Exam 1 - Nuances from Notes Flashcards
What are the 4 factors of production and their payments to inputs?
Labor (wages/salaries), Land/natural resources (rent), Capital (interest), Entrepreneurship (profit)
What is the equation for Real GDP?
C + I + G + NX
GDI is the sum off…
Wages/salaries, rent, interest, profit
What are interest rates and what is an important determinant of interest rates?
The price of money; rate of money growth
What does it mean for an asset to be “liquid”?
It can easily be converted into cash
What kinds of instruments are traded in a money market?
Short-term debt instruments (more widely traded market)
What kinds of instruments are traded in a capital market?
Long-term debt and equity instruments
What is the equation for real interest rate?
real interest rate = nominal interest rate - expected inflation
What do M1 and M2 measure?
The money supply in an economy
What are the two types of money?
Commodity money (has intrinsic value), fiat money (money because the government said so)
What does yield to maturity mean?
The value of all cash flow payments and future value in an interest rate
What is the most important part of our economy in the U.S.?
Consumption
Practice your money market, wealth effect, and fisher effect graphs now!
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