to rise, A shift in the worldwide demand for domestic goods because for example, quality improved.

41
Q

What’s the equation for the LM curve?

A

Money supply / Price = Money demand

Economics (6 decks)

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