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Economics > MACROeconomics > Flashcards

MACROeconomics Flashcards

1
Q

debt deflation

A

reduction in AD because of the increase in outstanding debt caused by deflation.

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2
Q

zero bound

A

on nominal interest rate; cannot go below zero

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3
Q

liquidity trap

A

situation where conventional monetary policy is ineffective bc nominal interest rates are up against the zero bound.

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4
Q

NAIRU

A

nonaccelerating inflation rate of unemployment, unemployment rate at which inflation does not change over time.

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5
Q

long-run phillips curve

A

shows the relationship between unemployment and inflation after inflation expectations have some time to adjust to experience.

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6
Q

short-run Philips curve

A

negative short run relationship between unemployment rate and rate if inflation.

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7
Q

cost-push inflation

A

sig. increase in price of an input with economy wide importance.

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8
Q

demand-pull inflation

A

caused by increase in AD

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9
Q

inflation tax

A

reduction in the value of money held by the public caused by inflation

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10
Q

classical model of the price level

A

real quantity of money is always at its LReq

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11
Q

monetary neutrality

A

changes in the money supply have no effects on the economy.

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12
Q

inflation targeting

A

when central bank sets a target for the inflation rate and sets monetary policy in order to hit that target.

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13
Q

expansionary monetary policy

A

increases aggregate demand

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14
Q

contractionary monetary policy

A

reduces aggregate demand

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15
Q

target federal funds rate

A

the fed can move the the interest rate through the open market operations that shift the money supply curve.

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16
Q

implicit liabilities

A

spending promises made by the gov that are effectively s debt despite the fact that they are not included in the usual debt statistics.

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17
Q

public debt

A

gov debt held by individuals and institutions outside the gov.

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18
Q

price floor

A

gov imposed limit on how low a price can be

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19
Q

price celing

A

gov imposed limit on how high prices can be

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20
Q

excise tax

A

tax on specific good at the time it is purchased

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21
Q

income tax

A

tax on income, changes as income changes.

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22
Q

tariff

A

tax on imports

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23
Q

quota

A

limits on how much of a good can be imported

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24
Q

potential output

A

output of economy at full employment.

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25
Q

per capita output

A

total output / total population

26
Q

frictional unemployment

A

always exists, people are searching for new job.

27
Q

nominal interest rate

A

real In. Rt. + inflation rate

28
Q

consumption

A

bought goods produced by businesses from households

29
Q

investment

A

businesses borrow the money households save from their income and invest it.

30
Q

Gov. Expenditures

A

gov payments for goods and services

31
Q

nominal GDP

A

gdp at existing prices

32
Q

real GDP

A

GDP adjusted for inflation

33
Q

wealth effect

A

as the price level falls the real wealth people hold increases as they consume more.

34
Q

interest rate

A

decrease in price level leads to decreased interest rates which increases investment expenditures.

35
Q

multiplier effect

A

amplifies initial changes in expenditures.

36
Q

AS curve slopes up BC?

A

Higher levels of prices prompts more goods produced.

37
Q

MPC

A

change in consumption/change in income

38
Q

fiscal policy

A

gov controlling AD

39
Q

in order to get out of a recessions according to KEYNES….

A

gov must take an active role in encouraging demand by either increasing gov spending or decreasing taxes.

40
Q

crowding out

A

where government expenditures is offset by the negative change in private expenditures.

41
Q

nominal deficit

A

shortfall of revenues in one year

42
Q

nominal surplus

A

excess of revenues over payments in one year

43
Q

DEBT

A

accumulated deficits minus accumulated surplusses

44
Q

real deficit

A

nominal deficit - (inflation * total debt)

45
Q

money supply is vertical because…?

A

it was chosen by the fed

46
Q

money demand is downward sloping bc…?

A

as interest rates rise people desire to hold less money

47
Q

money is highly liquid because…?

A

it can easily be exchanges for other assets

48
Q

M1

A

currency in the hands of public, checking account balances

49
Q

M2

A

M1 + savings account deposits & mutual funds shares.

50
Q

M3

A

M2 plus foreign deposits

51
Q

reserves

A

cash and deposits bank keeps on hand to manage normal cash inflows and outflows

52
Q

reserve ratio

A

percentage of deposits bank is required to hold.

53
Q

money multiplier

A

1/rr

54
Q

by decreasing the reserve req. ratio…. (what happens to money supply?)

A

fed increases amount of excess reserves and money supply is increased

55
Q

increase in the discount rate will…

A

make borrowing more expensive for banks and will increase banks reserves.

56
Q

to expand the money supply what open market operation will the FED take?

A

Buy Bonds.

57
Q

Expansionary monetary policy

A

decrease rr, decrease discount rate, buy bonds to expand the money supply which will decrease interest rates and raise income.

58
Q

contractionary monetary policy

A

increase rr, increase the discount rate, sell bonds, which contracts the money supply which will raise interest rates and lower income.

59
Q

inflation

A

MV=PQ money supply times velocity of money equals price level times quantity of real goods sold.

60
Q

philips curve

A

expresses relationship between inflation and unemployment. only a trade off in the short run.

Economics (11 decks)

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