Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

ECON 102 Chap 10-15 > ECON 102 Chap 10-15 > Flashcards

ECON 102 Chap 10-15 Flashcards

1
Q

Gross Domestic Product

A

measures two things at once:

  • total income of everyone in the economy
  • total expenditure on the economies output of goods/services
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Inflation

A

the rate at which prices are rising

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Deflation

A

the rate at wich the prices of things are falling

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Unemployment

A

the % of the labor force that is out of work

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Retail Sales

A

total spending at stores

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Macroeconomics

A

the study of economy-wide phenomena, including inflation, unemployment and economic growth

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Microeconomics

A

the study of how households and firms make decisions, and how they interact in markets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Circular-Flow Diagram

A

GDP - the total spent by households in the market for G/S

(also) the total wages , rent and profit paid by firms in the market for Factors of Production

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

GDP (definition)

A

the market value of all the final goods and services produced w/in a country in a given period of time

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

The components of GDP

A

Y (GDP) = C (Consumption) + I (investment) + G (Government Purchases) + NX (Net Exports)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Identity

A

an equation that must be true because of how the variables in the equation are defined

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Consumption

A

spending by households on g/s, with the exception of purchases of new housing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Investment

A

spending on capital equipment, inventories, and structures, including household purchases of new housing
- does NOT include financial investment such as stocks/bonds

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Government Purchases

A

spending on g/s by local, state and federal governments

- does NOT include Transfer Payments

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Transfer Payments

A
  • when the government pays social security, unemployment, etc. payments
  • NOT included in “Government Purchases” of GDP because they are not made in exchange for g/s.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Net Exports

A

spending on domestically produced goods by foreigners (exports) MINUS spending on foreign goods by domestic residents (imports)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Real GDP

A

what the value of g/s produced this year would be if we valued these g/s at prices that prevailed in a time period in the past (base year)
- better gauge of “well being” than nominal GDP

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Nominal GDP

A

the total production of g/s valued at current prices

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

GDP Deflator

A

a measure of the price level calculated as the ratio of nominal GDP over real GDP X100

=(Nominal GDP / Real GDP) x 100

  • takes inflation out of the equation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Inflation Rate

A

the % change in some measure of price level from one period to the next

Inflation Rate (yr2)= [GDP Def(yr1) - GDP Def(yr2) / GDP Def (yr2)] x 100

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Consumer Price Index

A

the measure of the overall cost of the g/s bought by a typical consumer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

How the CPI is Calculated

A

1 - Fix the Basket - determine what prices are most important to the typical consumer
2 - Find the Prices - find the prices of each g/s, in the basket, at each point in time
3 - Compute the Basket - use the data on prices to calc the cost of the basket of g/s at different times, keeping the quantity of good the same over time
4 - Choose the Base Year and Calc the Index - chose one year as the base year, a bench mark to compare the other years to

CPI = (price of G/S in Basket in current Year / prices of basket in base year) x 100

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Compute the Inflation Rate

A

= [(CPI in yr2 - CPI in yr1) / CPI in yr1] x 100

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Substitution Bias

A

when prices change from one year to another they do not change proportionally, consumers then substitute goods that are relatively less expensive, CPI misses this because of fixed basket.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Problems in measuring Cost of Living

A

Substitution Bias
Introduction of New Goods
Unmeasured Quality Change

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

GDP versus CPI

A

BIG Diff - GDP reflects the prices of all g/s produced domestically vs. CPI reflects the price of all g/s bought by consumers (including imports)

LITTLE Diff - GDP compares the prices of currently produced g/s to the same g/s of the previous year vs CPI compares the price of a fixed basket this year to the same basket in previous years

  • the group of g/s used to calc the GDP Deflator changes automatically over time.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

$ Figures from Different Times

A

amount in today $ = amount in other yr $ x (price level today / price level in other year)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Indexation

A

as in “indexed for inflation” - when some dollar amount is automatically corrected for changes in the price level by law or contract

ex: contract between firms and unions, if CPI goes up so do wages
COLA - cost of living allowance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Nominal Interest Rate

A

the interest rate that measures the change in dollar amounts (the growth rate of a deposit value)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Real Interest Rate

A

the interest rate corrected for inflation (the growth of purchase power of a deposit)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Nominal Interest Rate vs. Real Interest Rate

A

Real Inflation Rate = Nominal Inflation Rate - Inflation Rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

Production Function

A

Y=A F (L, K, H, N)
Y = the quality of output
L = the quality of labor
K = the quality of physical capital
N = quality of natural resources
F( ) = shows the inputs are combined to produce output
A = a variable that reflects the available production technology

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

Physical Capital (K)

A

K in the Production Function

  • or just capital
  • tools, like a lathe that a wood worker uses
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

Human Capital (H)

A

H in the Production Function

- economist term for the knowledge and skills that workers acquire through education, training and experience

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

Natural Resources (N)

A

inputs in production that are provided by nature

ex: land, rivers, mineral deposits

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

Technological Knowledge

A

the understanding of the best way to produce goods/services

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

Diminishing Returns

A

as the stock of capital rises the extra output produced from an additional unit of capital falls

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

Catch-Up Effect

A

it si easier for an economy to grow fast if it starts out relatively poorly

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

Investment from Abroad

A

Foreign Direct Investment

Foreign Portfolio Investment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

Foreign Direct Investment

A

Ford building a factory in Mexico

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
41
Q

Foreign Portfolio Investment

A

american buying stock in a Mexican company

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
42
Q

Brain Drain

A

when the most educated people of a country leave that country to go to a rich country

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
43
Q

Property Rights

A
  • the ability of people to exercise authority over the resources they own
  • respect of them is essential for the price system to work
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
44
Q

Free Trade

Inward - Oriented Policies

A

attempt to increase productivity and living standards w/in a country by avoiding interaction with the rest of the world

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
45
Q

Free Trade

Outward-Oriented Policies

A

policies designed to integrate a country into the world economy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
46
Q

Free Trade

Public Good

A

freely able to be used by anyone in the society

- ideas are for the most part considered public goods

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
47
Q

Patent

A

allows the inventor/developer to be the only one allowed to sell it for a certain time, allowing them to profit therefor encouraging more development

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
48
Q

Diluting the Capital Stock

A

rapid population growth reduces GDP per worker because forces the capital stock to be spread more thinly

  • less capital per worker, meaning lower productivity
  • especially human capital, means lots of school age children, large burdin on educational system
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
49
Q

Financial Systems

A

consist of the institutions that help to match one persons savings with another persons investment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
50
Q

Financial Markets

A

institutions through which a person who wants to save can directly supply funds to a person that wants to borrow

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
51
Q

Bond

A

a certificate of indebtedness that specifies the obligations of the borrower to the holder of the bond

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
52
Q

Bond - Date of Maturity

A

the time at which the load will be repaid

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
53
Q

Bond - Principle

A

the amount borrowed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
54
Q

Bond - Term

A

the length of time until the bond matures

55
Q

Bond - Perpetuity

A

a bond that never matures

56
Q

Bond - Credit Risk

A

the probability that the borrower will fail to pay some/all of the interest or principle

57
Q

Bond - Debt Finance

A

the sale of a bond in order to make money

58
Q

Bond - Default

A

when a borrower fails to pay all or some of the principle or interest

59
Q

Bond - Junk Bonds

A

bonds issued by financially risky companies

60
Q

Bond - tax treatment

A

the way the tax laws treat the interest earned on the bond

- most bond interest is taxable income

61
Q

Bond - Municipal Bonds

A

the bond owners are not subject to income tax on the interest income
- issued by state/local government, usually lower interest rate

62
Q

Stock

A

represents ownership in a firm and is a claim to the profits that the firm makes

63
Q

Stock Market - Equity Finance

A

the selling of stock to raise money

64
Q

Stock Market - Stock Index

A

an average of a group of stock prices

  • Dow Dones Industrial Average
  • Standards and Poors 500 Index
65
Q

Stock Market - dividend

A

money from profits that some companies pay out to its stock holders

66
Q

Stock Market - Retained Earnings

A

profits not paid out

67
Q

Stock Market - Dividend Yield

A

the dividend expressed as a percentage of stock price

68
Q

Stock Market - corporate earnings

A

(accounting profit)

the amount of revenue a company receives from the sale of its product minus the costs of production

69
Q

Stock Market - earnings per share

A

the companies total earnings divided by the number of shares of stock outstanding

70
Q

Stock Market - Price / Earnings Ratio

A

P/E

- price of a corporations stock divided by the amount the corporation earned per share over the last year

71
Q

Stock Market - buy and hold strategy

A

when someone buys stock and holds it for a long time no matter the daily fluctuations

72
Q

Financial Intermediaries

A

financial institutions through which savers can indirectly provide funds to borrowers
- the institutions stand between the lenders (savers) and the borrowers

73
Q

Banks

A

primary job is to take in deposits of people that want to save and use these deposits to make loans to those who need to borrow
- they facilitate purchases of g/s by allowing people to write checks, use debit cards

74
Q

Medium of Exchange

A

an item people can easily use to engage in transactions

75
Q

Mutual Funds

A

an institution that sells shares to the public then uses these proceeds to buy a section of various types of stocks
- allows people with small amount of money to diversify their holdings

76
Q

Mutual Funds - portfolio

A

a selection of various types of stocks

77
Q

Index Funds

A

which buy all the stock in a given index

78
Q

Closed Economy

A

one that does NOT interact with other economies
- no NX
Y=C+I+G

79
Q

Open Economy

A

one that interacts with economies around the world

Y=C+I+G+NX

80
Q

National Savings (or just savings)

A

I=Y-C-G
the total left over after paying for consumption and Government Purch.
i.e. S=I

81
Q

T =

A

the amount that the gov collects from households in taxes MINUS the amount it pays back to households in transfer payments

82
Q

S (private savings and national savings)

A

S= Private Savings(Y-T-C) + Public Savings(T-G)

83
Q

Private Savings

A

= Y-T-C

84
Q

Public Savings

A

= T-G

85
Q

Investment

A

refers to the purchase of new capital such as equipment or buildings

  • remember stock market is considered savings
  • buying a house is not included
86
Q

Loanable Funds

A

refers to all income that people have chosen to save and lend out

87
Q

Supply of Loanable Funds

A

comes from people that have extra income and want to save and lend it out
Savings = source of Loanable Funds

88
Q

Demand of Loanable Funds

A

comes from households and firms who wish to borrow to make investments
Investments = source of Loanable Funds demand
- Quantity of LF DEMANDED goes DOWN when INTEREST Rate goes UP

  • Quantity of LF SUPPLIED goes UP when INTEREST Rate goes UP
  • dependent upon REAL Interest Rate
89
Q

Investment Tax Credit

A

gives a tax advantage to any firm building a new factory or buying new pieces of equipment
- passage of this would cause demand for Loanable Funds to Rise i.e. the Interest Rate woud rise…

90
Q

Crowding Out

A

a fall in investment because of a rise in Government borrowing

  • S curve shifts left due to less public savings and lower supply of LF due to budget deficit
  • the S curve move causes a rise in interest rates, investment is discouraged because of higher rates
91
Q

Present Value

A

(of any future dollar amount)
- the amount of $ today that would be required, at current interest rates, to produce a future sum of money, in “n” years

Present Value = Future value / (1+ r)^n

92
Q

Future Value

A

how much a sum of today $ will be worth in “n” years

Future value = Present Value x (1+ r)^n

93
Q

Risk Averse

A

most people, they dislike bad things more then they like good things

94
Q

Utility (managing risk)

A

person’s SUBJECTIVE measure of well being or satisfaction (depending upon wealth

95
Q

Insurance

A

a person facing risk pays a fee to an insurance company which in return agrees to accept all/part of the risk

96
Q

Standard Deviation

A

means the volatility of a variable - how much is the variable likely to fluctuate
- increasing the number of stocks decreases but does not eliminate the amount of risk in a portfolio

97
Q

Adverse Selection

A

risky people are more likely to buy insurance

98
Q

Moral Hazard

A

people with Insurance are more likely to take risks

99
Q

Firm-Specific Risk

A

the uncertainty associated witha specific company

- eliminated by diversification

100
Q

Market Risk

A

the risk associated with the entire economy as a whole, can not be eliminated with diversification

101
Q

Fundamental Analysis

A

refers to the detailed analysis of a company to estimate its value

102
Q

Value of a Share

A

Present Value of any dividend + Present value of the money you get when you sell the stock

103
Q

Efficient Market Hypothesis

A

states that equilibrium sets the price of a stock at its value

104
Q

Informational Efficiency

A

the stock market reflects all available information about the value of an asset
- stock markets change when information changes

105
Q

Random Walk

A

one implication of efficient market hypothesis

- says stock prices are impossible to predict from available info

106
Q

Bubbles

A

occur when speculators buy overvalued assets expecting prices to rise further

107
Q

Rule of 70 (72, 75)

A

70/Interest Rate = the number of years it will take a sum to double
- interest rate in decimal form

108
Q

Employed

A
  • those people that work as paid employees
  • workers in their own businesses
  • unpaid workers in a family business
  • full time and part time
  • people temp not at work due to illness, vacation or weather etc.
109
Q

Unemployed

A

those who are not employed but are able to work and have tried to find employment in the last 4 weeks
- also those waiting to be recalled to a job they were laid off from

110
Q

Not in the Labor Force

A
  • those who fit neither of the first two categories

- ex: full-time student, home maker

111
Q

Labor Force

A

the sum of the Employed and the Unemployed

112
Q

Unemployment Rate

A

% of the Labor force that is in the Unemployed category

UR = # of Unemployed / Labor Force x 100

113
Q

Labor-Force Participation Rate

A

% of total Adult population that is part of the Labor Force

LFPR = Labor Force / Adult Pop. x 100

114
Q

Natural rate of Unemployment

A

the normal rate of Unemployment around which the unemployment rate fluctuates

115
Q

Cyclical Unemployment

A

the deviation of unemployment from its natural cycle

116
Q

Discouraged Workers

A

individuale that have tried to find a job but have given up after an unsuccessful search
- they do not show up in labor statistics even though they are really workers without jobs

117
Q

Frictional Unemployment

A

unemployment that results from the process of matching workers and jobs- thought to explain the relatively short spells of unemployment

118
Q

Structural Unemployment

A

when the quantity of labor supplied (workers) exceeds the labor demanded (jobs)

  • thought to explain longer spells of unemployment
  • happens when wages are set above equilibrium
119
Q

Three Reason for above Equilibrium Wage

A

minimum wage
labor unions
efficiency wages

120
Q

Household Survey

A

60,000 households

- used to calc the unemployment rate

121
Q

Establishment Survey

A

160,000 businesses with 40mill+ employees

- used to calc the amount of jobs the economy has gained or lost

122
Q

Sectoral Shifts

A

changes in the composition of demand among industries or regions

123
Q

Unemployment Insurance

A

government program that increases the amount of frictional unemployment (without meaning to)

124
Q

Minimum Wage Laws

A

increase unemployment because it forces wages above the point that balances supply and demand
It raises the amount of lobor supplied (workers) and reduces labor demanded (jobs)

125
Q

Union

A

a worker association that bargins with employers over wages, benefits and working conditions

126
Q

Collective Bargaining

A

the process by which unions and firms agree on the terms of employment

127
Q

Strike

A

an organized withdrawal of the labor from the firm

128
Q

Theory of Efficiency Wages

A

theory that firms operate more efficiently if wages are above the equilibrium level

129
Q

4 Types of Efficiency Wage Theory

A

Workers Health
Workers Turnover
Worker Quality
Workers Effort

130
Q

Worker Health

A

better paid workers eat better are more healthy and more productive

131
Q

Worker Turnover

A
  • firms can reduce turnover by paying higher wages
  • saves the firm from having to hire and train new workers
  • low turnover = lower production cost
132
Q

Worker Quality

A

when firms offer higher wages the will attract a higher quality pool of applicants

133
Q

Worker Effort

A

high wages make workers more egar to keep their jobs therefore they want to put forth their best effort

ECON 102 Chap 10-15 (1 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions