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Question 1

Investment

Answer 1

Buying machines, tools, and factories
- Interest rates down = more investment
- Does not include: stocks, bonds, retirement accounts

Question 2

Human Capital

Answer 2

Key shifter of Production Possibilities Curve (PPC), the intelligence and skills that increases productivity

Question 3

GDP (Included and not included)

Answer 3

Included: private consumption (C) + gross investment (I) + government spending (G) + (exports – imports)

Unincluded: activity between businesses, sales of goods or services produced outside the country, illegal goods or services, intermediate goods (unfinished goods), transfer payments, and used goods.

Question 4

Frictional Unemployment

Answer 4

The time between jobs when a worker is searching for a new job or transitioning from one job to another

Question 5

Structural Unemployment

Answer 5

Mismatch between the skills of unemployed workers and the skills needed for available jobs (Technology replacing)

Question 6

Cyclical Unemployment

Answer 6

Directly related to business cycle swings, like expansions or
recessions

Question 7

Sticky Wages

Answer 7

Explains why the short run aggregate supply curve was upwards sloping

Question 8

Stagflation

Answer 8

SRAS shifting to the left (decreasing)
Higher price level at less output
- Unemployment and inflation high

Question 9

Cost-push and demand-pull inflation

Answer 9

Cost-Push = Theorizes that as costs to producers increase from things like rising wages, these higher costs are passed on to consumers.
Demand-Pull = Takes the position that prices rise when aggregate demand exceeds the supply of available goods for sustained periods of time

Question 10

Fiscal policy

Answer 10

Laws that reduce unemployment and increase GDP (Close recessionary gap)
ex: Government Spending and Taxes

Question 11

Monetary policy

Answer 11

Adjusting money supply - Reserve Requirement, Discount Rate, and Open Market Operations

Question 12

Velocity of money

Answer 12

Quantity of theory of money - how much dollar is spent and re-spent over time

Question 13

M1 Money Supply

Answer 13

Basic measure of money by economists, includes money not held by US Treasury - Includes cash, checkable (demand) deposits, and traveler’s checks, is considered the basic measure because it is considered the most liquid

Question 14

M2 Money Supply

Answer 14

Everything in M1 but plus saving deposits in banks and time deposits

Question 15

Real interest rates

Answer 15

Percentage increase in purchasing power a borrower pays (Nominal interest rate - expected inflation)

Question 16

Nominal interest rates

Answer 16

The percentage increase in money that the borrower pays not adjusting for inflation
(Real interest rate + expected inflation)

Question 17

Debt

Answer 17

Cumulative amount of money the government has borrowed throughout history

Question 18

Deficit

Answer 18

Drives the amount of money the government borrows in any single year (adds up to debt)

Question 19

Crowding Out

Answer 19

Idea when the government borrows and increases interest rates that causes investment to go down

Question 20

Balance of trade (net export)

Answer 20

The difference between the value of a country’s imports and exports for a given period and is the largest component of a country’s balance of payments

Question 21

Balance of payments (CA & CFA)

Answer 21

Measure of all international transactions in a year. This includes the sale and purchase of goods/services and assets. There are two accounts within the balance of payments: (1) the current account, and (2) the capital account.