Econ 111-Exam 3 Flashcards
Who holds the national debt (Who lends to the U.S. Federal Government)?
People, institutions, and other countries
What is an IOU?
treasury notes, bills, bands
What is the national debt?
About 31 trillion
What percentage of who we owe, do we owe to ourselves?
71%
Who do we owe?
- US govt./agencies-29%
- Debt held by the public- 42%
- Foreign govt./investors- 29%
What is GDP?
The total market value of all real final goods and services produced in the U.S. in a year.
When is GDP stats released?
Every 3 months
What was the 2021 Nominal GDP?
$22.99 Trillion
What does nominal mean?
Current GDP in current prices
What is real GDP?
GDP that has adjusted for price level changes
What is a price index used for?
To convert nominal to real
What is an intermediate good?
A good produced for further processing
How much should GDP grow each year?
2% to 5%-short run
What is the average GDP growth rate for a long run period?
3%
What is a “bad” growth rate?
1% to 2%(anemic)
What is a recession?
Two consecutive quarters of falling real GDP
What was the official recession date periods?
1990, 2001, 2007, 2020
What was the shortest and deepest recession ever?
2020
What was the longest expansion of recession in history?
2009-2020
What does GDP exclude?
- Purely Financial Transactions
- Secondhand Sales
What is the GDP equation?
C+I+G+(Xg-M)
What does the C in the equation stand for?
Consumer spending
What does the I in the equation stand for?
Investment spending
What does the G in the equation stand for?
Government spending
What does the Xg in the equation stand for?
Exports
What does the M in the equation stand for?
Imports
What is the largest component of total spending?
Consumer spending
What do households spend on?
- Durable goods
- Non-Durables
- Services
What are the factors that determine consumption?
- Income
- Prices
- Wealth Effects
- Credit Condition
- Current Household Debt Level
- Taxes
- Expectations/Uncertainty
What does more income mean?
More consumption
What does more saving mean?
Less consumption and less income
What is wealth?
The value of assets such as stock portfolios and retirement accounts and the value of real assets-your home, & car.
What is the best measure of wealth?
Net worth
What encourages consumer spending regarding credit?
Easy credit and low rates
What discourages consumer spending regarding credit?
Low credit and easy credit
If the household debt burden is low, what will households do?
Households may borrow to fund consumer expenditures
If the household debt burden is high, what will households do?
Households may decrease current spending
to pay off past consumer spending
What does a tax change cause?
Disposable income is increased
What will happen if the tax is increased?
Decrease in consumer spending
What will happen if the tax is decreased?
Increase in consumer spending
What do businesses spend on?
- New tools, equipment, machinery, factories
- Residential investment
- Changes in Inventory
What does an increase in inventory do to GDP?
Inventory is added to GDP
What does a decrease in inventory do to GDP?
Inventory is subtracted from GDP
Which GDP component fluctuates the most?
Investment spending
What are the determinants of investment spending?
- Expectations
- Interest Rates
- Technology and Innovation
What are interest rates?
The price you pay to borrow
How is government spending determined?
Political Arena
What is the number one federal outlay?
Transfer Payments
What is the number one source of federal taxes?
Income Taxes
What are the state outlays/expenditures?
- Education
- Public Warfare
What are the local outlay/expectations?
- Education
- Welfare, Health, Hospitals
What are the local tax revenues?
- Property Taxes
- Sales and Excise
What does an increase in government spending do to GDP?
Increases GDP
What does a decrease in government spending do to GDP?
Decreases GDP
What are exports?
Total value of goods & services that we sell to others outside of the U.S.
What are imports?
Total value of goods & services that we buy from others outside of the U.S.
What are net exports(Xn)?
The difference between exports and imports
What is a trade surplus?
Xn is positive
What is a trade deficit?
Xn is negative
What is a tariff?
Tax on imports paid by the consumers
Where are tariffed goods produced?
Internationally
Who oversees the tariff code?
The U.S. Department of Customs
Who buys our stuff?
- Canada
- Mexico
Who do we buy stuff from?
- China
- Mexico
What are some GDP issues to remember?
- Non-Market Transactions
- Underground Economy
- Per Capita Output
What is the per capita output equation?
GDP/population
What does ceteris paribus mean?
All things remaining equal are the same
