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12th grade > econ midterm > Flashcards

econ midterm Flashcards

1
Q

basic econ problem: scarcity

A

bc of limited resources n unlimited want

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2
Q

econ questions

A

what/how/for whom to product

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3
Q

opportunity cost

A

exist bc of scarcity
giving up something good to do something else

opportunity cost of college is debt

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4
Q

consumer sovereignty

A

consumers have power, not gov

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5
Q

factors of production

A

land, labor, capital, entrepreneurship

physical capital: machine/computer/tools
human capital: skills/edu of workers n anything that takes care of them

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6
Q

traditional economies

A

decisions made based on whats done in the past. little change/innovation. basic econ. have same job as your parent. amish

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7
Q

command economy

A

decisions made by gov
centralized planning
bureaucracy
lack of worker incentive to meet gov quotas
inefficient
short supply of consumer good, low quality. EQUITY

north korea, cuba

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8
Q

market econ

A 
consumers/producers make decision
has private property. Efficient
profit motive
high standard of living
NO SOCIAL SAFETY NET. when employee have no more skills, theres nothing for them. business could hurt consumers
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9
Q

mixed econ

A

some decision made by gov n other by consumers/producers.
USA: gov does not own business but regulates them for consumers.
OSHA: shut down factory
FAA
FDA

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10
Q

PPC

production posssibility curve

A

quantity of 2 goods that a society can currently produce

full employ: on the line

unempl: below curve
unattainable: above curve

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11
Q

ppl concave

A

increasing opportunity cost

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12
Q

ppc straight

A

constant opportunity cost

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13
Q

ppc illustrate econ growth.

A

move curve to the right/outward

do it when theres an increase in production

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14
Q

absolute advantage

A

produce a product when you can make more than someone else.

actual value

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15
Q

comparative advantage

A

make a product when you can do it at a lower opportunity cost

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16
Q

output questions

A

over, in direction of source not product

look at product row n c which is less.

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17
Q

law of supply

A

direct relationship btw price and QS

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18
Q

supply curve

A

movement along it: change in quantity of supply

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19
Q

things that shift the supply curve

A 
PINTS
producer expectation
input prices
technology
number of producers
subsidies
tazes
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20
Q

Supply curve

producer expectation

A

if they think price decrease, product will b dumped before it happens

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21
Q

input prices

A

higher price of input (wages)= lower supply

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22
Q

technology

A

increase tech= increase supply

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23
Q

subsidides

A

pay someone to do something

increase supply

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24
Q

tax

A

decrease supply

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25
Q

wage

A

increase= increase in productivity

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26
Q

law of demand

A

inverse relationship btw price n quantity demand. relationship btw price of good n how much consumer is willing to purchase

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27
Q

movement along demand curve

A

change in quantity demanded

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28
Q

demand curve shift, change in demand

A

CCCPS

consumer income
consumer tastes
consumer expectation
population/ # of buyers
substitutes 
complements
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29
Q

demand curve

consumer income

A

normal goods: as income increases, demand increases

inferior good: as income decreases, demand increases

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30
Q

demand curve

consumer expectations

A

demand decreases when consumer think that price is going to b lower in the future

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31
Q

demand curve subsitutes

A

one being used in place of another

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32
Q

demand curve

complesments

A

2 goods used that are used together (pancake/syrup)

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33
Q

wage

A

increase wage= increase productivity

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34
Q

supply and demand graph

A

price vs quantity

equilibrity: ppl r willing to pay at the price n consumers r willing to make at that price

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35
Q

binding price floor

A

above= surplus
legal min price (ex. min wage)
producers want to produce more but consumers don’t want to buy that much

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36
Q

equity

A

fairness, if price isn’t fair to ppl, gov will alter it
price floor
price ceiling

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37
Q

binding price ceiling

A

below, shortage
legal max price
producers don’t want to produce much. high demand, low supply.
ex. rent control, landlord can’t rent higher than __, so they make cutbacks on services

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38
Q

nonbinding ceiling

A

does not nothing to market

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39
Q

elasticity of demand

A

how much quantity stretch when price is changed

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40
Q

relatively inelastic demand

A

vertical
quantity doesn’t that much when you change the price. buy at whatever price

a necessity 
can't delay the purchase
few substitutes
broad market structure (food)
small % of budget
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41
Q

relatively elastic demand

A

horizontal. buy it when its on sale. buy at a certain price

luxury
can delay purchase
many substitutes
narrow market (chicken)
large % of budget
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42
Q

total revenue test

A

to c if good is elastic or not
price x quantity= TR

inelastic: increase price, increase TR
elastic: increase price, decrease TR

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43
Q

factor payment

resources

A

land-rent
labor-wage
capital-interest
entrepreneurship- profit

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44
Q

GDP

A 
decrease: decrease disposable income
measure anything (goods/services) made in the country in a year. doesn't count intermediate goods: double counting
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45
Q

recession

A

GDP goes down for 2 quarters

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46
Q

not in GDP

A 
work you do for yourself
barter
housework
cash
transfer payment (from gov)
stock/bond
crime/pollution
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47
Q

income method to calculate gdp

A

wage
interest
rent
profit

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48
Q

expenditure method to calculate gdp

A 
Cigx
consumer spending
investment (volitole, sensitive, first indicator)
gov spending
net export
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49
Q

unplanned investment

A

whats made but not sold at the end of the year

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50
Q

business cycle

A

expansion/recovery: increase GDP

peak: GDP highest, danger of inflation

contraction/recession: falling GDP

trough/depression: lowest GDP

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51
Q

GDP-depreciation

A

NDP
net domestic product

depreciation: new thing replaces old

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52
Q

Personal income- personal taxes

A

disposable income

53
Q

disposable income- expenses

A

discretionary income

54
Q

unemployed

A

able/willing/looking for a job

55
Q

frictional unemploy

A

btw transition in life

56
Q

cyclical unemploy

A

during contraction of business cycle, econ slowdown

57
Q

structural unemploy

A

skills obselete

58
Q

discouraged worker

A

unemployed person stops looking for a job
unemployed for 2 yrs

not counted in unemployment states

increase in discouraged workers will lower labor force participation

59
Q

unemployment rate

A

unemployed/ labor force

60
Q

labor force

A

unemployed + employed

61
Q

labor force participation rate

A

labor force/ population

62
Q

misery index

A

inflation + unemployment

63
Q

demand-pull

A

occurs when products are bought faster than they can b produced. top of business cycle graph, decreased unemploy

64
Q

cost-push

A

increase price of production= increase price
BAD
increase unemployment

65
Q

hyperinflation

A

higher than 50% inlfation. no control over printing money

66
Q

deflation

A

overall price fall

67
Q

unemployed rate

A

unemploy / # in labor force

68
Q

quantity theory of money

A

increase of money supply = increase price level

69
Q

ways inflation creates distortions in the economy n impact business/consumers

A

menu costs

shoe leather costs

70
Q

menu costs

A

how much it costs for business spend time, effort to make new cost. bad inflation

71
Q

shoe leather costs

A

cost of ppl trying to counteract inflation, customers buy stuff before price rise up,

72
Q

losers from inflation

A

consumers (prices rise faster than income)
fixed income
savers
banks with fixed rate loans

73
Q

winners from inflation

A

investors in gold/silver
real estate
gov in debt
ppl paying others on fixed dollar contract

74
Q

leading indicators of change in econ

A

avg work weak
building permit increase= good
stock market increase=good
inventory

75
Q

measure of inflation

A

cpi
ppi
gdp deflator

76
Q

cpi

A

uses a fixed weighted market basket of goods that coonsumer purchases regularly. list f what ppl buy regularly. most weighted: mortage

77
Q

weakness of cpi

A

substitution bias
uses only retail prices
quality changes=changes in price
new stuff

78
Q

gdp deflator

A

nominal GDP/ real GDP

___ - 100= inflation %

meausres goods produced . doesn’t included imported good

79
Q

PPi

A

measures price change of goods purchased by business. increase means later increase in cpi n other stuff

80
Q

fiscal policy automoaic

A

already in place to smooth out econ during recession.

unemployment benfits, wellfare, food stamp, progressive income tax

81
Q

discretionary fiscal policy

A

new laws needes to b made to fix recession/inflation

82
Q

MPC

consume

A

percentage of additional income that is spend

83
Q

MPS

saving

A

percentage of additional income that is saved

84
Q

MPC+MPS

A

1

85
Q

spending multiplier

A

how increase/decrease in spending will affect GDP

1/MPS

86
Q

tax multiplier

A

how increase/decrease in tax affact gdp

one less than spending multiplier

87
Q

inflationary expectaiton

A

phillips curve, increase shift in SRPC

88
Q

inside lag

A

long

recognize problem to time policy becomes law n enacted

89
Q

outside lag

A

short

from when policy enacted to the time it makes and impact

90
Q

Federal reserve

A

7 board of governors, appointed by pres, confirmed by senate. banks keep money here.

decrease suppy money= increase interest rate

91
Q

demand pull inflation

A

increase shift in AD, bought faster than produced, too fast

92
Q

cost push inflation

A

decrease shift in SRAS

stagflation, little supply

93
Q

classical econ

A

econ is flexible, stay out of it

94
Q

keynesian

A

econ is rigid, needs intervention

95
Q

real balances wealth effect

A

increase in price, less value of money, ppl can’t buy alot, business make less, lowers GDP

96
Q

interest rate effect

A

increase prices, ppl save less

banks less money to lend = higher interest rate on loans. business don’t spend much

97
Q

foreign purchase effect

A

when price increase, foreign buy less n GDP down

98
Q

shift in lras

A

more/less workers
tech
edu of workers
new energy source

99
Q

balance budget effect

A

always one (spending - taxing) when spending is expansionary.
if expansionary with contractionary fiscal at the same time
AD moves right a little bit

100
Q

phillips curve

A

inflation vs unemployment

natural rate of unemployment

movement along; AD
shift: up-bad, SRAS

101
Q

medium of exchange

A

What this means is that you can give people money and they will give you goods or services in exchange. This is very important because it makes economic activity easy.

102
Q

store of value

A

remains valuable for a long time

103
Q

unit of account

A

Knowing the value or price of a good, in terms of money, enables both the supplier and the purchaser of the good to make decisions about how much of the good to supply and how much of the good to purchase.

104
Q

monetary policy tools

A

discount rate: weakest
reserve requirement : powerful
open market operation : important

105
Q

discount rate

A

interest rate that red charge bank for borrowing money

recession: kower

106
Q

reserve requirement

A

% of bank deposits that must hold n not lend to customers

recession: lower

107
Q

open market operation

A

buying/selling gov bonds

recession: buy

108
Q

increase supply money=

A

increase demand.

if demand is higher than supply: inflation

if supply is too low= recession

109
Q

fed fund rate

A

interest rate that bank pays another bank for a loan

if lowered: prime rates lowered (rate that bank charge their best business

110
Q

money multiplier

A

1 / reserve requirement

multiply answer by deposit then subtract by deposite

for FED: multiply answer by deposite
creating money out of thin air

111
Q

money market

A

NIR vs quantity of money

Expansionary: Right MS, Right AD

112
Q

loanable fund

A

money available for borrowing

supply: saving, savors, fed
demand: investment, borrowers

real interest rate vs quantiy of loans

increase demand: expansionary fiscal

S: ppl save more if real interest rate high

113
Q

commodity money

A

intrinsic value salt

114
Q

representation money

A

backed by gold/silver

115
Q

fiat money

A

not backed by anything, need central bank

116
Q

M0

A

cash/coin

117
Q

M1

A

demand deposit/checks

118
Q

M2`

A

small saving account

119
Q

MV=PQ

A

monetarism: monetors beleive in monetary policy. increase MS just enough to keep up with GDP. shouldn’t raise more than 3%-5%

M: money supply
V: velocity
P: pice level
Q: real GDP

120
Q

crowding out effect

A

expansionary fiscal policy= budget deficit
business wont b spending much bc high interest rates. therefor AD doesn’t move as high bc low investment spending while gov increase spending

keynesian support (its okay)
Classical: powerful/importnat thing

FED, increase MS

121
Q

transaction deman

A

amt of money to buy daily things

122
Q

asset demand

A

money saved wieh niterest rate is high, not spending money.

123
Q

capital stock

A

factories, machines

124
Q

supply shock

A

drastic movement of supply

125
Q

progressive tax

A

based on income

126
Q

regressove tax

A

less money you make, the highest income of your tax is affect (the more it effects you)

sales

127
Q

poprtional tax

A

to income

128
Q

interest rate n price of bonds

A

inverserly related

129
Q

reational expectation theory

A

ppl who knows econ make choice based on that, take anti fiscal actions making the policies usless

12th grade (39 decks)

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