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Definitions |
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unemployment rate
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unemployed+discouraged/population(working age)
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Shortage
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Price is below equilibrium
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Disposable Income
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Individual income after taxes
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investment spending tends to be...
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procyclical
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Anything used to satisfy wants.
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Resources
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Pure Capitalism
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No Gov'tprivate ownership of resourcesMonopoliesno public goods
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Frictional Unemployment
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The short-term unemployment associated with the process of matching workers with jobs
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patents
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encourages firms to develop new products and production processes
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Compute the four propensities
APC APS MPC and MPS when given the necessary data
Chapter 10
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Finish
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Thrifts?
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Savings and loan associations, mutual savings bank, credit union
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fiscal policy
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decisions that determine the governments budget, including the amount and composition of government expenditures and government revenues
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an analytical tool that highlights some aspects of reality while ignoring others
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model
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Inflation
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increase in the overall price level measured by a price index such as CPI
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money is...
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1) convenient2) eliminates barter and need for a double coincidence of wants3) reduces transaction costs4) increases division of labor and labor specialization
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positive relationship
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Relationship that exists between two variables when both variables move in the same direction
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Which of the following would be counted in U.S. GDP?a. a new U.S.-produced radio bought by a Japanese citizen living in Kyotob. a used U.S.-produced computer bought by a French citizen living in Kansasc. a new Japanese radio bought by a U.S. citizen in Rh
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A
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gross private investment
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business spending on equipment, structures, and incentories and household spending on new owner-occupied housing
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Draw a graph of investment demand curve for the business sector and explain what it shows
Chapter 10
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Finish
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Define: imports
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goods produced abroad and sold domestically
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A period during which aggregate output declines. Conventionally, a period in which aggregate output declines for two consecutive quarters.
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Recession
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Depression
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A sharp recuction in an economy's total output accomapnied by high unemployment lasting more than a year.
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payments by govrenments to individuals or firms, including Social Security payments, unemployment compensation, and interset payments
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transfer payments
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governments and other local, national, and international organizations established for some public purpose beyond individual or family self-interest, and not operating with the goal of making a profit
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public-purpose sphere
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payments given to producers to encourage more production, either for export or as a substitute for imports
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trade-related subsidies
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Money
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- Medium of Exchange- Unit of Account- Stock of Value
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structural unemployment
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enough jobs but a mismatch between skills and jobs. (technology)
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cost pull inflation
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-caused by an decrease in SRAS
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Gross Tuning
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The use of macroeconomic policy to stabilize the economy such that large deviations from potential output do not persist for extended periods of time
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Consumer Surplus
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Difference between the price that the consumer pay and they price they're willing to pay
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inflation rate
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the percentage change in the price index from the preceding period
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sunk costs
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costs that have already been incurred and cannot be recovered
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Describe how a change in taxes shifts consumption and saving schedules
Chapter 10
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Finish
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Post Foc Fallacy
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After this, therefore because of this.
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market
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A group of firms and individuals in touch with each other to buy or sell some good.
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In the short-run macro model, if the economy is in equilibrium, it must also be operating at full employment.
True or False?
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False
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Microeconomics
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The study of how households and firms make decisions and how they interact in markets.
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when an indicator moves in the opposite direction from the business cycle. It moves up as the economy goes down into recession, and down as the economy goes up into recovery
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countercyclical movement
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restrictions on the flows of people into and out of a country
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migration controls
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consumer purchases that are expected to last longer than three years. These are generally items of equipment, such as vehicles and appliances, used by households to produce goods and services for their own use
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consumer durable goods
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Demand pull theory
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excessive demand pulls prices up. "too many dollars chasing too few goods"
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2 ways to calculate GDP
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Expenditure Approach and Resource Cost-income Approach
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SRAS increase results with
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-increase in output-decrease in price level
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Current Account
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The part of the balance of payments accounts that records payments and receipts arising from trade in goods and services and from interest and dividends that are earned by capital owned in one country and invested in another
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efficient market hypothesis
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the theory that asset prices reflect all publicly available information about the value of an asset
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economic growth
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the ability to produce a larger total output. This growth is the result of (1) increases in supplies of recourses (2) improvements in recource quality (3) technological advances
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Define: normative statements
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claims that attempt to prescribe how the world should be
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reserve ratio
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the ratio of the required reserves the commercial bank must keep to the bank's own outstanding checkable-deposit liabilities
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what is the driving force in increasing living standards
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increases in productivity
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Factors of production
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The factors of production are the inputs used to produce goods
and services. The two most important factors of production are
capital and labor. In this module, we will take these factors as
given (hence the overbar depicting that these values are fixed).
K (capital) = K
L (labor) = L
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assigning a monetary value to an environmental service that is equal to what it would cost to maintain the same standard of services using an alternative method
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maintenance cost approach
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the fertility rate required in order for each generation to be replaced by a next generation of the same size. This requires an average fertility of 2.1 children per woman in industrialized countries
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replacement fertility rate
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a quantity of any resource that is valued for its potential economic contributions
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capital stock
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people who seek to enjoy the benefit of a public good without paying for it
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free riders
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crowding in
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the increase in a component of GDP due to a decrease in govt. spending
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total producer surplus
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measured by the are above the supply curve and below the price
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Budget Deficit Function
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A relationship that plots, for a given fiscal policy, the government's budget deficit as a function of the level of real GDP
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the classical political business cycle would have a politician following
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expansionary policies before and election, and contradictory policies after and election
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Principle 7: Governments can sometimes improve market outcomes
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-"invisible hand" can only work if gov't enforces rules and maintains institutions key to market economy
-Ex: farmer can't work if crops stolen, restaurant must know people will pay, music industry doesn't want illegal copies
-"invisible hand" powerful, but not omnipotent
-Government must enforce efficiency in case of market failure (can be caused by externality like pollution or market power)
-Ex: every town needs water, but only one well, no "invisible hand"-led competition to check self-interest
-Or enforce equality: "invisible hand" does not ensure everyone has sufficient food, decent clothing, adequate healthcare
-Can vs. will: policies can be for selfish reasons, policy makers may not have all the info.
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d: marginal propensity to consume
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the amount by which consumption spending rises when disposable income rises by a dollar. for each dollar how much you are willing to spend
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taxes on production and imports
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a national income accounting category that includes such taxes which firms treat as costs of producing a product and pass on to buyers by charging a higher price
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the national account that tracks inflows and outflows arising from international trade, earnings, transfers, and transactions in assets 13
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balance of payments (BOP) account
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the theory that market forces will tend to make shortages and surpluses disappear
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theory of market adjustment
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gross domestic product
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1) market value of the final goods and services produced in an economy during a given time period2) GDP 3) measure value of an economy's production
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the two tools of fiscal policy that the government can use to stabalize the economy
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government spending and taxation
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Budget Deficit =
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- Sg OR - ( t - g )
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Of the three sources of unemployment:
_______ are the largest, their numbers fluctuate _____
_______ are the 2nd largest, their numbers fluctuate _____
_______ are the smallest, their numbers fluctuate _____
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job losers, fluctuate greatly
entrants and reentrants, fluctuate some
job leavers, fluctuate very little
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suggested by the United Nations, this is equal to GDP less depreciation of both manufactured and natural capital
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environmentally adjusted net domestic product (eaNDP)
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Contractionary Fiscal Policy
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A decrease in G, or a decrease in NT for the purpose of decreasing AD
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MV = PQ (MANDATORY)
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M = Money stockV = Income Velocity of CirculationP = Price LevelQ = Quantity of Goods and ServicePQ = GDP
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An economy is at full employment when:
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the unemployment rate equals the natural unemployment rate.
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changes in taxes and effect on AD
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decrease in taxes shift AD curve right, more money in circulation, an increase shift AD curve left, less money in circulation.
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What are the avg. level of prices measured by?
And what are the two most important?
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price indices
1- CPI deflator
2- GDP deflator
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What is included in change in G and (x-m)?
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G- fiscal policy
(x-m)- exchange rates
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who are complementary goods related to one another?
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as the demand for one increases, the demand for the complementary good decreases
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The shapes of the curves in the AS/AD model are based:
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On the relationship between the price level and total output.
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