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BEC Custom 4 Flashcards

1
Q

Who are always not included in the labor force?

A
  • <16 years old
  • Retired
  • Not seeking work
  • Institutionalized
  • Active Military
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2
Q

Frictional Unemployment

A
  • in transition between jobs

- don’t have information needed to get matched up with an employer

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3
Q

Structural Unemployment

A
  • the need for their prior types of jobs have been greatly reduced or eliminated
  • they lack the skills for currently available jobs
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4
Q

Seasonal Unemployment

A
  • those out of work because their jobs regularly and predictably vary by the season of the year
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5
Q

Cyclical Unemployment

A

Those not employed because of a downturn in the business cycle

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6
Q

Unemployment rate

A
  • % of the labor force not employed

* not the % of the population not employed

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7
Q

Natural unemployment rate

A

those unemployed due to frictional, structural, and seasonal reasons

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8
Q

When does full employment occur?

A
  • when there is no cyclical unemployment

* frictional, structural, and seasonal are not counted as unemployed in measuring full employment

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9
Q

Aggregate demand

A
  • total spending in economy

- sum of all market demand curves

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10
Q

What is aggregate demand the sum of?

A

consumption spending, investment, government spending, and net exports (net imports would be subtracted)

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11
Q

Consumption spending

A

spending by individuals on goods and services

  • does not include new housing (that is investment)
  • primarily determined by personal disposable income (PDI)
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12
Q

Consumption function

A

measures the relationship between disposable income (PDI) and consumption spending (CS)

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13
Q

Average Propensity to Consume (APC)

A
  • measures the % of disposable income (PDI) spent on consumption (CS)
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14
Q

Average Propensity to Save (APS)

A

Reciprocal of APC

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15
Q

Marginal Propensity to Consume (MPC)

A

Measures the change in consumption spending as a % of the change in disposable income

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16
Q

Investment spending

A

Spending on capital items including -

  • residential construction
  • non-residential construction
  • business property, plant, and equipment
  • business inventory
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17
Q

Government spending

A
  • purchase of goods and services by all levels of the government
  • excludes transfer payments - not for goods or services
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18
Q

Discretionary fiscal policy

A

government changes to spending or taxation to impact aggregate demand

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19
Q

Multiplier Effect equation

A

change in spending x [1/(1 - MPC)]

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20
Q

Aggregate Supply

A

Total output of goods and services produced in the economy at different price levels

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21
Q

Classical Aggregate Supply Curve

A
  • completely vertical supply curve
  • no change in output as price increases at full employment
  • may be associated with the very short-term
22
Q

Keynesian Aggregate Supply Curve

A
  • horizontal up to the output at full employment, then slopes upward
  • increasing supply at a price until full employment, then increased supply only with increased price
23
Q

Conventional Aggregate Supply Curve

A
  • continuous positive slope that is steeper for output after full employment
  • at full employment, prices increase proportionately faster than output supplied
24
Q

Aggregate Equilibrium

A

aggregate demand = aggregate supply

25
Business Cycles
cumulative fluctuations up and down in aggregate real gross domestic product * recur over time * no consistent pattern of length (duration) or magnitude
26
What are common causes for changes in the business cycle?
- changes in interest rate - changes in taxes - changes in outlook and confidence
27
Business cycle indicators
changes in specific measures of economic activity that are associated with changes in overall business cycle
28
leading economic indicators
changes in measures that occur before changes in business cycle * i.e. consumer expectations, initial unemployment claims, and stock prices
29
lagging economic indicators
changes in measures that occur after changes in business cycle *i.e. relationship between inventory and sales, length of unemployment, and amount of commercial loans outstanding
30
Consumer Price Index (CPI)
CPI relates price of a basket of goods and services during a period to price of the basket of consumer goods and services in a prior base period
31
Wholesale Price Index (WPI)
relates price of basket of raw materials, intermediate materials and finished goods at the wholesale level during a period to price of basket in a prior base period
32
Gross Domestic Product (GDP) Deflator
- relates nominal GDP to real GDP | - GDP deflator = nominal GDP/real GDP X 100
33
Inflation
rate of increase in the price level
34
Deflation
rate of decrease in the price level
35
Demand induced (demand-pull) inflation
Aggregate spending for goods and services exceeds productive capacity of the economy at full employment
36
Supply induced (cost-push) inflation
Increases in the cost of inputs result in higher prices passed on to end user
37
What are the three functions of money?
- medium of exchange - measure of value - store of value
38
M1 measure of money
- narrowest definition of money - includes - paper and coin currency held outside banks, and check-writing deposits in banks (funds that can be accessed using checks)
39
M2 measure of money
- includes all items of M1 plus - savings deposits, money-market deposits, certificates of deposit less than $100,000, and individual-owned money-market mutual funds
40
M3 measure of money
- includes items in M2 plus - certificates of deposit greater than $100,000, and institutional-owned money-market mutual funds
41
Fed Board of Governors
7 member policy making body of the Federal Reserve System
42
Fed Open-Market Committee
12 member body responsible for implementing monetary policy to effect money supply through open-market operations
43
Monetary Policy
- managing the money supply to achieve national economic objectives, including: economic growth and price level stability
44
How does the Fed exercise monetary policy?
reserve requirement, open market operations, and the discount rate
45
Fed Reserve Requirement
- percent of loans made by banks that must be held in reserve
46
Fed Open Market Operations
Fed buying and selling U.S. Treasury debt with member banks
47
Fed Discount Rate
Interest rate member banks pay when borrowing from the Fed - increasing discount rate = reduced borrowing and reduced money supply - decreasing discount rate = increased borrowing and increased money supply
48
Absolute Advantage
ability of a country, business or individual to produce a good or provide a service more efficiently than another entity
49
Comparative Advantage
Ability of one country, business or individual to produce a good or provide a service with lower opportunity cost than another entity
50
Porter's Four Attributes of National Advantage
- factor endowment - advantages in factors of production (land, labor, infrastructure, etc.) - demand conditions - nature of domestic demand for a good or service - relating and supporting industries - extent to which supplier and related industries are internationally competitive - firm strategy, structure, and rivalry - how entities are created, organized, managed and how they compete

CPA (16 decks)

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