Economics 201 Practice Exam Flashcards

This deck covers key vocabulary and conceptual applications from the Economics 201 Spring 2026 Practice Exam, including macroeconomic indicators, fiscal and monetary policy, and labor market definitions.

Short-run impact of an oil blockade

A macroeconomic shift where inflation increases and real GDP decreases simultaneously.

Fiscal Policy (Output Gap Mitigation)

Government actions such as a decrease in the federal income tax rate used to influence aggregate demand and lessen the impact of an output gap.

Monetary Policy (Output Gap Mitigation)

Actions by the Fed, such as targeting a lower federal funds rate by buying bonds, to influence the money supply and interest rates.

Long-run Macroeconomic Self-Correction

The process where falling nominal wages decrease production costs, shifting the Short-Run Aggregate Supply (SRAS) curve to the right to return the economy to equilibrium.

Nominal GDP Growth Rate Formula

$$\text{Nominal GDP Growth} = \frac{\text{Nominal GDP}_{2024} - \text{Nominal GDP}_{2023}}{\text{Nominal GDP}_{2023}} \times 100$$

Annual Inflation Rate Formula

$$\text{Inflation Rate} = \frac{CPI_{2024} - CPI_{2023}}{CPI_{2023}} \times 100$$

Primary Sanction

In the context of the US and Russia, a comprehensive ban on the purchase of vital exports like Russian oil and natural gas to reduce economic growth.

Secondary Sanctions

Sanctions placed on financial institutions in third-party countries (e.g., China, India, and Turkey) to dissuade them from enabling trade with a sanctioned nation.

Loanable Funds Market Supply Shift

An increase in the supply of loanable funds occurring when foreign investors purchase domestic financial assets like US Treasury securities.

Financial Assets

Instruments such as corporate bonds that represent claims on future payments for the investor.

Financial Intermediaries

Institutions like banks that act by channeling funds from savers to borrowers, helping to reduce risk and transaction costs.

Interest on Reserve Balances (IORB)

A tool used by the Federal Reserve to decrease the money supply by maintaining or increasing the interest paid on bank reserves.

Labor Force Participation Rate

The percentage of the working-age population that is in the labor force; a decline suggests people may have stopped looking for work.

Employed

A category for individuals currently working, including those working part-time (e.g., 12 hours a week) who may be seeking full-time employment.

Structural Unemployment

Unemployment resulting from industrial changes, such as a company moving towards AI, where workers must gain new certifications to match market needs.

Real GDP Growth

Economic growth stemming from increases in the production of real goods and services, adjusted for price changes (e.g., chained to 2016 Rubles).