Final Exam Flashcards
On Canada’s balance of payments, a German buying. Canadian bond creates a
- credit on the capital account
On Canada’s balance of payments, a Canadian buying an American avocado creates a
- debit on the current account
A Canadian buy-in gan avocado from the U.S. creates additional
-demand for U.S. dollars
supply of Canadian dollars
Additional shipments of Canadian lumber to the U.S. will cause
- appreciation of the Canadian dollar
Falling interest rates in Canada with steady interest rates in the U.S. will cause
- a decrease in the demand for Canadian dollars
aggregate behaviour
- the behaviour of all households and firms, taken together. (e.x. studying unemployment)
aggregate output
- the total quantity of goods produced by the entire economy in a given period
Name the three major concerns of macreconomics
1) output growth
2) unemployment
3) price level stability (inflation and deflation)
sticky prices
- are prices that don’t always adjust rapidly between quantity supplied and quantity demanded
unemployment rate
- the percentage of the labour force that is unemployed
- key indicator of the economy’s health
- measures the percentage of people who are ready and able to work but don’t have a job
- if there is an unemployment rate - then that means the aggregate labour market is NOT in equilibrium
- near impossible to not have an unemployment rate in a dynamic economy
inflation
- is an increase int eh overall price level
- governments want to keep inflation low
- encourages borrowing, consumption, but can also discourage investment
hyperinflations
- a period of very rapid increase in the overall price
- ver rare –> could destabilize an economy or government
deflation
- a decrease in the overall price
- discourages borrowing and consumpiton
stagflation
- high inflation consistent with high unemployment
Name the 4 components of the macroeconomy
- households –> private sector
- firms –> private sector
- the government –> public sector
- rest of the world –> foreign sector
Name the 3 market arenas
1) goods and services market
2) labour market
3) money market
labour market
- input market
- households = SUPPLY labour
- firms and governments = DEMAND labour
- rest of the world = SUPPLY and DEMAND labour
labour productivity
- aggregate output/ # of hours worked
money market (capital/financial)
- made up of the borrowers and savers
- firms and government = demand funds
- consumers = supply funds
- firms - borrow (demand) to build new buildings to earn more in the future
- they consider the cost and availability of borrowing vs raising equity
the great gatsby
- set in the 1920s
- boom cycle
- very wealthy and gridy
the grapes of wrath
- set in the early 1930s
- bust cycle
- bad for the economy, very depressing time
great depression
- a period of severe economic contraction and high unemployment in 1930s
- said that a lot of monetary and fiscal policy errors prolonged the depression
- didn’t end until the war started
John Maynard Keynes
- father of macroeconomics
- influenced byt hed depth of the great depression
- ground-breaking book - general theory of employment
- says that government should step in when aggregate demand is low
All other things being equal, an increase in the domestic price level will
- decrease the value of real wealth and cause the consumption and aggregate expenditure functions to shift dowward
All other things being equal, a decrease in the domestic price level will shift the next export function
- upward, thus causing the aggregate expenditure function to shift upward
The aggregate demand (AD) curve relates
- equilibrium real national incomes to the price level
All other things equal, a fall int eh domestic price level causes
- the aggregate expenditure curve to shift upward and hence leads to a movement downward and to the right along the AD curve
All other things being equal, the AD curve shifts to there ight was a result of
- increased government expenditure
- increased autonomous exports
- increased investment expenditure
- decreased tax rates
All other things being equal, an increase in desired investment expenditures will
- shift the AE curve upward
- shift the AD curve to the right
- cause the equilibrium levels of real national income and price to increase if the economy operates with a positively sloped SRAS curve
fine-tuning
- refers to the governments role in seeking goldilocks solutions (just right solutions) to inflation and unemployment
treasury bonds, notes, or bills
- promissory notes issued by the federal government when they borrow money
- promise to pay
corporate bonds
- promissory notes issued y tech corporations when they borrow money
stock
- a quantity of something at a given time
flow
- a quantity measured per unit of time that shows how fast something is changing
GDP (gross domestic product)
- the value of all goods and services produced in a. country in a year
frictional unemployment
- arises from the flow of individuals form job to job and in and out of employment. (unemployed for short period of time because of constant movement between jobs).
structural unemployment
-mismatch of available jobs and available skills. (don’t have right qualifications for jobs that are available). Also includes seasonal unemployment
