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Econ 2000 > Macro > Flashcards

Macro Flashcards

1
Q

Sole Proprietorship

A

a person who owns and acts as the legal face of a business

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2
Q

Partnership

A

two or more entities have a contract with each other

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3
Q

Corporation

A

a legal fiction that exists to coordinate and simplify business relations

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4
Q

Limited liability companies

A
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5
Q

Cooperative

A
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6
Q

Articles of incorporation

A

acts as a constitution for the corporation

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7
Q

Stocks/shares

A
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8
Q

Legal personhood

A
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9
Q

Board of directors

A
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10
Q

Chief Executive Officer (CEO)

A
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11
Q

Initial public offering (IPO)

A
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12
Q

Hostile takeover

A

outsiders start buying up shares with intent to replace the board

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13
Q

Corporate raids

A

when a hostile takeover is done to squeeze the share value higher

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14
Q

Liquidating

A

ending a corporation and selling its assets

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15
Q

Greenmail

A

buying back shares to stop the takeover

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16
Q

Franchising

A

when someone buys the right to use a corporation’s model and brand

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17
Q

Financial instruments

A

tradable debt contracts that can be modeled with supply and demand

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18
Q

Debt

A

trade of goods over time

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19
Q

Risk aversion

A

people usually dislike risk

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20
Q

Time preference

A

euphemism for impatience referring to the idea that people usually want things sooner rather than later

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21
Q

High time preference

A

impatient, need a bigger payout to wait

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22
Q

Low time preference

A

patient, will accept a smaller payout to wait

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23
Q

Lifetime savings cycle

A

people usually want to smooth consumption over their lifetime

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24
Q

The general pattern

A

young people borrow, middle aged people pay off debt and save, old people live off savings

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25
Q

Futures contracts

A

tradeable contracts promising to sell a fixed amount at a fixed price in the future

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26
Q

Gross domestic product (GDP)

A

the measure of an economy’s size

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27
Q

Included in the calculations of GDP

A

consumption, investment, government spending, net exports

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28
Q

Consumption

A

goods purchased by consumers for their use

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29
Q

Investment

A

capital purchased by producers to produce other goods

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30
Q

Not included in the calculations of GDP

A

double counting, home production, illegal production

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31
Q

Nominal GDP

A

default GDP

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32
Q

Real GDP

A

GDP adjusted for inflation

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33
Q

Purchasing power parity

A

GDP adjustment accounting for cost of living

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34
Q

GDP per capita (PPP)

A

GDP/population shows standard of living

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35
Q

Productivity

A

GDP/hours worked shows efficiency

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36
Q

Gross national product (GNP)

A

the measure of an economy’s wealth

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37
Q

Currency

A

something in circulation as a means of exchange

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38
Q

Trade

A

occurs when one person’s marginal benefit of a good exceeds another person’s marginal/opportunity cost of providing it

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39
Q

Barter

A

direct exchange of goods

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40
Q

Double coincidence of wants

A

person A must have something person B wants and person B must have something person A wants

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41
Q

3 functions of currency

A

medium of exchange, unit of account, store of value,

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42
Q

Medium of exchange

A

providing a common measure of the value of goods and services being exchanged

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43
Q

Unit of account

A

a standard numerical monetary unit of measurement

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44
Q

Store of value

A

money must hold its value over time

45
Q

Numeraire

A

a good that you measure all other goods by

46
Q

Commodity currencies

A

a means of exchange that derive their underlying value from being an actual product with inherent value

47
Q

Specie

A

precious metals, gemstones, coins

48
Q

Coin-clipping

A

a type of counterfeiting specie: shave off the edges, melt it, and make a new coin

49
Q

Debasing

A

a type of counterfeiting specie: mixing in less valuable metals

50
Q

Paper currency

A

bills issued by banks and govt and backed by specie

51
Q

Fiat currency

A

currency with nothing backing it, depending entirely on faith

52
Q

Cryptocurrency

A

Bitcoin; uses a blockchain to limit production

53
Q

Fractional reserve banking

A

creates money by loaning out more than the bank reserves

54
Q

Money multiplier

A

multiplies the amount of money in circulation (1/RR)

55
Q

Bank run

A

the withdraws exceed the reserves, so the bank can’t pay out

56
Q

Inflation

A

an increase in the general price level caused by an increase in the money supply relative to real output

57
Q

Hyperinflation

A

when inflation occurs too quickly for a currency to serve its three functions

58
Q

Money supply

A

all currency in use

59
Q

Amount of money being spent

A

(M)(V) = (P)(Y) (M = money supply, V = velocity, P = prices, Y = output)

60
Q

Money supply

A

M = (MB)/(RR) (M = money supply, MB = monetary base, RR = reserve ratio)

61
Q

Equation

A

(MB)(MM)(V) = (P)(Y)

62
Q

Long run (inflation)

A

inflation is neutral because the money has a
chance to circulate through the whole economy and the neutrality of money

63
Q

Short run (inflation)

A

inflation benefits the money creator at everyone else’s
expense and as ripple effects of increased demand
through an economy

64
Q

Velocity of money

A

the amount of times a dollar can change hands in a given period

65
Q

Neutrality of money

A

changes in the money supply only affect nominal variables (prices, wages, and exchange rates) and not real variables (employment, real GDP, and real consumption)

66
Q

Price confusion

A

mistakes caused by using outdated opportunity costs

67
Q

Sticky prices

A

some prices can’t change as fast as others

68
Q

Menu costs

A

literal costs of changing the prices

69
Q

Disinflation

A

a reduction in the inflation rate

70
Q

Deflation

A

decrease in the general price level

71
Q

Seigniorage

A

the profits a money creator takes from inflation

72
Q

Geary-Khamis dollar

A

a common currency across time and space (US dollars)

73
Q

Human Development Index (HDI)

A
74
Q

The Gini Coefficient

A
75
Q

Sen Social Welfare Function

A
76
Q

Business cycle

A

an empirical regularity that economies tend to grow and shrink like a wave function

77
Q

Recession

A

when economies shrink

78
Q

Depressions

A

particularly severe recessions

79
Q

Boom

A

Dramatic growth

80
Q

Miracles

A

very massive booms

81
Q

Austrian business cycle theory (Hayek)

A

blames cycles on cheap credit causing malinvestment (cheap credit encourages risky investment, risky investment accumulates, domino effect of failures when systemic risk gets too high)

82
Q

Keynesian model (Keynes)

A

explains the cycle as being driven by shocks to
aggregate demand

83
Q

Aggregate demand (AD)

A

the set of all combinations of inflation rate and real growth rate that can equal a given growth rate of the money supply

84
Q

Long run aggregate supply (LRAS)

A

a (perfectly inelastic) curve that shows the relationship between price level and real GDP that would be supplied if all prices were fully flexible

85
Q

Short run aggregate supply (SRAS)

A

model that shows the positive relationship between the aggregate price level and amount of aggregate output supplied in an economy

86
Q

Positive shock to AD

A
87
Q

Negative shock to AD

A
88
Q

Paradox of thrift

A

one small negative shock spirals into a very large
one

89
Q

Animal spirits

A
90
Q

Irrational exuberance

A
91
Q

Stimulus

A

Keynes’ solution for when people are suffering and they’re desperate for a cure

92
Q

Can we make recessions shorter?

A

there are two main approaches: monetary policy and fiscal policy. both prioritize manipulating aggregate demand to counteract short-term shocks

93
Q

Monetary policy

A

focuses on manipulating the money supply. conducted by the central bank (banker’s bank) with leadership appointed by both govt and private banks. The Fed can buy T-bills (govt bonds) with money it magics out of thin air. The Fed can sell T-bills (govt bonds) it has. arguably causes future recessions through malinvestment.

94
Q

expansionary monetary policy

A

increasing money supply (inflation)

95
Q

contractionary monetary policy

A

decreasing money supply (unemployment)

96
Q

Fiscal policy

A

focuses on manipulating demand directly through taxes and govt spending. conducted by legislatures. artificially lift AD by spending more govt money called a stimulus. Will raise inflation, but you end the recession faster. You can also cut taxes to raise the aggregate demand. How effective fiscal policy is going to be depends on two multipliers, like our money multiplier, and both are consequences of the paradox of thrift.

97
Q

Contractionary fiscal policy

A

taxes up, spending down (AD falls)

98
Q

Expansionary fiscal policy

A

taxes down, spending up (AD rises)

99
Q

Spending multiplier

A

the total amount of new commerce

100
Q

Tax multiplier

A

the total amount of commerce restricted

101
Q

Solow

A

found that depreciation and diminishing returns meant economies had a maximum size for a technology level. poor nations catching up and rich nations on the cutting edge.

102
Q

Solow growth model

A

production requires capital and labor. per capita production is what we care about. production grows proportionally when the factors are well-
proportioned. go higher in one category and you get diminishing returns. per capita output increases with diminishing returns.

103
Q

Solow growth model implications

A
  1. there’s a limit (steady-state) to how big you can get
  2. the less capital you have, the faster you grow
  3. if you somehow get more capital than your steady-state, you’ll just decay back to the steady-state
104
Q

Schumpeter

A

explored how technological entrepreneurship creates and destroys, how it sets up winners and losers

105
Q

Acemoglu

A

combined creative destruction with his ideas of extractive and inclusive institutions to explain why authoritarian societies breed stagnation

106
Q

Public choice

A

political science done using economics

107
Q

Growth

A

long-term macroeconomics, why are nations rich or poor?

108
Q

Catching up growth

A

countries start out below the steady-state and are working to catch up

109
Q

Cutting edge growth

A

countries invent new technologies, increasing output at all capital levels

Econ 2000 (1 decks)

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