Macroeconomics Quiz Flashcards

Terms Definitions
RER (equation)
Net Transfers=
Transfers - Taxes
Slow, or no economic growth
Major Components of Money
coinscurrencydemand depositsOCD's
Spending on capital equipment, inventories, and structures, including household purchases of new housing.
withdrawals multiplier
-MPC / (1 - MPC)
Something whose value does not change
Unemployment Rate
Ratio of unemployed individuals divided by total number of persons in the civilian labor force, expressed as a percentage
Discuss the relative importance of monetary policy tools

Chapter 16
withdrawal of spending from the economy's circular flow of income and expenditures
Myth –
narrative stories about supernatural forces or beings
expenditures necessary just to maintain a status quo situation
defensive expenditures
The fraction of an additional dollar of disposable income spent on consumption
items commonly used as form of money
Expectations-Augmented Phillips Curve
The relationship between unemployment and the rate of increase of money wages that arises when the output-gap and expectations components of inflation are combined
frictional unemployment
unemployment that results because it takes time fro workers to search for the jobs that best suit their tastes and skills
limited government
gov doesnt own means of production
Describe the immediate cause of the cyclical changes in the levels of real output and employment

Chapter 9
thrift institutions
savings and loan associates, mutual savings banks, and credit unions collectively

Full-Time Workers
people who usually work 35+ hours/week
The consumption of capital in the production process; the wearing out of plant and equipment.
the school of economics, originating in the eighteenth century, that stressed issues of growth and distribution, based on an image of smoothly-functioning markets
classical economics
the provision by the natural environment of places to put waste materials
sink functions
made up of businesses operating outside of government oversight and regulation. In less industriaalized countries it may constitute the majority of economic activity
informal sphere
Laffer Curve/Thought
lower taxes could yield higher govt. revenues. Bell shaped curve that shows a maximum at a median tax rate.
Difference between the NRO and the short run equilibrium quantity
final good
good sold to produce final product that will not be resoldex-grandmother buying yarn to make a hat for her granddaughter
Human Capital
The knowledge and skills that workers acquire through education, training and experience.
Friction unemployment
Caused by workers looking for jobs matching their skills/preferences 
Financial capital
includes money and other “paper “ assets (such as stocks and bonds) that represent claims on future payments.
unlimited: they can be fulfilled in a short period of time but generally we cannot satisfy them
State Okuns law on the economic cost of unemployment

Chapter 9
Equation for Economic Profit?
Total Revenue - Total Cost
d: primary bond market
bonds newly issued are bought
• The degree to which an asset can easily be exchanged for money.
Physical Capital
The stock of equipment and structures that are used to produce the goods and services.
self-reinforcing patterns of high savings, investment, productivity growth, and economic expansion
virtuous cycles (in development)
a rise in the general level of prices
a curve indicating the quantities that sellers are willing to supply at various prices
supply curve
Expansionary (easy) Monetary Policy
Low interest rates encourages buying to consumers and encourages business to invest.
international substitution effect
as prices increase in the US, consumers purchase more goods from other countries, which decreases the amount purchases in the US
tax multiplier
the ratio of change in the equilibrium level of output to a change in texas.
absolute advantage
the ability to produce a good using fewer inputs that another producer
Consumption (C) plus Investment (I) plus Government Expenditures (G) plus Net Exports (NX) is defined as
Gross Domestic Product (GDP)
A student has recently graduated with a degree in economics and finance and is now looking for a job as an investment analyst at a brokerage firm. This person is now ...
a) not in the labor force
b) structurally unemployed
c) frictionally unemployed
d) ou
c) frictionally unemployed
discount rate
the interest rate charged on loans the Fed grants to commercial banks
In the US, from 1967-2007:
________ increased ~96%
________ increased by ~75%
aggregate hours
average hours/worker decreased
change in demand
a shift of the entire demand curve
proposed by the World Bank, this is equal to gross saving less depreciation of both manufactured and natural capital
genuine saving
the annual number of deaths per 1,000 population
death rate
a measure of all domestic incomes earned in prudction
national income (NI)
the process of moving from a situation of poverty and deprivation to a situation of increased production and plenty, through investments and changse in the organization of work
economic development
law of one price
the theory that goods are easily traded across countries should sell at the same price.
increase in consumer confidence
-leads to increase in aggregate demand AD;shift to the right-creates movement along SRAS curve because of increase in quantity
indirect taxes minus subsides
taxes such as sales taxes, customs duties, and license fees less subsidies that the government pays for which it receives no goods or services in return.
normative economics
the study of what the goals of the economy should be
this term refers to the idea that a lower price increases purchasing power of a buyers money income
income effect
formula for demand for funds
Ip + (G-T)

planned investment plus the deficit
a trade deficit exists when
imports exceed exports

opposite is a trade surplus
a curve showing the maximum amount of twooutputs that society could produce from given resources, over a given time period
productoin-possibilities frontier (PPF)
the theory that market forces will tend to make shortages and surpluses disappear
theory of market adjustment
movement along a supply curve in response to a price change
change in quantity supplied
economists assume that people are rational ad respond to incentives if
people act in their own self-interest
What are the six characteristics of Money?
1) Universal Acceptance
2) Scarce
3) Divisible
4) Portable
5) Unique
6) Durable
Total value of all final goods and services, measured in current market prices, produced in the economy during a year.
Gross Domestic Product (GDP)
the amount a bond returns during a year, if held to maturity, expressed in percentage terms. The yield is determined by the coupon amount, the bond price, and the time to maturity.
bond yield to maturity
is government spending easily observed
yes, as firm revenues or as payments and taxes are observed in take home pay
We refer to money as M1 which is what?
currency and demand deposits
Examples of Fed actions that could decrease money supply are making open market...
sales, increasing the required reserve ratio, and increasing the discount rate
Recessionary Gap an eventual fall in nominal wages moves the economy to LR macro-equilibrium where aggregate out put is equal to potential output.
Recessionary Gap an eventual fall in nominal wages moves the economy to LR macro-equilibrium where aggregate out put is equal to potential output.
When an effective price ceiling is removed, we would expect the price of the good to:
Increase and the quantity demanded to decrease.
people who are neither "employed" nor "unemployed"
"not in the labor force" (BLS definition)
whats the opp cost of holding money
the interest you could have earned by holding other assets instead
households can divide wealth between two assets:
1) money which can be used as a means of payment but earns no interest
2) bonds which earn interest but cannot be used as a means of payment
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