Terms : Hide Images
| 360657608 | macroeconomics | BLANK is the branch of economics that deals with the whole economy and issues that affect most of society | |
| 360657609 | microeconomics | BLANKS the branch of economics that looks at decision making at the firm, house hold, and individual levels and studies behavior in markets for particular goods and services | |
| 360657610 | Gross Domestic product | BLANK is the total value of all final goods and services produced in a year within that country | |
| 360657611 | national income | BLANK is the sum of income earned by the factors of production owned by a country's citizens. | |
| 360657612 | personal income | BLANK is the money income received by households before personal income taxes are subtracted | |
| 360657613 | depreciation | BLANK is the decline in the value of capital over time due to wear or obsolescence | |
| 360657614 | net domestic product | BLANK is GDP minus depreciation. this indicates how much output is left over for consumption and additions to the capital stock after replacing the capital used up in the production process | |
| 360657615 | inflation | BLANK is a sustained increase in the overall price level | |
| 360657616 | deflation | BLANK is a sustained decrease in the overall price level | |
| 360657617 | nominal money | the actual number of dollars | |
| 360657618 | real money | the purchasing power of the dollars | |
| 360657619 | consumer price index (CPI) | BLANK= cost of base yr market basket at current prices / cost of base year market basket at base year prices X 100. A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. | |
| 360657620 | price indexes | BLANK are used to measure inflation and adjust nominal values for inflation to find real values | |
| 360657621 | real GDP | BLANK= nominal gdp / CPI for the same yr as the nominal figure X 100. BLANK is used to obtain a measure of the amt produced that isn't affected by changes in prices, the production of goods and service valued at constant prices | |
| 360657622 | nominal GDP | the production of goods and services valued at current prices | |
| 360657623 | gross domestic product deflator | BLANK reflects the prices of goods/services but not the quantities produced, NOMINAL GDP / REAL GDP X 100. monitor avg level of prices. (an alternative price index that reflects the importance of products in current market baskets, rather than in base yr market baskets, which become less relevant over time | |
| 360657624 | producer price index | A family of indexes that measures the average change in selling prices received by domestic producers of goods and services over time this applies to prices of wholesale goods such as lumber and still. BLANK is sometimes a good predictor of future inflation because producers often pass their cost increases on to consumers | |
| 362574735 | labor force | the BLANK includes employed and unemployed adults | |
| 362574736 | unemployed | to be considered BLANK a labor force participant must be willing and able to work, and must have made an effort ot seek work in the past four weeks | |
| 362574737 | labor force participation rate | BLANK is the number of people in the labor force divided by the working age population | |
| 362574738 | unemployment rate | the BLANK is the number of unemployed workers divided by the number in the labor force | |
| 362574739 | frictional unemployment | BLANK occurs as unemployed workers and firms search for the best available worker job matches | |
| 362574740 | structural unemployment | BLANK is the result of a skills mismatch. poorly educated people may find themselves BLANK because they lack marketable skills | |
| 362574741 | cyclical unemployment | BLANK results from downturns in the business cycle | |
| 362574742 | season unemployment | BLANK is the result of changes in hiring patterns due to the time of year | |
| 362574743 | discourage workers | BLANK are those who are willing and able to work, but become so frustrated in their attempts to find work that they stop trying. | |
| 362574744 | natural rate of unemployment | (bout 5% US) is the typical rate of unemployment in a normally functioning economy and is often thought of as the sum of frictional and structural unemployment | |
| 362574745 | full employment | BLANK is not 100 percent employment, but the level of employment that corresponds with the natural rate of unemployment. with BLANK there is no cyclical unemployment | |
| 362574746 | okun's law | economists have estimated that for every one percentage point increase in the unemployment rate above the natural rate, output falls by 2 to 3 percentage points | |
| 362574747 | aggregate supply curve | the BLANK curve indicates the total value of output that producers are willing and able to supply at alternative price levels in a given time period, holding other influences constant | |
| 362574748 | aggregate demand | the total demand for goods and services in the economy | |
| 362574749 | price level | the average level of all prices, essentially what a price index like CPI or the GDP deflator measures | |
| 362574750 | shifts in short run aggregate supply | BLANK may occur due to changes in labor, capital, natural resources, technology and expected price level | |
| 363238457 | say's law | classical economists believe in THIS, the idea that supply creates its own demand. when supplying goods workers earn money to spend or save and savings end up being borrowed and spent on business investments. | |
| 363238458 | rational expectations | BLANK suggests that people learn to anticipate government policies designed to influence the economy, thereby making the policies ineffectual. government intervention is not necessary or useful for stabilizing the economy | |
| 365855165 | the real wealth effect (or real balances effect) | when the price level increases, the value of assets such as cash and checking-account balances falls. Given amounts of each of these assets will purchase fewer goods when prices are higher. The real value (or purchasing power) of the assets thus declines, and people buy less. Likewise when the price level falls, the purchasing power of people's assets increase, and they buy more. | |
| 365855166 | the foreign trade effect | when the price level in one country increases, the prices of imports from other countries become relatively less expensive. at the same time exports from the country whose price level rose become relatively more expensive. thus, more imported goods and services are purchased and fewer exports are sold. Domestic firms will also find it relatively more profitable to invest abroad. the decrease in exports and the increase in imports resulting from a higher price level lead to a decrease in real GDP. | |
| 365855167 | the interest rate effect | when the price level increases, the real quantity of money (its purchasing power) decreases. People need more money even to continue their current consumption levels. This increases the demand for money in the form of loans and decreases the supply of loanable funds. To reach equilibrium in the money market, the interest rate (which is effectively the price of money) must increase. the higher interest rate leads to a decrease in real gdp as households and firms put off major purchases and investment until future periods when the interest rate might be lower. likewise a decrease in the price level decreases interest rates and increases real gdp. | |
| 367038215 | supply side inflation (cost-push) | when inflation results from an increase in resource costs that shifts the AS curve to the left | |
| 367038218 | stagflation | the combination of rising prices and falling output | |
| 367038220 | demand pull inflation | BLANK is the result of the AD curve shifting out to the right relative to the AS curve | |
| 367038222 | creeping inflation | inflation that remains steady for a long period at a low rate | |
| 367038224 | galloping inflation | unsteady inflation that exceeds 10 % per year and grows month after month | |
| 367038227 | hyperinflation | very rapid price increases in excess of 50 % per year | |
| 367038229 | recessionary gap | BLANK exists as the amount by which equilibrium real GDP would have to increase to reach full employment | |
| 367038231 | inflationary gap | BLANK exists as the amount by which equilibrium real GDP would have to decrease to reach full employment | |
| 367038233 | spending multiplier | BLANK is the number by which the initial amount of new spending should be multiplied to find the total resulting increase in real GDP. 1 / MPS or 1/ (1-MPC) | |
| 367038236 | marginal propensity to consume (MPC) | BLANK is the amount by which consumption increases for every additional dollar of real income. change in consumption divided by change in real income | |
| 367038238 | marginal propensity to save (MPS) | BLANK is the fraction of each additional dollar of income that is saved. change in saving divided by change in real income | |
| 368006863 | expansionary fiscal policy | BLANK involves increasing govt purchases, increase transfers or decreasing taxes in order to shift aggregate demand to the right and boost real GDP | |
| 368006864 | fiscal policy | changes in govt spending and or taxation to achieve particular macro goals | |
| 368006865 | contractionary fiscal policy | BLANK involves decreasing purchases, decreasing transfers, or increasing taxes thus shifting AD to the left which will lower the price level and decrease real GDP | |
| 368006866 | tax multiplier | blank indicates the total change in real GDP resulting from each $1 change in taxes. = MPC / MPS. the BLANK is negative because tax increases lead to expenditure decreases and vice versa. changes in taxes or transfer payments | |
| 368006867 | balanced budget multiplier | if an increase in govt spending is accompanied by an equivalent increase in taxes, or likewise G and T both decrease in order to balance the budget, the govt spending multiplier and the tax multiplier are combine to for the BLANK. = 1. thus the change in real GDP resulting from an equivalent change in G and T is no different from the initial change in G and T | |
| 368006868 | crowding out | the decrease in real investment stemming from higher interest rates due to govt purchases is called BLANK, caused by expansionary fiscal policy | |
| 368006869 | money demand | BLANK is about how we hold our wealth. it is not about wanting more wealth or more income, but about how we split our wealth between money and bonds. increase in income = increase in MD, higher prices = increase in MD | |
| 368006870 | open market operations | the operations of selling bonds = decreases MS, buying bonds = increase MS | |
| 368006871 | tools to control MS | the fed has 3 major BLANKS, open mkt ops, required reserve ratio and discount rate | |
| 368006872 | discount rate | the rate at which the fed lends to member banks | |
| 368006873 | federal funds rate | borrowing from other banks, the interest rate banks charge each other | |
| 369598491 | monetary policy | BLANK is the use of money and credit controls to influence interest rates, inflation, exchange rates, unemployment, and real GDP. | |
| 369598492 | expansionary monetary policy | the effects of BLANK are that money supply increases, interest rates decrease, investment increases, AD increases | |
| 369598493 | contractionary monetary policy | the effects of BLANK are that money supply decreases, increase interest rates, decreases investment and decreases AD | |
| 369598494 | money | BLANK is anything that is commonly accepted as a means of payment of goods and services | |
| 369598495 | commodity money | BLANK has value beyond its usefulness as money | |
| 369598496 | fiat money | BLANK is money that has no intrinsic value | |
| 369598497 | money | BLANK has three primary functions. medium of exchange, store of value and unit of account | |
| 369598498 | medium of exchange | an item that buyers give to sellers when they want to purchase goods and services | |
| 369598499 | unit of account | the yardstick people use to post prices and record debts. (money provides a standard unit for price listings and comparisons) | |
| 369598500 | store of value | an item that people can use to transfer purchasing power from the present to the future | |
| 369598501 | liquidity | the ease with which an asset can be converted into the economy's medium of exchange | |
| 369598502 | M1 | BLANK is the sum of coin and paper money plus checking deposits and travelers' checks. the most liquid assets | |
| 369598503 | M2 | BLANK is the M1 plus savings deposits, small time deposits (deposits less than $100,000 with a fixed term of maturity such as CDS) money mkt mutual funds and eurodollar deposits | |
| 369598504 | M3 | BLANK is M2 plus large time deposits, eurodollar time deposits and other less liquid assets | |
| 369598505 | fractional reserve banking system | the US has a BLANK in which only a fraction of total deposits held on reserve and the rest is lent out. | |
| 369598506 | reserve ratio | BLANK = banks reserves / total deposits | |
| 369598507 | money multiplier | the total amt of deposits resulting from an initial deposit that is ultimately held as reserves is conveniently found using the BLANK. BLANK = 1 / required reserve ratio | |
| 372007776 | tools of central bank policy | central bank (fed)- adjustments in the required reserve ratio, adjustments in the discount rate paid by banks to borrow from the fed, and open market operations | |
| 372007777 | equation of exchange | monetarists explain the power of monetary policy using the BLANK. according to the following equation, the money supply (M) times the velocity of money (V) equals the average price (P) times the quantity of goods and services sold in a period (Q) MV=PQ | |
| 372007778 | velocity of money | BLANK is the number of times per period (typically a year) that the average dollar is spent on final goods and services | |
| 372007779 | quantity theory of money | BLANK states that in addition to the velocy of money being stable that the quantity of goods and services sold in a period (Q) is stable. this implies that increases in M will have no effect other than to increase the price level | |
| 372007780 | real interest rate | BLANK = nominal interest rate - anticipated inflation | |
| 372007781 | nominal interest rate | BLANK = real interest rate + anticipated inflation | |
| 372007782 | natural rate of real interest | monetarist believe that there is a fairly stable BLANK, in which case fluctuations in the nominal interest rate simply reflect changes in anticipated inflation | |
| 372007783 | fisher effect | An economic theory that describes the relationship between inflation and both real and nominal interest rates. The BLANK states that the real interest rate equals the nominal interest rate minus the expected inflation rate. Therefore, real interest rates fall as inflation increases, unless nominal rates increase at the same rate as inflation. | |
| 372007784 | monetarists | BLANK see the money supply as the primary tool to bring economic stability. for stability they suggest following a strict "monetary rule" such as increasing the money supply at a rate equal to the average growth in real output. they believe that fiscal and monetary policy, intended for fine tuning threaten to destabilize the economy. they also feel that changes in government spending will crowd out private spending and have little or no effect on aggregate spending, prices, real output, or real interest rates. unemployment and output are expected to tend towards their natural rates without active intervention | |
| 372007785 | classical economists | BLANK agree with monetarists that the economy is fairly stable and will naturally adjust to full employment. they feel that attempts to fine-tune the economy are ineffectie because individuals come to anticipate the government's actions and act to offset them. BLANK emphasize that the velocity of money is constant, meaning that an increase in the money supply has a direct effect on total spending | |
| 372007786 | keynesians | BLANK view the economy as inherently unstable and blame inadequate demand for periods of stagnation. they recommend active government policy to respond to inflationary and recessionary gaps. they feel that changes in government spending can affect aggregate spending, real interest rates, and real out put. BLANK also believe that changes in the money supply have a relatively small and indirect effect on output. | |
| 373602366 | budget deficit | BLANK is the difference between federal government spending and tax collections (G-T) in one year | |
| 373602368 | national debt | the BLANK is the accumulation of past deficits- the total amount that the federal government owes at a given time | |
| 373602370 | ricardian equivalence | the BLANK theory that some people adhere to is that deficit financing is no different from tax financing because if the former is chosen, people will simultaneously increase their savings by the amount they would have been taxed in preparation for the inevitable repayment of the debt at a later time. | |
| 373602372 | borrowing/creating money | deficits can be financed either by BLANK or BLANK | |
| 373602374 | short run phillips curve | shifts to the left in AD result in lower price levels but higher unemployment. this inverse relationship between inflation and unemployment is portrayed in what is called a BLANK. a shift in the right ward AD curve corresponds to a movement from the right to the left along the BLANK | |
| 373602376 | stagflation | BLANK is caused by shocks to supply that shift AS leftward and result in a rightward shift in the Phillips curve | |
| 373602378 | shocks to supply | stagflation is caused by BLANK that shifts AS leftward and result in a rightward shift in the phillips curve | |
| 373602380 | shifts in phillips curve | BLANK occur in this graph due to changes in inflationary expectations and supply shocks | |
| 374903745 | balance of payments | the BLANK is a statement of all international flows of money over a given period. | |
| 374903746 | three | there are BLANK (number) balances within the balance of payments statement | |
| 374903747 | merchandise trade balance | BLANK = merchandise exports - merchandise imports | |
| 374903748 | current account balance | BLANK = trade balance + services balance + transfers. this includes the merchandise trade balance plus the trade of services and transfers between countries | |
| 374903749 | capital account balance | BLANK = foreign purchases of home assets - home purchases of foreign assets. the BLANK considers other types of assets that change ownership across international borders, including securities, currency, capital (such as machinery), and land. | |
| 374903750 | depreciates | a currency that BLANK or becomes "weaker" is one that falls in value relative to other currencies. BLANK decreases imports because they become more expensive for domestic consumers, and increases exports because they become relatively less expensive for foreigners to purchase. currency BLANK makes a trade deficit smaller or a trade surplus larger | |
| 374903751 | appreciation | BLANK results in a 'stronger' currency. when a currency BLANK it takes fewer units of that currency to buy a unit of another currency. BLANK increases imports because they become less expensive and decreases exports because they become more expensive. BLANK leads to a larger trade deficit or a smaller trade surplus | |
| 374903752 | arbitrage | BLANK is the practice of buying at a low price and selling at a high price for a certain profit. BLANK will prevent exchange rates from being different in one place than in another for any significant period. | |
| 374903753 | fixed exchange rate | the central bank can set a BLANK in which case changes in demand for dollars only affect the quantity of dollars purchased | |
| 374903754 | flexible exchange rate | the central bank can set a BLANK where the quantity of assets denominated in the home currency is fixed and the BLANK changes with demand |
