Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

AP Econ > Macro Review > Flashcards

Macro Review Flashcards

1
Q

Natural rate of unemployment and full employment rate

A

Same rate, includes no cyclical unemployment only frictional and structural

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Economic Growth determinants

A

Quantity and quality of resources
Technology/productivity
Capital stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Economic growth shown graphically

A

Outward shift in the PPC or rightward shift of LRAS

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Economic growth path

A

Change in interest rate-change in investment spending, change in capital stock, change in economic growth

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What happens with a change of taxes?

A

Affects consumption and therefore shifts AD

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What happens with a change in business taxes?

A

Affects firm costs and therefore AS but also affects investment and therefore AD

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Types of unemployment

A

Frictional (in between jobs)
Structural (insufficient skills for job)
Cyclical (unemployment due to lack of demand)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Determinants of Aggregate Demand

A

Consumption, Investment, Government spending, net exports

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

GDP equation

A

GDP=C+I+G+(X-M)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Determinants of Aggregate Supply

A

Input costs, technology, legal-institutional environment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

National income

A

Real GDP/output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Real GDP

A

gross domestic product adjusted for inflation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Nominal GDP

A

Gross domestic product not adjusted for inflation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Determinants of the PPC

A

Change in technology
Change in quantity or quality of resources
Specialization and trade

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

CPI equation

A

(Price of the current market basket/value of the market basket in the base year)*100

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Quantity theory of money

A

Identity (equation) that shows how an increase in the money supply will result in a proportional increase in prices

MV=PQ(p*q=nominalGDP)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

GDP deflator

A

Index number that shows how prices have changed for all goods and services
(Nominal GDP/real GDP)*100

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Does real GDP account for changes in price and is it adjusted for inflation?

A

Yes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Mixed economy

A

Mixture of different economies

Aims to have private property, pricing and individual self interest

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Government deficit spending

A

**

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Supply Shock

A

Sudden unexpected change in aggregate supply

22
Q

Classical view

A

Aggregate supply is vertical and government does not need to get involved because wages and prices are flexible upward and downward

*Full employment level of real GDP stays the same regardless of price level

23
Q

Stagflation

A

Simultaneous increases in the inflation rate and unemployment rate

24
Q

Federal Funds Rate

A

The rate that banks charge one another on overnight loans from their excess reserves

25
Q

Scarcity

A

Unlimited wants and limited resources

26
Q

Circular Flow-Product market

A

Businesses sell goods and services in the product market which individuals buy. In return, individuals give money to businesses in the product market which is the business’ revenue.

27
Q

Circular flow-resource market

A

Individuals give land labor capital (resources) to businesses. In return businesses pay individuals which turns to individual’s income

28
Q

Free market

A

businesses, government and consumers

29
Q

GDP definition

A

dollar value of all final goods and services produced in a country’s borders in a given year

30
Q

What is not included in GDP?

A

Intermediate goods
non production transactions
non market activities

31
Q

Nominal vs real GDP

A

Nominal is NOT adjusted for inflation real is adjusted

32
Q

GDP deflator

A

(Nominal GDP/Real GDP)*100

33
Q

CPI

A

Measure of inflation

(market basket of current year/market basket in base year)*100

34
Q

Frictional unemployment

A

Unemployed because you are in between jobs

35
Q

Structural unemployment

A

Unemployed because of skills

36
Q

Cyclical unemployment

A

Happens because of recession

37
Q

In the short run, how are the wages, resource prices and price level affected?

A

Wages and resource prices do not change at the same pace as price level

38
Q

In the long run, how do wages resource prices and price level change?

A

They all change at the same pace which makes the LRAS vertical

39
Q

Fiscal Policy

A

Changes in government spending or taxation to influence the economy (affects C and G)
Inflationary gap: decrease government spending or increase taxes
Recessionary gap: increase in government spending or decrease taxes

40
Q

Monetary Policy

A

Changes in the money supply to influence the economy (affects I)
Inflationary gap: decrease money supply
Recessionary gap: increase money supply

41
Q

Keynesian View

A

Aggregate supply is horizontal
Prices and wages are sticky downward
Need government interference

42
Q

What are the two reasons that people demand money?

A

Transaction demand- households and businesses need money for daily transactions
Asset demand- people may prefer holding money rather than other assets (bonds, stocks, real estate)

43
Q

Money market graph

A

Interest rate and quantity of money
Demand is downsloping- higher interest rate=less money
The fed supplies the money-perfectly vertical and inelastic supply

44
Q

Affect on interest rate when the fed changes the supply of money

A

If the fed increases the supply of money then the interest rate goes down and if the fed decreases the supply of money then the interest rate goes up

45
Q

3 Fed Tools (monetary policy)

A

1) reserve requirement (how much the bank has to hold in its reserves)
2) discount rate (interest rate that the fed charges banks to borrow money)
3) open market operations (buying and selling of government bonds-buy bonds to increase money supply and sell bonds to decrease money supply)

46
Q

The higher the interest rate the_____ investment

A

less

47
Q

Real interest rate=

A

nominal interest rate-expected inflation

48
Q

Lump sum taxes

A

The tax revenue of the government is the same at all GDP levels

49
Q

Demand pull inflation

A

Excess of total spending over the countries ability to produce—overissuance of money by the central bank
Too much spending chasing too few goods

50
Q

Cost-push inflation

A

Output and employment decline while price level rises

Cost-push inflation is the result of supply shocks

51
Q

Functions of money

A

Medium of exchange, store of value, unit of account

52
Q

Money multiplier

A

1/reserve ratio

AP Econ (15 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions