FINAL Flashcards
1
Q
GDP
A
gross domestic product
2
Q
the market value of all goods and services produced in a country at any given time
A
GDP
3
Q
GDP formula
A
Y=C+G+I+NX
4
Q
what does C stand for in the GDP formula
A
consumption the spending by households on goods and services, with the exception of purchases of new housing include durable goods and non durable goods D: automobiles and appliances ND: food and clothing
5
Q
what does the G stand for in the GDP formula
A
government spending spending on goods and services by local, state, and federal governments ex. salaries of gov’t workers (army general or school teacher) and expenditures on public works NOT classified as gov’t spending: paying social security to retired person or unemployment insurance benefit to someone who was laid off
6
Q
what does the I stand for in the GDP formula
A
investments the purchase of goods that will be used in the future to produce more goods and services the sum of purchases of business capital, residential capital, and inventories BC: business structures, equipment, and intellectual property products RC: ex. landlords apartment building and a homeowners personal residence I:
7
Q
what does the NX stand for in the GDP formula
A
net exports foreign purchases of domestically produced goods minus the domestic purchases of foreign goods
8
Q
the production of goods and services valued at constant prices accounts for inflation uses base yr price level measures in physical units
A
real GDP
9
Q
the production of goods and services valued at current prices does not account for inflation uses their own price levels measures in #$ units
A
nominal GDP
10
Q
GDP deflator formula
A
(nominal/real) x100
11
Q
GDP inflation
A
(deflator 2-deflator1/deflator1)
12
Q
CPI means
A
consumer price index
13
Q
measure of goods bought by average customer
A
CPI
14
Q
basket price formula
A
(P x Q) + (P x Q) + (P x Q) etc
15
Q
CPI formula
A
(basket price/base yr basket price) x 100
16
Q
CPI calculated w inflation
A
(CPI2-CPI1/CPI1) x 100%
17
Q
CPI correcting inflation
A
(price level today/price level base) basket price
18
Q
financial system lenders
A
you putting money in the bank
19
Q
financial system borrowers
A
needing loans
20
Q
financial systems intermediate
A
the bank
21
Q
unemployment
A
anyone who doesnt have a job but is looking for one
22
Q
labor force
A
employed and unemployed
23
Q
adult population
A
anyone over 18 employed + unemployed + not in work force
24
Q
how many types of unemployment are there
A
3
25
cyclical unemployment
the deviation of unemployment from its natural rate rates go up and down
26
structural unemployment
results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one not enough seats to fill
27
frictional unemployment
the unemployment that results from the process of matching workers and jobs often though to explain relatively short spells of unemployment haven't found the perfect job yet
28
why is it bad for unemployment to be at 0%?
inflation goes up we are not filling all jobs people are not cycling through jobs--\> transferring
29
what does the federal reserve do?
control money supply and monetary policy
30
how does the federal reserve influence money supply??
by buying and selling bonds
31
how does the federal reserve buy and sell bonds?
through open market operations bonds adjust money supply
32
how do bonds adjust money supply?
they decrease by selling bonds (money out of system) increase by buying bonds (money in system)
33
what is the reserve ratio?
the fraction of the banks deposit that keeps safe
34
what is the formula for money multiplier?
1/RR(.10)
35
reserve ratio=
10%
36
reserve ratio ex. $10
for every dollar spent, $10 is added to the money supply
37
money multiplier effect happens\_\_\_\_
in a chain
38
mm= the bank has to \_\_\_\_
maintain capital amount (how much they keep in safe)
39
federal funds rate
the short-term rate to overnight money
40
money supply is dictated by \_\_\_
the feds
41
supply and demand: nominal is measured in
#$ units
42
supply and demand: real is measured in
physical units
43
classical dichotomy
the theoretical separation of nominal and real variables
44
velocity of money
the rate at which money changes
45
velocity of money formula
V= PY/M
46
for the velocity of money formula, what is P? P= price level
GDP deflator
47
for the velocity of money formula, what is Y output?
real GDP
48
for the velocity of money formula, what is M?
quantity of money
49
quantity formula
MV=PY
50
quantity formula: MV=
monetary policy value
51
quantity formula: PY=
value of output
52
Which of the following does NOT add to U.S. GDP? a. Air France buys a plane from Boeing, the U.S. aircraft manufacturer. b. General Motors builds a new auto factory in North Carolina. c. The city of New York pays a salary to a policeman. d. The federal government sends a Social Security check to your grandmother.
the federal government sends a social security check to your grandmother bc shes retired and its social security
53
An American buys a pair of shoes manufactured in Italy. How do the U.S. national income accounts treat the transaction? a. Net exports and GDP both rise. b. Net exports and GDP both fall. c. Net exports fall, while GDP is unchanged. d. Net exports are unchanged, while GDP rises.
net exports fall, while GDP is unchanged
54
The consumer price index (CPI) measures approximately the same economic phenomenon as a. Nominal GDP b. Real GDP c. The GDP Deflator d. The Unemployment Rate
the GDP deflator
55
Which of the following best describes the catch-up effect? a. The property whereby the benefit from an extra unit of input declines as the quantity of the input increases. b. The property whereby countries that start off poor tend to grow more rapidly than countries that start off rich. c. The quantity of goods and services produced from each unit of labor input. d. Society’s understanding of the best ways to produce goods and services.
The properties whereby countries that start off poor tend to grow more rapidly than countries that start off rich
56
How does the Fed increase the money supply in the economy using Open Market Operations? a. Buying Bonds b. Selling Bonds c. Increasing Inflation d. Decreasing the Reserve Ratio
buying bonds
57
The Federal Reserve sets a reserve ratio at 10% (0.10) for all banks. What will the money multiplier be? MM=1/RR=(1/.10) = 10
MM= 1/RR MM= 1/.10= 10
58
T or F: GDP is the market value of all final intermediate goods produced within the United States during a given time period.
false
59
Y/N: will this increase the U.S. GDP? A United States-based company in New York City opens a plant in Viet Nam that produces all of their good.
no
60
Y/N: will this increase U.S. GDP? Samsung, a Korean company, produces their phones in Korea and ships them to the United States to be sold.
no
61
Y/N: will this increase U.S. GDP? A stay at home mom in Montana starts babysitting for the local community and gets paid.
yes
62
Y/N: will this increase U.S. GDP? A local lawyer that usually makes $110/hour takes a pro bono case to help a struggling family in New Jersey.
no
63
Y/N: will this increase U.S. GDP? A businessman in Los Angeles decides to invest more assets into technological stocks.
no
64
Y/N: will this increase U.S. GDP? The U.S. Congress signs a bill funding the creation of 1,000 new federal job positions.
yes
65
Y/N: will this increase GDP? A local consulting firm decides to invest in the construction of a new office space. [
yes
66
Y/N: will this increase GDP? 20,000 textbooks are sold to schools in Germany by a U.S. textbook company.
yes
67
Y/N: will this increase GDP? A local gamer buys a new steady state hard drive from Japan.
no
68
Y/N: will this increase GDP? A U.S. shoe company produces shoes in China that are then sold in the United States.
no
69
Which of the following is a better indicator of economic well-being? a. Nominal GDP b. Real GDP c. GDP deflator d. Inflation rate
Real GDP
70
GDP is an imperfect measure of a country's well-being because it does not capture a. how much a country spends on goods b. how much leisure time a country takes c. the amount of government involvement in the economy d. GDP is a perfect measure of well-being.
how much leisure time a country takes
71
An American buys a Korean made car. How do the U.S. national income accounts treat the transaction? a. Net Exports fall and GDP is unchanged b. Net Exports and GDP both fall c. Net Exports and GDP both rise d. Net Exports are unchanged and GDP rises
net exports fall and GDP is unchanged
72
the GDP deflator measures roughly the same economic phenomenon as \_\_\_\_\_\_.
CPI
73
Suppose the government wants to reduce the type of unemployment from the previous question. Which of the following policies would help achieve this goal? Check all that apply. a. Improving a widely used job-search website so that it matches workers to job vacancies more effectively b. Extending the number of weeks for which unemployed workers are eligible for unemployment insurance benefits from the government c. Establishing government-run employment agencies to connect unemployed workers to job vacancies d. Decrease government spending
a. improving a widely used job-search website so that it matches workers to job vacancies more effectively c. establishing government-run employment agencies to connect unemployed workers to job vacancies
74
fisher effect formula for real interest rate
RIR= nominal interest rate- inflation rate
75
productivity
the quantity of goods and services produced from each unit of labor input
76
why is productivity important?
ex. crusoe if he is good at catching fish, growing vegetables and making clothes, he lives well. if he is bad, he lives poorly. if he gets to consume only what he produces, his living standards are tied to his productivity
77
how is productivity determined?
physical capital per worker human capital per worker natural resources technological knowledge
78
physical capital
the stock of equipment and structures used to produce goods and services
79
factors of production
the inputs used to produce goods and services
80
human capital
the economists term for the knowledge and skills that workers acquire through education, training, and experience raises a nation's ability to produce goods and services includes the skills accumulated in early childhood programs, grade school, high school, college, etc
81
natural resources
inputs into production that are provided by nature, such as lands, rivers, and mineral deposits take two forms: renewable and nonrenewable
82
technological knowledge
the understanding of the best ways to produce goods and services takes many forms- common knowledge or proprietary
83
diminishing returns
the property whereby the benefit from an extra unit of an input declines as the quantity of the input increasees
84
catch-up effect
the property whereby countries that start off poor tend to grow more rapidly than countries who start off rich
85
bond
certificate of indebtedness that specifies the obligations of the borrower to the holder of the bond
86
financial markets
the institutions through which a person who wants to save can directly supply funds to a person who wants to borrow
87
financial intermediaries
financial institution through which savers can indirectly provide funds to borrowers
88
mutual fund
an institution that sells shared to the public and proceeds to buy a selection, or portfolio, of various types of stocks, bonds, or both stocks and bonds
89
formula for savings
S= (Y - T - C) + (T - G)
90
private savings
the amount of income that householders have left after paying their taxes and paying for their consumption
91
public savings
the amount of tax revenue that the government has left after paying for its spending
92
budget surplus
when the government receives more money than it spends
93
budget deficit
when the government spends more than it receives in tax revenue
94
natural rate of unemployment
the normal rate of unemployment around which the unemployment rate fluctuates
95
unemployment insurance
government program that partially protects workers' incomes when they become unemployed unintentionally increases the amount of frictional unemployment
96
collective bargaining
the process by which unions and firms agree to the terms of employment
97
efficiency wages
above-equilibrium wages paid by firms to increase worker productivity one of the reasons why economies always experience some unemployment (along with job search, minimum-wage laws, and unions)
98
what are the different types of efficiency wages?
worker health worker turnover worker quality worker effort
99
what is money's three functions in the economy?
medium of exchange unit of account store of value
100
medium of exchange
an item that buyers give to sellers when they purchase goods and services
101
unit of account
the yardstick people use to post prices and record debts
102
store of value
an item that people can use to transfer purchasing power from the present to the future
103
what are the two different kinds of money?
commodity money and fiat money
104
commodity money
when money takes the form of a commodity with intrinsic value intrinsic- the item would have value even if it were not used as money
105
fiat money
money without intrinsic value established as money by government decree
106
the federal reserve
the agency that is responsible for regulating the system of fiat money
107
central bank
an institution designed to oversee the banking system and regulate the quantity of money in the economy
108
who runs the federal reserve?
a board of 7 governors appointed by the president and confirmed by the senate the governors have 14 year terms
109
who is the most important member of the board of governors? why?
the chair they direct the Fed staff, preside over board meetings, and testify regularly about federal policy in front of congressional committees
110
how many federal reserve banks are there?
12
111
monetary policy
the setting of the money supply by policy makers in the central bank
112
what is the federal open market committee made up of?
seven members of the board of governors five of the twelve regional bank presidents
113
why is NY permanent?
NY is the traditional financial center of the US economy and because all Fed purchases and sales of government bonds are conducted at the New York Fed's trading desk the president of the NY fed always gets a vote
114
reserves
deposits that banks have received but not loaned out
115
money multiplier definition
the amount of money the banking system generates with each dollars of reserves
116
leverage
the use of borrowed money to supplement existing funds for purposes of investment
117
open-market operations
the purchase and sale of US government bonds by the Feds
118
quantity theory of money
explanation of how the price level is determined and why it might change over time
119
fisher effect
the one-for-one adjustment of the nominal interest rate to the inflation rate crucial for understanding this change
120
shoeleather costs
the resources wasted when inflation encourages people to reduce their money holdings
121
which graph is this?
loanable funds market graph
122
what are A and B?
wage and labor
123
124
what are C and D?
supply and minimum wage (floor)
125
what are E and F?
demand and efficient wage
126
what are G and H?
W\* and L\*
127
what are I, J, and L?
LD, LS, and unemployment
128
what graph is this?
minimum wage graph
129
what are A and B?
interest rate & amount loanable funds
130
what are C and D?
demand and supply
131
what are E and F?
E nothing, F=$
132
what are G and H?
D3 and S2
133
what are I, J, and K?
$2 and i2 and i3
134
what graph is this?
money supply
135
what are A and B?
v=1/p and MD
136
what are C and D?
MS and MD2
137
what are E and F?
SL and 4
138
what are G and H?
3 and 2
139
what are I and J?
1 and 1
140
what are K, L, and M?
3, 2, and 1
dont forget the i1, i2, and i3
141
