Brainscape's Knowledge GenomeTM

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


See full index

Laurin > Economics Endterm > Flashcards

Economics Endterm Flashcards

1
Q

GDP (Gross Domestic Product)

A

-> The market value of all final goods and services produced within a country within a year

  • Uses marekt prices
  • Only uses final goods
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

GNP (Gross National Product)

A

Value of all final goods and services produced by a country permanent residents, weherever located

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

Nominal GDP

A

Values are calculated in the year they occur

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

Real GDP

A

Adjusts for inflation

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

National Spending Approach (GDP) (4)

A

Y (total GDP) = C onsumption + I vestment + G overnment spending + NX net exports

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

Factor Income Approach

A

Y = Wages + Rent + Interest + Profit

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

Disadvantages of using GDP as a measure (3)

A
  • Does not measure non-priced production
  • GDP does not count leisure
  • Does not measure the distribution of income
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Solow growth model (4)

A

The total output (Y) = F (Physical capital (K) & Human capital x education (eL) & Ideas (A))

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

Marginal product of capital:

A

Increase in output from adding one more unit of capital, which diminishes as more capital is added.

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

Consumption

A

Consumption = Y - Investment

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

Depreciation ()

A

Depreciated units / initial units of capital

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

Where do fluctuations comes from (2)

A
  • Business fluctuations: Fluctuations in the growth rate of real GDP around its trend growth rate
  • Recession: A significant, widespread decline in real income and employment.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Aggregate demand curve

A

Shows all the combinations of inflation and real growth; that are consistent with a specified rate of spending growth (M+v)

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

Quantity of Money Theory (4)

A

Money growth + velocity growth = real growth + inflation rate

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

Shifting along the AD-curve

A
  • Increase in spending growth (M+v) shifts the curve up and to the right.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Shifts of the AD-curve: (in/out)

A
  • Out: Increased spending because of higher v and/or M
  • In: Decrease in v and/or M
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Long run aggregate supply curve:

A

The LRAS curve is determined by the solow growth model (labour, capital..), inflation is not a factor.

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

Shits in the LRAS Curve (2)

A
  • Positive real shock shifts curve to the right
  • Negative real shock shifts curve to the left
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Demand shock

A

Aggregate demand changes in the short term (-> Shifts AD-curve and leads to temporary changes in GDP and lasting impact on prices)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Factors that shift AD (5)

A
  • Faster money growth rate
  • Confidence
  • Increased wealth
  • Lower taxes
  • Greater growth of government spending
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Unemployment rate

A

Unemployed / (employed + unemployed)

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

Labor force

A

employed + unemployed

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

Unemployed workers

A

Adults who do not have a job but who are looking for work

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

Frictional unemployment

A

Short-term unemployment caused by ordinary

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

Structural unemployment

A

Long-term unemploy +ment caused by large shocks to the economy (loss of a sector).

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

Cyclical unemployment

A

Up and downs of business cycles

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Discouraged workers

A

people who give up looking for a job

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

Labor force participation rate

A

The percentage of adults in the labor force.

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

Underemployment rate

A

Includes part-time workers who would rather have a full-time position and people who would like to work but have given up looking for a job.

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

Natural rate of unemployment

A

Rate of structure plus frictional unemployment

31
Q

Labor regulations can increase unemployment (3)

A
  • Unemployment benefits reduce the incentive to work
  • Minimum wages increase wages and therefore unemployment
  • Employment protection laws make an employer think twice before hiring
32
Q

Factors that affect structural unemployment (3)

A

A. Larg, long-lasting shocks that require the economy to restructure: oil shocks, shift from manufacturing to services, globalization and global competition …

B. Labor regulations: Unemployment benefits, minimum wages, powerful unions, employment protection laws

C. REDUCTION policies for structural unemployment: job retaining, job search assistance, work test, early employment bonuses.

33
Q

Disinflation

A

decrease in inflation rate

34
Q

Deflation

A

decrease in average level of prices

35
Q

Price Index (3)

A
36
Q

Cause for deflation

A

Decrease in average level of prices

37
Q

Cost of inflation: (3)

A
  • High inflation comes by surprise
  • Money illusion: people mistake change in nominal prices for changes in real pries
  • Inflation transfers real resources from citizens to the government
38
Q

Irreversible investment

A

Many investments involve sunk costs (irreversible investment), the worse the situation the more difficult to detect signals about investment.

39
Q

Labor adjustments costs

A

Negative shock hits, takes time to find a new job and might lower expectations.

40
Q

Time bunching

A

tendency for economic activities to be coordinated at common points in time

41
Q

Collateral damage

A

Reduction of the value of the collateral

42
Q

Role of central banks (3)

A
  • Determine and influence the money supply
  • Regulate commercial banks / lend money
  • Manage the nations payment system
43
Q

Components of money supply (3)

A

A. Currency – paper bills and coins
B. Total reserves – held by banks at the central bank
C. Checkable deposits – checking or debit account

44
Q

Fractional reserve baking:

A

Banks hold only a fraction of deposits on reserves, they lend out the rest

45
Q

Reserve ration

A

Reserve / deposit

46
Q

Money multiplier

A

(MM): 1/RR

The amount with which the money supply expands with each dollar increase in reserves

47
Q

M1

A

Currency + checkable deposits

48
Q

M2: (4)

A

M1 + savings + bonds + small-time deposits

49
Q

The monetary base (MB):

A

currency and total reserves held at the fed

50
Q

Controlling the money supply (3)

A
  1. Open market operations: buying/selling government bonds
  2. Discount rate lending and the term auction facility-federal reserve lending to banks and other financial institutions.
  3. Paying interest on reserves held by banks at the fed
51
Q

Bandwagon effect on investment

A

Delayed investment holds slows down overall investment mentality, often are multiple investment needed at the same time in order to be successful.

52
Q

The negative real shock dilemma (two steps)

A

(1) A real growth reduces the real growth and increases inflation. (2) The CB reduces inflation, but by doing so decreases growth even more.

53
Q
A
54
Q

How should the fed respond to asset price increase (housing bubble) (3)

A
  1. Nobody expected it to be as fatal as it was
  2. Not easy to identify bubbles
  3. Monetary policy can influence AD and target credit markets but it cant influence specific demand of assets in one single market.
55
Q

Progressive tax:

A

has higher tax rates for people with higher incomes

56
Q

Flat tax:

A

has constant tax rate

57
Q

Regressive tax:

A

higher tax rates for people with lower incomes

58
Q

National debt held by the public

A

All federal debt held by individuals, corporations, state or local governments, foreign government, other entities than the federal government itself.

59
Q

Three principles underlying international finance: (3)

A
  1. Gains from trade
  2. Rate of savings
  3. Market equilibrium
60
Q

Balance of payments

A

yearly summary of all economic transactions between residents of one country and residents of the rest of the world

*Trade deficit + capital surplus = BoP is always zero

61
Q

Capital surplus

A

Inflow of foreign capital is greater than the outflow of domestic capital

62
Q

Current account (3)

A
  • Balance of trade (export minus imports of goods and services)
  • Net income on capital held abroad, including interest and dividends
  • Net transfer payments, such as foreign aid
63
Q

Capital account (financial account):

A

–> measures changes in foreign ownership

  • Includes things like foreign direct investment (FDI); portfolio investment; other investment
64
Q

Nominal exchange rate

A

rate at which you can exchange one currency for another

65
Q

Real exchange rate

A

exchange goods and services of one country for the goods and services of another country.

66
Q

Purchasing power parity (PPP):

A

real purchasing power of money should be the same whether it is spent at home or converted into another currency and spent abroad.

–> Law of one price not possible because of
- Transportation cost, services cannot be shipped, tariffs or quotas.

67
Q

3 different types of fixed exchange rate systems:

A
  1. Simply adopting the money of another country (dollarization)
  2. Currency union
  3. Backing currency with high levels of reserves and promising certain exchange rate
68
Q

International monetary fund (IMF):

A

International lender of last resort

69
Q

The world bank

A

Lends money for specific projects in developing countries

70
Q

The Fisher effect (3)

A

Nominal interest rate = expected inflation rate + equilibrium real interest rate

71
Q

Progressive tax

A

has higher tax rates for people with higher incomes

72
Q

Flat tax

A

has constant tax rate

73
Q

Regressive tax

A

higher tax rates for people with lower incomes

74
Q

Nominal wage confusion

A

Responding to nominal wage increase instead of real wage increase

Laurin (5 decks)

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