Midterm 2 Econ
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Last updated 12:33 AM on 11/15/22
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44 Terms
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What two things cause shifts in the demand for labor?
Changes in price of output and productivity
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When real wage INCREASES, what shifts left?
Demand of labor
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When real wage DECREASES, what shifts left?
Supply of labor
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What two things cause shifts in the supply of labor?
Changes in the working age population and change in working age population willing to work
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Name the three types of unemployment
Structural frictional and cyclical
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Formula for Saving
Current income minus spending on current needs
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Formula for saving rate
saving over income
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Formula for wealth
assets minus liabilities
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Is saving a stock or flow value?
Flow
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Is wealth a stock or flow value?
Stock
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Formula for change in wealth
Saving plus capital gains minus capital losses
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What are the three reasons for household saving?
Life cycle saving
Precautionary saving
Bequest saving
Precautionary saving
Bequest saving
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As real interest rate goes up, how does saving change?
Saving increases
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National saving formula
S = Y-C-G
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Private saving formula
Sprivate = Y-T-C
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Public saving formula
Spublic = T-G
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Saving is the sum of what?
Private and public saving
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The variable T means what?
Net taxes
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Net taxes formula
Total taxes minus transfer payments minus government interest payments
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Private saving is the sum of what?
Household and business saving
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The surplus of the government budget surplus is what?
Public saving
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What two factors affect investment decisions?
Costs and benefits
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What is costs of investment?
Price of new capital goods
Real interest rate
Real interest rate
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Does real interest rate shift the supply and demand curves in SAVING AND INVESTMENT?
No
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What is money?
Asset used to make purchases
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What are the three functions of money?
Medium of exchange
Unit of account
Store of value
Unit of account
Store of value
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What is M1?
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What causes cyclical unemployment?
Business cycle
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What equals natural unemployment?
structural plus frictional
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What is u*?
Natural rate of unemployment
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What is u?
Rate of unemployment
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The formula for cyclical unemployment is?
Unemployment minus natural unemployment
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Okun’s Law
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What causes slowdowns or speed ups in REAL GDP growth?
Potential output growth
Output gaps develop
Output gaps develop
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Do prices change immediately with a change in demand?
No
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How do firms meet demand in the SHORT run?
Preset prices
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How do firms meet demands in the LONG run?
Total spending analysis
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What is the equilibrium of an open economy?
SK + I = I
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What does unemployment do during recessions?
Rise
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Which type of unemployment is associated with recessions?
Cyclical
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Which industries are most affected during recessions?
Durable goods
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How do recessions affect the rate of inflation?
It declines
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What does Y* mean?
Potential output
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Output gap formula
Note 
Flashcards (29)