Economic Measurese & Indicatiors Flashcards

1
Q

GDP can be calculated in 2 ways

A

Expenditure approach &

Income approach

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2
Q

GDP is measured by

A

household

  • Businesses
  • Federal, state and local governments
  • The foreign sectors
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3
Q

The discount rate set by the Federal Reserve is the

A

Rate that the central bank charges for loans to commercial banks

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4
Q

Frictional unemployment refers to unemployment resulting from

A

The time needed to match qualified job seekers with available jobs.

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5
Q

Cyclical unemployment results from:

A

A recession in the economy.

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6
Q

Expenditure Approach (GICE)

A

-Government expenditures

Capital investment

Consumption

Net exports

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7
Q

Valid tools that the Federal Reserve bank uses to control the supply of money

A

Raising or lowering the discount rate.

Changing the reserve ratio.

Selling government securities.

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8
Q

What are the 3 ways to lower money supply?

A

Lower the required reserve ratio, decrease the discount rate, buy bonds in the open market.

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9
Q

Structural Inflation

A

hen individuals do not have the qualifications or skills necessary to fill available jobs

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10
Q

The inflation rate measures:

A

The rate at which the overall price level increases.

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11
Q

stagflation

A

A combination of rising unemployment and a rising price level

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12
Q

Deflation is best defined as

A

A continuous decline in the overall price level.

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13
Q

Inflation can be caused by

A

Inflation can be caused by

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14
Q

What is one of the ways that Federal Reserve Policy would increase money supply?

A

By reducing the discount rate

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15
Q

CPI measures

A

Rate of Inflation

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16
Q

CPI’s primary purpose is to

A

Compare relative price changes over time.

17
Q

Structural.

A

unemployment typically resulting from technological advances

18
Q

What is the formula for Nominal Interest Rate

A

Real Interest Rate+ Inflation

19
Q

Inflation Rate (FORMULA)

A

CPI(CY)-CPI(PY)/ PY X 100= Percentage

20
Q

GDP Income Approach IPIRATED

A
Income of Proprietors
Profits of Corporations
Interest (Net)
Rental Income
Adjustments for net foreign income and miscellanious items
-Taxes
-Employee compensation (wages)
-Depreciation
21
Q

Demand-Pull Inflation

A

a) Increases in govt. spending
b) Decreases in taxes
c) Increases in Wealth
d) Increases in the money supply

22
Q

Cost-Push Inflation

A

a) An increase in oil prices

b) An increase in the nominal wages

23
Q

Relationship between Nominal Interest Rates & Inflation

A

They tend to move together

24
Q

GNP Gross national product

A

Includes goods and services from oversees, Produced by a US company

25
Increases in Money Supply
When the FED purchases government securities, it increases the money supply
26
Decreases in Money Supply
When the FEd sells government securities, it decreases the money supply
27
Discount Rate
The discount rate is the interest rate that the Fed charges memeber banks for short-term loans Raising discount rate dicourages borrowing Lowering discount rates encourages borrowing
28
Required Reserve Ratio definition
The fraction of the total deposits banks must hold in reserve . Raising the reserve decreases the money supply Lowering the reserve increases the money supply
29
Demand for money is inversely related to interest rates
As interest rates rise demand of money goes down. | & opposite
30
Demand for a product tends to be price inelastic if:
Few good substitutes are available for the product
31
Demand for a product tends to be price elastic if:
There are many substitutes for that product
32
Price elasticity of demand
(Q2-Q1/Q1) / (P2-P1/P1) 2= New Price or New Quatity 1= Old Price & Old Quantity