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Econ 201 > Midterm 2 > Flashcards

Midterm 2 Flashcards

1
Q

Labor force size =

A

number employed + number unemployed only

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2
Q

unemployment

A

Number unemployed / Labor force * 100

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3
Q

labor force participation

A

labor force / adult population * 100

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4
Q

difference between frictional and structural unemployment

A

frictional occurs because you’re actively looking or swapping jobs structural occurs because of the absence of demand of a certain type of worker from outsourcing or tech

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5
Q

natural unemployment =

A

frictional + structural unemployment

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6
Q

how do you calculate gdp deflator

A

gdp deflator = nominal gdp / real gdp * 100

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7
Q

CPI =

A

price this year / price base year

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8
Q

how to calculate inflation from previous year

A

cost year - cost prev / cost prev * 100

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9
Q

What’s the rule of 70

A

takes 70/growth rate years to double RGDP

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10
Q

change in GDP

A

= Technology + 1/3 delta K / k (qty capital) + 2/3 delta L / L (labor)

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11
Q

What is most important to growth

A

institutions, then technology once established

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12
Q

AE =

A

C + I + G + X - IM where I is planned investment

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13
Q

Planned investment =

A

actual change in investment - unplanned change

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14
Q

When change in AE < GDP

A

inventories rise and employment falls

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15
Q

When change in AE > GDP

A

Inventories fall and employment rises

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16
Q

Consumption =

A

a + MPC (Y-T)

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17
Q

MPC =

A

change in consumption /change in income

18
Q

What’s on the AE model

A

national income on x axis, AE on y axis keynsian cross for 1:1 Y = AE

19
Q

Unplanned investment =

A

Y (AS) - AE

20
Q

Fiscal policy uses

A

G, T
delta AE = 1/1-MPC * delta G
delta AE = -MPC/1-MPC * delta T

21
Q

Monetary policy uses

A

monetary supply

delta AE = 1/1-MPC * delta I

22
Q

What’s the weath effect

A

consumption increases lower prices, nominal assets have more purchasing power

23
Q

Interest rate effect

A

lower prices, less money to buy stuff -> more money in bank so more loanable funds and more investment demand

24
Q

When is SRAS shifted

A

shifts with costs of production, right if wages fall or productivity rises or commodities fall

25
Q

Stagflation occurs when … a recession occurs when…

A

AS shifts left, AD shifts left

26
Q

Discretionary fiscal policy

A

deliberate changes in G T or Tr

27
Q

Automatic stabilizers

A

Government spending and taxes that auto increase and decrease with a business cycle

28
Q

Okun’s law

A

1% rise in unemployment for each 2% fall in GDP

29
Q

US govt borrows by

A

selling bonds

30
Q

Fischer equation

A

contracted nominal interest rate ≈ real interest rate + expected inflation rate.

31
Q

M1 =

A

currency in cirulation + checking accounts

32
Q

M2 =

A

M1 + time deposits (interest saving accounts)

33
Q

delta money supply =

A

1/rr * delta money bonds

34
Q

Two problems of monetary system

A

Liquidity problems -> not enough cash to meet withdrawals, FDIC insured, solvency (net worth < 0)

35
Q

Federal reserve toosl

A

Increase money supply by buying bonds
Decrease by selling bonds
Reserver ratio
Discount Rate

36
Q

In the long run, on the money chart,

A

MD eventually shifts to the new interest rate if MS move, changes in MS affect price level but not real GDP or real interest rate

37
Q

Expansionary monetary policy

A

has the money supply increased, interest rate decreased, consumption increased, and with it AD

38
Q

Contractionary monetary policy has the

A

AD decreased since interest rate is increased after the money supply is decreased

39
Q

Contractionary monetary policy has the

A

AD decreased since interest rate is increased after the money supply is decreased

40
Q

when velocity is constant

A

money growth = real gdp growth + inflation

41
Q

Velocity equation

A

MV = PY where M = M1, P = price level, Y = real GDP

Econ 201 (1 decks)

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