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Info Systems Quiz 1 > Macro quiz 3 > Flashcards

Macro quiz 3 Flashcards

1
Q

Productivity

A

amount of goods and services produced for each hour of work, explains why standards of living vary so much

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2
Q

Determinants of productivity

A

physical capital, human capital, natural resources, and technological knowledge

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3
Q

Physical capital per worker

A

stock of equipment and structures used to produce goods and services ex. saws, lathes, drill presses

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4
Q

Human capital per worker

A

knowledge and skills that workers acquire through education, training, and experience

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5
Q

Natural resources per worker

A

land, rivers, mineral deposits, and other resources provided by nature and used as inputs into production

renewable and nonrenewable

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6
Q

Technological knowledge

A

understanding of the best ways to produce goods and services

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7
Q

Diminishing returns

A

as the stock of capital rises, the extra output produced from an additional unit of capital falls

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8
Q

Higher saving rate in long run

A

In the long run, the higher saving rate leads to a higher level of productivity and income but not to higher growth in these variables

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9
Q

Catch-up effect

A

controlling for other variables, such as percentage of GDP devoted to investment, poor countries tend to grow at faster rates than rich countries

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10
Q

Foreign direct investment

A

capital investment that is owned and operated by a foreign entity

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11
Q

Foreign portfolio investment

A

investment financed with foreign money but operated by domestic residents

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12
Q

externality

A

effect of one person’s actions on the well-being of a bystander

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13
Q

barin drain

A

emigration of highly educated workers to rich countries, where these workers can earn more

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14
Q

Property rights

A

ability of people to exercise authority over the resources they own, need to be respected for this process to work 567567

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15
Q

Inward-oriented policies

A

aim to increase productivity and living standards by avoiding interaction with the rest of the world

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16
Q

Outward-oriented policies

A

integrate these countries into the world economy

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17
Q

Public good

A

once one person discovers an idea, it enters society’s pool of knowledge, and other people can freely use it

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18
Q

Affects of large labor force

A

large population means more workers are available to produce goods and services

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19
Q

Determinants of standard of living

A

saving/investment, diminishing returns/catch-up effect, investment from abroad, education, health/nutrition, property rights/political stability, free trade, research and development, population growth

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20
Q

Financial system

A

consists of the institutions that help match one person’s saving with another person’s investment

-move scare resource from savers (people who spend less than they earn) to borrowers (people who spend more than they earn)

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21
Q

Financial markets

A

institutions through which a person who wants to save can directly supply funds to a person who wants to borrow

22
Q

Bond

A

certificate of indebtedness that specifies the obligations of the borrower to the buyer of the bond

23
Q

Date of maturity

A

time at which the loan will be repaid

24
Q

Principal

A

buyers of the bond give their money in exchange for the promise of interest and eventual repayment

25
Q

Term and perpetuities

A

term: length of time until the bond matures
perpetuities: bonds that never mature

26
Q

credit risk, default, high-yield bond

A

credit risk: probability that the borrower will fail to pay some of the interest or principal
default: the failure of payment
high-yield bonds: raise money since its pays high interest

27
Q

Tax treatment and municipal bonds

A

tax treatment: way the tax laws treat the interest earned on it
municipal bonds: bond owners are not required to pay federal income tax on th interest income and, income cases, may not need to pay state and local taxes either

28
Q

Inflation protection

A

Treasury Inflation-protected securities which generally pay a lower interest rate than similar bonds without this feature

29
Q

stock, equity finance, debt finance, stock index

A

stock: represents partial ownership in a firm and is a claim to some of the profits the firm makes
equity finance: sale of stock to raise money
debt finance: sale of bonds
stock index: tack overall level of stock prices, computed as an average of a group of stock prices

30
Q

Financial intermediaries

A

financial institutions through which savers can indirectly provide funds to borrowers ex. banks and mutual funds

31
Q

Banks

A

take in deposits from people who want to save and use these deposits to make loans to people who want to

medium of exchange: special asset that people use to engage in transactions

store of value: wealth that people have accumulated in past saving in stocks and bonds

32
Q

Mutual fund

A

institution that sells shares to the public and uses the proceeds to buy a selection or portfolio of various types of stocks, bonds, or both

advantage: allow people with small amounts of money to diversify their holdings, give ordinary people access to the skills of professional money managers,

33
Q

Index funds

A

buy all the stock in a stock index, perform somewhat better on average than mutual funds that take advantage of active trading by professional money managers

34
Q

Main goal of financial institutions

A

directing the resources of savers into the hands of borrowers

35
Q

Accounting

A

refers to the way in which various numbers are defined and added up

36
Q

Closed economy and open economy

A

one that does not interact with other economies and one that interacts with other economies around the world

37
Q

Closed economy equation

A

Y = C + I + G (closed, so no trade, so cut exports)

38
Q

National saving

A

Y - C - G = I
(Y - C - G) -> total income in economy after paying for consumption and government purchases -> substitute S = I

39
Q

Two components of national saving

A

private saving (Y - T - C): amount of income that households have left after paying their taxes and paying for their consumption

public saving (T - G): amount of tax revenue that the government has left after paying for its spending

40
Q

Budget surplus and budget deficit

A

surplus: (T - G) is positive
deficit: (T - G) is negative

41
Q

saving vs. investment

A

saving: income exceeds consumption so purchasing stock or bonds
investment: refers to the purchase of new capital such as equipment or buildings

42
Q

Market for loanable funds

A

income that people have chosen to save and lend out rather than use for their own consumption and to the amount that investors have chosen to borrow to fund new investment projects

governed by supply and demand

saving is the source of the supply for loanable funds

43
Q

Demand for loanable funds

A

comes from households and firms that wish to borrow to make investments

investment is the source of the demand for loanable funds

quantity of loanable funds supplied rises as the interest rate rises

44
Q

Affects of reform on tax laws saving and investing

A

saving incentive: encourage greater saving, the result is lower interest rates and greater investment

investment incentive:encourage greater investment, the result is higher interest rates and greater saving

45
Q

Investment tax credit

A

gives tax advantage to any firm building a new factory or buying a new piece of equipment

46
Q

Balanced budget

A

government spending = tax revenue

47
Q

Crowding out

A

fall in investment caused by government borrowing represented by the movement along the demand curve

48
Q

Effects on supply and demand for loanable funds on budget deficit

A

when government reduces national saving by running a budget deficit, the interest rate rises, and investment falls, reduce economy’s growth rate

49
Q

Flow of resources available to fund private investment

A

government budget deficit reduces the supply of loanable funds

50
Q

flow of resources available from private saving

A

government budget deficit would increase demand rather than reduce supply

Info Systems Quiz 1 (22 decks)

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