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Macro Econ > Exam 2 > Flashcards

Exam 2 Flashcards

0
Q

Supply creates its own demand

A

Says law

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1
Q

Assumed that in the long run the economy would adjust itself to a point of supply at the point of full employment

A

Classical economists

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2
Q

Who put forth the idea that producing goods and services will creat the means and willingness to purchase goods and services

A

J.B. Says

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3
Q

Assumptions of the classical economy

A
  1. Pure competition exists
  2. Wages and prices and interest rates are flexible to adjust the economy to equilibrium
  3. People are motivated by self interest
  4. People cannot be fooled by the money illusion.
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4
Q

Income =

A

Consumption + savings

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5
Q

What circulates in the economy to force supply?

A

Consumption spending

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6
Q

What causes GDP to decrease as funds are drawn from the economy?

A

Savings

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7
Q

Classical economists assume that money saved would what?

A

Be borrowed by firms and used in investment to buy capital goods

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8
Q

GDP =

A

C+g+i+x

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9
Q

What causes decrease in aggregate demand?

A
  1. When the economy is at full employment
  2. When the real GFP is below its long run level.
  3. Unemployment decreases
  4. Competition among workers and suppliers of inputs will push prices down
  5. The economy will adjust to the LRAS curve at full employment
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10
Q

Increase in aggregate demand?

A
  1. When the economy is at full employment
  2. Real GDP increased among its long run level
  3. Employment increased above full employment
  4. Competition among workers and suppliers of inputs will push prices up
  5. The economy will adjust to the LRAS curve at full employment
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11
Q

GDP measured in dollars

A

Nominal GDP

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12
Q

GDP measured in terms of final goods and services produced in the economy

A

Real GDP

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13
Q

Refers to an increase in Real GDP from one period to the next

A

Absolute real economic growth

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14
Q

Refers to an increase from one period to the next in per capital real GDP.

A

Per capita real economic growth

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15
Q

Specified the relation between technology and the quantity of factor inputs to outputs or real GDP

A

A production function

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16
Q

Real GDP = T(L,k)

A

T is the technology coefficient
L is labor
K is physical capital like tools, machines, equipment etc

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17
Q

When real GDP changes what else changes?

A

The long run aggregate supply curve

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18
Q

Technology is endogenous - part of the economic system and is somehow gives to us through a process we do not understand

A

New growth theory

19
Q

Emphasizes labor and physical capital in the process of growth

A

Bro classical growth theory

20
Q

Discovering and implementing new ideas are what cause economic growth -

A

Paul romer

21
Q

Refer to the rules , regulation, laws, customs, and business practices of a country

A

Institutions

22
Q

If individuals and firms have property rights, they have an incentive to create new things without the fear that they will be stolen and sold by others

A

Property rights

23
Q

Individuals and firms need a legal system to enforce the laws and protect them

A

Legal system

24
Q

If the government promotes economic growth people in the economy are motivated to creat growth out of their own self interest

A

Growth promotions policies instead of transfer promoting policies

25
Q

Competitive markets, international trade, economic freedom, a stable monetary system, lower taxes, lower regulations

A

Other institutions

26
Q

Who believed in a Laissez Faire approach to the economy from the government “ let it be” in other words

A

The classical economists

27
Q

The classical economists said that wages would - in the face of recession, prices would - , and interest rates would -

A

Wages would decrease
Prices would decrease
And interest rates would decrease

28
Q

Classical economists said that any money being saved is money not being spent and this would do what to the economy?

A

Bring it down

29
Q

October 1929 what happened?

A

Stock market crashes to be the official beginning of the Great Depression

30
Q

Who rebelled against the classical economists and proposed that the gov should use changes in taxes and government spending to boost economy

A

John Maynard Keynes

31
Q

Start with a balanced budget and we lower taxes and increase spending - budget deficit

A

Problem

32
Q

Level or consumption that does not depend on the level of encore

A

Autonomous consumption

33
Q

Consumption that goes up as our income increases

A

Discretionary consumption

34
Q

The number we multiply a small initial change in spending to calculate a total change in spending

A

Multiplier

35
Q

The greater the MPS the - the multiplier

A

Smaller

36
Q

Three sections of a keynesian AS curve

A
  1. Horizontal range- price level remains constant
  2. Up Sloping range - the other level will rise in an increase in GDP
  3. Vertical range - price level will increase when we reach full employment
37
Q

The situation where production in the economy is short of full production

A

Recessionary gap

38
Q

The situation where production in the economy is beyond full production

A

Inflationary gap

39
Q

Inflation that is caused by too much demand in the economy

A

Demand pull inflation

40
Q

Consists of financial institutions such as commercial banks, investment banks, brokerage funds, and mor

A

Financial sector

41
Q

Consists of firms that produce goods and services, individuals who buy food and services, individuals who work for firms and more

A

Real sector

42
Q

What occurs when financial firms and financial markets undergo s major disruption

A

A financial crisis

43
Q

Assets =

A

Liabilities + owner equality

44
Q

Aloe

A

Assets- a thing of value
Liability - a debt owed to another
Owners equity- the value that would be left over for the owner of all the assets were sold and used to pay off liabilities

45
Q

A situation for a bank where the value of its liabilities is greater than the value of its assets

A

Insolvency

46
Q

An unjustified dramatic increase in the price of a type of asset

A

Bubble

Macro Econ (1 decks)

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