economics 451-525 Flashcards
the length of the average work week is a (leading/concurrent/lagging) economic indicator
leading
which actor is on the demand side of the product market in the circular flow model
the household sector
are used car sales included in gap measurement
no
the equation mv=pq is known as the equation of
exchange
what does m stand for in the equation of exchange
money supply
what does v stand for in the equation of exchange
velocity of money
to increase the money supply in the economy, the federal reserve can (sell or buy) government bonds
buy
what is the discount rate
the interest rate the federal reserve charges banks to borrow money
what is the federal funds rate
the rate banks charge one another on loans
who is represented on the federal advisory council
member banks elect one representative per district
how long does each member of the federal advisory council hold office
each one is elected to a one year term and convention has it that each serves three consecutive one year terms
open market operations are the buying and selling of
government bonds
the reserve ratio is fifty percent what is the simple money multiplier
2
the reserve ratio is ten percent how much money is created from fifty dollars
500 dollars
how often and where does the federal advisory council meet
four times each year in washington dc
the higher the reserve ratio, the (higher/lower) the money multipler
lower
banking that employs a reserve ratio is known as _ banking
fractional reserve
the reserve ratio is 25% what is the simple money multiplier
4
what is the reserve ratio
the percentage of deposits that banks must hold on reserve
who sets the reserve ratio
the federal reserve
how does the reserve ratio relate to money multiplication
money in excess of required reserves can be loaned out to individual and then spent, deposited, and loaned out again
what does the phrase you cant push on a string mean with regard to monetary policy
it is east to slow down the economy through monetary policy, but harder to speed it up since for example high interest rates definitely discourage borrowing but low interest rates may not interest depressed consumers
what is the marginal propensity to consume
the percentage of each additional dollar an individual receives that he or she spends
what is an automatic stabilizer
an automatic stabilizer is a feedback mechanism that adjusts automatically offset a decrease or increase in aggregate demand. For instance unemployment insurance helps keep demand up during a recession by providing the unemployed with spending money
what is moral suasion with regard to the federal reserve
moral suasion occurs when the federal reserve pressures banks to act in a certain way
what is the margin requirement with regard to stock purchases
if you buy 100$ share of stock with 10$ of your own money and 90$ borrowed from your stockbroker you are buying stock on the margin the federal reserve can control how much you need to put in cash
what does regulation q allow the federal reserve to do
it allows the federal reserve to set the top interest rate that can be paid out by a bank to consumers
TRRUE OR FALSE; IN PERFECTLY COMPETITIVE MARKETS, SELLERS HAVE A POSITIVE INCENTIVE TO SELL BELOW THE PRICE OF THEIR COMPETITORS
FALSE
IN A MONOPOLISTIC COMPETITIVE MARKET PRICES FALL WITHIN A (WIDE/NARROW) RANGE
NARROW
WHAT DOES PERFECT INFORMATION MEAN
ALL CONSUMERS AND PRODUCERS HAVE ACCESS TO ALL INFORMATION ABOUT PRICE AND AVAILABILITY OF THE PRODUCT AND ABOUT ONE ANOTHER
ADVERTISING ISAN IMPORTANT STRATEGY IN WHICH TWO MARKET STRUCTURES
MONOPOLISTIC COMPETITION AND OLIGOPOLY
WHAT FACTOR IN A MARKET AFFECT THE LEVEL OF COMPETITION
NUMBER OF BUYERS AND SELLERS, NO BARRIERS TO ENTRY OR EXIT, HOMOGENEOUS PRODUCT, PERECT INFORMATION
IS PROFIT GUARANTEED TO A REGULATED MONOPOLY
NO
A MARKET IN WHICH ONLY ONE FIRM PROVIEDS THE GOOD OR SERVICE IS A…
MONOPOLY
WHAT ARE THE CHARACTERISTICS OF AN OLIGOPOLY
A FEW LARGE SCALE SELLERS, HOMOGENEOUS OR SLIGHTLY DIFFERENTIATED PRODUCTS, MUTUAL INTERDEPENDENCE, STEEP BARRIERS TO ENTRY
IS A MONOPOLY A PRICE TAKER
NO A MONOPOLY IS A PRICE SEARCHER SEEKING OUT THE PRICE AT WHICH IT CAN EARN THE MOST PROFIT
SPECIFICALLY CHARACTERIZE THE STRUCTURE OF THE MARKET FOR PUBLIC UTILITIES
NATURAL MONOPOLY
IF ONE FIRM DECIDES TO CHARGE MORE IN PERFECT COMPETITION WHAT HAPPENS
CONSUMERS BUY FROM OTHER PRODUCERS AND THE FIRM’S SALES PLUMMET TO ZERO
WHAT TERM REFERS TO WHAT HAPPENS WHEN A MONOPOLY FIRM WITHHOLDS GOODS FROM CONSUMERS IN ORDER TO RAISE THE PRICE
CONTRIVED SCARCITY
WHY ARE MONOPOLIES CRITICIZED
THEY CAN CHARGE MORE FOR THEIR PRODUCTS, THEY CAN AFFORD TO BE LESS RESPONSIVE TO CONSUMER DESIRE, THEY BLOCK COMPETITORS FROM ENTERING THE MARKET
A MONOPOLY HAS…. SELLERS
ONE
MARKETS WITH (HIGH/LOW) BARRIERS TO ENTRY OFTEN RESULT IN MONOPOLIES
HIGH
WHAT TYPE OF MARKET STRUCTURE HAS ONLY ONE SUPPLIER
MONOPOLY
WHAT DO YOU CALL THE EXCLUSIVE LEGAL RIGHT TO CONTROL INTELLECTUAL PROPERTY
A COPYRIGHT
WHAT IS THE DIFFERENCE BETWEEN A PRICE TAKER AND A PRICE SEARCHER
PRICE TAKERS SELL AT THE MARKET PRICE, WHATEVER IT HAPPENS TO BE; PRICE SEARCHERS SELL AT THE POINT OF PROFIT MAXIMIZATION
what does it mean for products in perfect competition to be homogeneous
the goods provided by different producers are essentially identical
can a patent or copyright create a natural monopoly
yes
what do you call the exclusive legal right to make or sell an invention for a given period of time
a patent
is dynamic efficiency a positive or negative result of monopolies
dynamic efficiency is generally considered positive. firms have more resources available with which to develop technology and improve resources
if one firm in an oligopoly raises its prices, other firms tend to (ignore/match) this increase
ignore
true or false. in perfectly competitive markets, all sellers are price takers
TRUE
are new car sales included in GDP measurement?
yes
how much was the median household income of asians and pacific islanders in 1999?
$51,205
in the circular flow model, what is the real flow?
resources, goods, and services
define “recession”
a recession is in effect when output falls at least two consecutive quarters
exports are (leaks from/injections into) the money flow
injections into
short-run growth of output is cyclical, but long-run growth general (increases/decreases).
increases
government is one answer to which basic economic question?
who will receive the benefits of production
the money supply is a (leading/concurrent/lagging) economic indicator
leading
if you mow your parents lawn for free, is it included in GDP measurement?
no
what is the difference between the real flow and the money flow?
the real flow is the direction of resources, goods, and services moving from the household sector to the business sector and back again. the money flow is the direction of money (opposite the direction of real flow) as it is used to acquire resources, goods, and services
are social security payments directly included in GDP measurement?
no
according to classical economics, for how long can the business cycle persist?
indefinitely
income is (leading/concurrent/lagging) economic indicator
concurrent
whose economic law favors supply-side economic thinking?
say’s law
is the sale of stocks included in GDP measurement?
no
a change in price level causes the aggregate supply to (increase/decrease/stay the same)
stay the same
how does the government enter the circular flow of an economy?
money leaks from the circular flow to the government in the form of taxes; the government injects money into the real flow through transfer payments and direct spending
which racial group earned the highest median household income in the U.S. in 1999?
asians and pacific islanders
are black market transections included in GDP measurement?
no
t at higher price levels, people demand a (smaller/greater) quantity of output from the economy?
smaller
employment is a (leading/concurrent/lagging) economic indicator
concurrent
true or false: if firms expect they will have greater income in the future, they will invest more now, decreasing aggregate demand
TRUE
at what point do the aggregate supply and aggregate demand curves intersect?
at the equilibrium price level
is the resale of homes included in GDP measurement?
no
