Brainscape's Knowledge GenomeTM

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


See full index

Econ 102 > Exam 3 > Flashcards

Exam 3 Flashcards

1
Q

Financial shocks

A

any change in borrowing conditions that affect the real interest rate (shifts MP curve)

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

Spending shocks

A

any change in aggregate expenditure at a given real interest rate and income (shifts IS curve)

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

Supply shocks

A

any change in production costs that leads suppliers to change the prices they charge at any given level of output (shifts the Phillips curve)

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

Monetary policy

A

when the fed reserve raises or lowers the risk-free real interest rate (shifts MP curve)

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

Financial market risks

A

any change that makes banks more reluctant to lend money at a given interest rate will raise the risk premium and shift MP curve up

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

Three causes of inflation

A

Expected, Demand pull (movement along the curve), cost push inflation (shift the curve)

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

What does the Phillips curve show

A

relationship between output gap and unexpected inflation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What causes cost push inflation

A

input price change, productivity, and exchange rate changes

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

what is the multiplier

A

the amount of GDP change as a result of an extra dollar of spending

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

What affects the multiplier

A

MPC and MPS

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

MPS

A

the proportion you spend when you receive an extra dollar

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

MPS=

A

1-MPC

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Multiplier equation

A

1/1-MPC

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

Social insurance

A

refers to gov provided insurance against bad outcomes

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

WHat do states provide

A

health care, human services, and education

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Mandatory spending

A

terms of spending written into legislation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Discretionary spending

A

spending that congress annually appropriates

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

What do payroll taxes fund

A

social insurance (applies only to earned income)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

earned income

A

wages, net earnings from self-employment, bonuses, commission

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

progressive tax

A

more you earn the higher your taxes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Automaatic stabilizers

A

spending and tax programs that adjust as the economy expands and contracts without policymakers taking action

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

Income tax

A

tax on taxable income

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

corporate tax

A

taxes on business owners

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

Where does fed gov revenue come from

A

income, payroll, and corporate tax

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

Sales tax

A

tax you pay on purchases, on total purchases (state and local)

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

Excise tax

A

tax on specific products based on quantity (alcohol, gas)

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

Property tax

A

% of value of property

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

Regressive taxes

A

the higher the income the less fraction you pay in tax

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

Marginal tax rate

A

the tax rate you pay if you earn an additional dollar

30
Q

Tax expenditures

A

special deductions, exemptions, or credits that lower your tax obligations to encourage you to engage in certain activities

31
Q

Examples of tax expenditures

A

American opportunity tax credit

Earned income tax

32
Q

Who do tax expenditures benefit and why?

A

The higher income group because they spend more on tax-preferred goods and services

33
Q

Fiscal policy

A

choices in spending and taxes to help stabilize the economy

34
Q

Expansionary fiscal policy

A

gov expanding the economy: more spending, lower taxes

35
Q

Contractionary fiscal policy

A

If the economy is overheating: less spending, higher taxes

36
Q

What is considered good fiscal policy?

A

Timely, targeted, temporary

37
Q

When was the Fed reserve created

A

by congress in 1913

38
Q

What does the fed reserve consist of?

A

board of governors and 12 federal reserve district banks

39
Q

What does the fed reserve do?

A

issues national currency and checks where your money comes from

40
Q

Important characteristics of the fed

A
  • regionally diverse

independence with check and balances– monetary policy is not influenced by political pressure

41
Q

FOMC or Federal Open Market Committee

A

The board of governors and the presidents of the fed districts meet to determine monetary policy

42
Q

WHat is discussed at an FOMC meeting?

A
  • What is the forecast for the U.S. economy
  • What are the right policy choices given the economic output
  • How should the Fed Communicate its plan to the public
43
Q

What are the two policy goals of the Fed?

A

Price stability and Maximum sustainable employment

44
Q

WHy does the Fed focus on targeting inflation more than employment?

A
  • More straightforward to influence inflation with interest rate
  • Inflation and unemployment interconnect
45
Q

Why not 0% inflation target?

A
  • Inflation greases the wheels of the labor market– allows firms not to cut wages
  • The fed can lower real interest rate by more
  • A 0% inflation rate runs the risk of deflation
  • Measured inflation might be overstated
46
Q

How does the fed choose interest rate

A
  • Start with neutral real interest rate
  • Targets nominal interest rate to influence real interest rate
  • Compares inflation with target inflation
  • Looks at output gap
47
Q

Neutral real interest rate

A

real interest rate at which GDP is equal to potential GDP

48
Q

Forward guidance

A

providing information about the future course of monetary policy in order to influence market expectations of future interest rate

49
Q

Quantitative easing

A

purchasing large quantities of longer-term government bonds and other securities in an effort to lower long-term interest rates

50
Q

Lorenz curve

A

summarizes income distribution in graph form

51
Q

Gini coefficient

A

a single statistic that summarizes the degree of inequality described by the Lorenz curve

52
Q

Gini equation

A

Gini=A/(A+B)

53
Q

Gini coefficient perfectly equal

A

equal to zero (B takes over everything)

54
Q

Gini coefficient perfect inequality

A

A/A=1 the higher the gini the more inequality

55
Q

Intergeneration mobility

A

the extent to which economic status of children is independent of the economic status of their parents

56
Q

poverty rate

A

family income below the poverty line

57
Q

absolute poverty

A

judges the adequacy of resources relative to an absolute standard of living

58
Q

Relative poverty

A

judges poverty relative to the material living standard of your contemporary society

59
Q

means-tested

A

the eligibility of social safety nets determined by income-level

60
Q

Cost of redistribution

A

administrative cost
reduced incentive to work
bad actors (tax evasion and tax avoidance)

61
Q

Production possibility frontier

A

a way of modeling a resource constraint

62
Q

What causes a PPF to be bowed out

A

resources are not equally productive

diminishing return to production

63
Q

Utility function

A

measure of happiness with consumption

64
Q

Indifference curves

A

a curve where every bundle, you are indifferent to

65
Q

Rules of indifference curves

A
  • must slope downwards– must give up one good to obtain another
  • bowed in because of diminishing marginal utility
  • cannot cross because it violates non-satiation (having more of both goods is always better)
66
Q

Net government debt

A

debt the government owes to individuals businesses and other governments

67
Q

Importance of debt

A
  • able to invest in future projects

- boost the economy when the economy is in a recession

68
Q

Main argument for budget balance

A

fiscal responsibility

69
Q

debt ceiling

A

a limit on how much total US debt the US gov could have

70
Q

Unfunded liabilities

A

a commitment to incur expenses in the future without a plan to pay for those expenses

71
Q

Why worry about debt

A
  • slower economic growth due to crowding out
  • limited future fiscal choice
  • risk of crisis of confidence
  • a debt crisis becomes more likely
72
Q

Why not to worry about debt

A
  • most owed by americans to Americans
  • future generations can help pay the debt
  • wont take a big adjustment to repay the debt
  • as long as the gov has the capacity to make payments it ok
  • gov has options for repayment

Econ 102 (3 decks)

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