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Econ 110 > exam 4 > Flashcards

exam 4 Flashcards

1
Q

define employment

A

commonly relied upon measure of economic welfare

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2
Q

why is employment used instead of GDP

A

it is calculated more quickly

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3
Q

employment rate=

A

working / working+looking

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4
Q

labor force precipitation rate=

A

working + looking / population>16

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5
Q

unemployment rate=

A

looking/ working+looking

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6
Q

define natural rate of unemployment

A

includes the production parameters and GDP

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7
Q

what does the natural rate of unemployment do?

A

determines how many people can be employed without inflation rising

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8
Q

what type of correlation does unemployment rate and RGDP have

A

negative correlation

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9
Q

what can cause the demand of micro markets to shift down

A

diminishing marginal utility
income effects
substitution effects

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10
Q

what are aggregated demand represented by

A

CPI and RGDP

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11
Q

define income effect

A

decomposing GDP

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12
Q

define intrest rate effect

A

price of borrowing money

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13
Q

define negative correlation

A

as one good/supply increases, another decreases, or vice versa

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14
Q

describe and define short run

A

factors of production are fixed
set 1-2 years

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15
Q

define and describe long run

A

factors of production are variable
decisions are made 5+ years out

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16
Q

define shortage run aggregated supply

A

GPD deflator or CPI shows relationship;

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17
Q

describe long run aggregated supply

A

wages reflect work being put in
perfectly inelastic

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18
Q

Y1=

A

production possibility frontier

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19
Q

define production

A

productivity causes a shift

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20
Q

what are examples of key inputs

A

fuel, tech, transportation

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21
Q

what correlation is between unemployment and vacancy rates

A

negative

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22
Q

define disposable income

A

percent of income that isn’t used for rent, food, etc

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23
Q

define intrest rates

A

ability to borrow and invest

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24
Q

AD will be __________ if AS is __________

A

higher; lower

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25
Q

what can an increase in any front cause

A

an increase in LRAS

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26
Q

what are institutional changes

A

legal, transport, energy, and infrastructure

27
Q

define fiscal

A

explicit taxing and spending on behalf of the government

28
Q

define fiscal policy

A

how much money is taxed and how much is spent

29
Q

what is the fiscal policy determined by

A

the executive and legislative branches

30
Q

monetary policy is _____________

A

continuous

31
Q

who plays a major role in fiscal theory/policy

A

John Maynard keynes

32
Q

what did Keynes want

A

the gov to step in and lend aid in macroeconomic issues

33
Q

what was Keynes book called

A

a general theory of employment interest in money

34
Q

what type of system did Keynes what

A

a system of equations for employment fluctuation, interest rates, and money supplements

35
Q

what combats classical economics

A

rationality

36
Q

what is unemployment rate

A

a function of supply and demand

37
Q

Smith:invisible hand as Keynes:_______ ________

A

animal spirits

38
Q

what makes economics unstable

A

human nature

39
Q

define classical theory

A

investment goes to firms with the greatest profit potential

40
Q

what will people most likely invest in

A

what others think are the most profitable

41
Q

what causes recessions

A

consumer pessimism

42
Q

what does pessimism lead to

A

decreased spending

43
Q

what would the control on interest rates do

A

discourage people from saving and instead invest

44
Q

define monetary policy

A

actions that affect money supply that is determined by the federal reserve

45
Q

describe the federal reserve

A

independent, central band of US
independent of taxpayer dollars and politics

46
Q

what is the dual mandate

A

low unemployment
price stability

47
Q

as interest rate goes down, what does aggregate demand do

A

go up

48
Q

what does more income cause

A

more spending but also more inflation

49
Q

wealth is not money itself, but…

A

what can be bought with money

50
Q

how do banks get covered by FDIC

A

by doing what the Fed tells them

51
Q

do banks hold all their money? why or why not

A

no, because they are lenders and lend out a portion of that bone y

52
Q

what are the 3 tools of monetary policy

A

reserve requirements
open market operations
federal fund rates

53
Q

define RRR

A

reserve requirement ratio

54
Q

define RR

A

required reserve

55
Q

define ER

A

excess reserve

56
Q

Σloans=

A

1/RRR x loan1

57
Q

describe government bonds

A

a low risk, low reward IOU system

58
Q

define quantitative easing

A

the federal reserve buys bonds from the government which allows the government to pay back the fed

59
Q

define federal fund rate

A

inters rate that banks charge each other to borrow or lend excess reserves

60
Q

how does the fed effect the economy

A

by controlling interest rates

61
Q

what is the fed constrained by

A

inflation and intrest rates

62
Q

describe expansionary

A

decreased aggregate demand
expands RRR
buys bonds
lower federal fund rate

63
Q

describe contractionary

A

increased aggregate demand
increases RRR
sells bonds
raises federal fund rate

Econ 110 (4 decks)

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