important stuff that my dumbass will probably forget

Question 1

shifts in labor demand curve

Answer 1

changing output price
changing demand for good and service
changing technology
changing input prices, ex cost of hair clippers

Question 2

shifts in labor supply curve

Answer 2

changing tastes
changing opportunity cost of time, ex washing machines lower opportunity cost of working in home
changes in population

Question 3

shifts in credit demand curve

Answer 3

• changes in perceived business opportunities for firms, ex United increases prices if sales go up
• changes in household preferences or expectations, ex expecting a TV in a household leads to people borrowing more
• changes in govt policy, ex increase in govt borrowing

Question 4

shifts in credit supply curve

Answer 4

• changes in the saving motives of households, ex predicting hard times ahead
• changes in the saving motives of firms, basically same thing but for firms

Question 5

3 main things banks do

Answer 5

1. identiy profitable lending opportunities
2. transform short term liabilities into long term investments (maturity transformation)
3. manage risk, transfer risk

Question 6

three functions of money

Answer 6

medium of exchange
store of value
measure of relative value, or unit of account

Question 7

social costs of inflation

Answer 7

1. a high inflation rate creates logistical cost
2. distorts relative prices
3. sometimes leads to counterproductive policies like price controls

Question 8

social benefits of inflation

Answer 8

1. govt revenue is generated when the govt prints currency, called seignorage (benefit if the creation is low enough)
2. can sometimes stimulate economic activity, ex if company has fixed wages, and inflation occurs, they now are able to higher more workers because the real wage of the original worker has fallen

Question 9

dual mandate of central bank/ federal reserve bank/ fed

Answer 9

monitors financial institutions

1. low and predicable levels of inflation
2. maximum levels of employment

Question 10

federal funds market/ federal interest rate

Answer 10

banks borrow and lend reserves to one another

interest rate in this market is the federal interest rate

Question 11

shifts in demand curve for federal funds market

Answer 11

1. economic expansion/ contraction
2. changing liquidity needs, ex bank run
3. changing deposit base, banks need to always have 10% of consumeres bank accounts in vault cash or in reserve
4. changing reserve requirement from the fed
5. changing interest rate paid by the fed for having reserves on deposit at the fed

Question 12

federal funds market supply curve

Answer 12

vertical, does not respond to shifts, can be moved by the fed

Question 13

how does the fed shift the supply curve

Answer 13

buys bonds from banks, increases reserves, shifts right
called open market operations
(basically just controls the reserves)

Question 14

3 properties of economic fluctuations

Answer 14

1. co movement of many aggregate machroeconoic variables
   - ex consumption and investment grow together
2. limited predictability of fluctuations
   - ex dont follow a cycle
3. persistence in the rate of economic growth

Question 15

three schools of thought on the sources of fluctuations on aggregate economic fluctuations

Answer 15

1. real business cycle theory: emphasizes changing productivity and technology
2. keynesian theory: emphasizes changing expectations about the future
3. financial and monetary theories: emphasizes changes in prices and interest rates