Macroeconomics Flashcards
When do leakages occur?
When income is used for purposes other than domestic consumption.
What are uses of income for purposes other than domestic consumption?
Savings and taxes, and payments for imports
An increase in the value of the Chinese RMB relative to the USD would most likely result in what outcome?
An increased aggregate demand in the US. Chinese good would be more expensive in the US and US goods less expensive in China. The US would therefore buy less goods from China.
How does inflation distort reported income
Depreciation is not reflective of current FA replacement costs. During a period of inflation, the current depreciation will reflect the old price of the asset, not the current (replacement) cost of the asset.
An increase in the minimum wage rate would likely result in?
the aggregate supply curve would shift inward (reduce supply). There would be an increase in the cost of labor so supply would decrease and shift the aggregate supply curve inward.
An increase in business investment would do what?
Increase aggregate demand.
If a good is produced in 2008 but sold in 2009, when should it be included in GDP?
- It should be included in the year in which it was finished, regardless of when it was sold.
What are the M1 measures of money supply?
Paper currency, coins, and check writing deposits.
What is the purpose of the CPI (consumer price index)
to compare relative price changes over time. it relates prives paid for a basket of good during a period ato the price of goods in a prior base period.
How does the Federal Reserve increase the money supply?
reduces the discount rate. by reducing the discount rate the cost of borrowing is reduced and banks increase lending, which increases the money supply.
what is the discount rate?
the interest rate paid by banks when borrowing from the Fed (fed reserve bank).
What is GDP?
a measur of the market value of all final goods and services produced for exchange in the domestic economy during the year.
Injections
the amount of expenditures added to domestic production that do not result from domestic consumption expenditures
What is included in injections
government spending, government subsidiaries, investment spending, and amounts received from exports. (not amounts paid for imports)
Microeconomics
considers only the relationship between individuals and businesses.
