Test 2 Flash Cards
What are the three general kinds of taxes
Personal
Corporate
Retirement
What are the three kinds of business
Sole proprietorship
Partnership
Corporation
Describe the progressive tax system
As income increases the tax rate percentage paid increases
Describe the regressive tax system
As income increases the tax rate percentage paid decreases
Proportional tax system?
As income decreases/increases the tax rate percentage paid doesn’t Change known as a flat tax
What is the business cycle
The ups and downs of business activities or the fluctuations in business activities
What is GDP
The total dollar value of all final goods and services that are produced within the border of the country by businesses and residents of the country in a given economic year
What is GNP
The total dollar value of all final goods and services that are produced within and outside the border of the country by businesses and citizens of the country in a given economic year
What is the classical view
- no govt
- voluntary unemployment
- long run equilibrium
Keynesian view
- limited govt intervention in the economy
- voluntary and non voluntary unemployment
- short and long run equilibrium
Define civilian labor force
Individuals that are legally capable and willing to do civilian jobs
Unemployment
Part of the civilian labor force (that are capable and willing to do civilian jobs) that didn’t find jobs
What are the two ways of unemployment
Voluntary-quit
Non voluntary-fired
Define structural unemployment
Out of job due to lack of skill
Define fictional unemployment
Changing careers
Cyclical unemployment
Out of job due to low demand for the skills
Define target natural rate of unemployment
The rate of unemployment that may occur if the economy is performing at its potential equilibrium level of output
Define full employment
When the unemployment rate is equal two at most the natural rate of unemployment
Define underemployment
Available for full-time but working part-time hours
What is over employment
Working more than the full time requirements
What is inflation
When prices increase is up to 100% or purchasing power of money decreases
What is deflation
When prices go down or purchasing power of money is higher
What is hyper inflation
Inflation rate more than 100%
What is stagflation
Simultaneous increase in both the inflation rate and unemployment rate
Define price index
A measure of the price level
What is the consumer price index CPI
A weighted average price of a set or bundle of goods and services that are used daily by most consumers
What is the producer price index PPI
A weighted average price of a set or bundle of goods and services that are used daily by most producers
Define real income
Income adjusted for inflation based on the purchasing power
Define nominal income
Income not adjusted for inflation or income based on the current price level
What is the GDP deflator
The weighted average price of all goods and services produced in an economy for a given economic this fiscal year
What is the barter system
The coincidental medium of exchange of goods and services
Define total demand deposit TD
Money taken to the bank for safekeeping
Define required reserve ratio of
The percentage of the total deposit that must be kept at the bank
Define required reserve
The dollar amount of the total deposit that must be kept in the vault of the bank
Define excess reserves
The loanable funds for the dollar that is left to be loaned out after the required reserve has been taken from the total deposit
Define simple money multiplier deposit or
The reciprocal of the required reserve ratio
When changing the required reserve ratio of what happens in inflation
The required reserve ratio is increased
When changing the required reserve ratio of what happened in recession
The required reserve ratio is decreased
When changing the discount rate what occurs in inflation
The discount rate is increased
When changing the discount rate what happens in recession
The discount rate is decreased
In an open market operations what occurs in inflation
Federal Reserve sell bonds
In an open market operations what occurs in recession
Federal Reserve buys bonds
What is a bond
A instrument that becomes cash on and or after certain maturity right
Define interest rate
Price of money charged or premium paid by regular banks to their customers
Defined real interest rate
Rate adjusted for inflation rate based on purchasing hours
Define nominal interest
Rate not adjusted for inflation or rate based on the current price level
What is prime interest rate
The interest rate the banks charge to their trustworthy customers
What is the discount rate
The rate the national Federal Reserve Banks charge members little banks when member banks borrow money from the national Bank
What is the federal funds rate
The rate members little banks charge to each other when memory banks borrow money from each other
What is the federal funds markets
The markets where the members banks borrow money from each other
What causes cost push inflation
Increase in the cost of production
What causes demand pull inflation
Increase in the demand for goods and services
Define Dutch disease
Employee refusal to work due to higher marginal tax rates
What is the Laffer curve
Graphical representation of the relationship between the percentage tax rate and each revenue generated at each tax rate
What is structural budget deficit caused by
Poor management or the deficit that made her even if economy is producing at its potential equilibrium level of output
What is the passive budget deficit
Deficit that may occur due to bad economic times or poor economic fluctuations
Define nominal budget deficit
Deficit not adjusted for inflation or deficit based on the current level price
Define real budget deficit
Deficit adjusted for inflation or Dubson based on the purchasing power of the money
Define average propensity of savings
On average the percentage of each dollar earned that is saved
Define average propensity of consumption
On average the percentage of each dollar earned that is consumed
What is the first page of the aggregate supply curve
The Kinsey and stage price level doesn’t change in output level change
What is the second stage of the aggregate supply curve
The classical stage price level change output level does not change
What is the third stage of the aggregate supply curve
The intermediate stage price level change Output level change
Define monetary policy
The means by which government manipulate the interest rates and money supply to achieve desirable results equilibrium
Explain expansionary monetary policy
Use the one we are in recession increase money supply and decreased interest rates
Explain contractionary monetary policy
Used when we are in in inflation decreased money supply and increased interest rates
Define fiscal policy
The means by which the government manipulate the spending and interest rates to achieve desirable equilibrium result
Describe expansionary fiscal policy
Is used mostly when we are in recession increase spending decrease taxes
Describe contractionary fiscal policy
Use mostly when we are in inflation decrease spending increased taxes
What does the Phillips curve do
Shows the graphical inverse relationship of the unemployment and inflation rates
