Studied by 9 peoplefull employment
no cyclical/low unemployment
underemployment
workers are overqualified for their jobs or work fewer hrs than they prefer
labor force
those in the adult pop who are either working or looking for work
unemployment rate formula
\# of ppl without jobs who are looking for work
__________________________________________________
# of ppl in the labor force
labor force participation rate formula
\# of ppl in labor force
________________________
the adult pop
unemployment benefits
cash transfers to unemployed workers who lost their jobs, actively seeking work, & meet other qualifications
inflation
increase in the economy’s price level
demand-pull inflation
inflation resulting from a rightward shift of the aggregate demand curve
greater demand pulls up price level
cost-push inflation
inflation resulting from a leftward shift of the aggregate supply curve
reduced supply pushes up price level
nominal interest rate
interest rate expressed in current dollars as a % of the amt loaned
interest rate on loan agreement
real interest rate
interest rate expressed in dollars of constant purchasing power as a % of the amt loaned
nominal interest rate minus inflation rate
laissez-faire
gov shouldnt intervene in a market economy beyond the minimum required to maintain peace and property rights
demand-side economics
macroeconomic policy that focuses on shifting the aggregate demand curve as a way of promoting full employment and price stability
Keynes - if gov spent money over budget then the gov will go into debt
stagflation
decline/stagnation of a nation’s output accompanied by a rise/inflation in price level
supply-side economics
macroeconomic policy that focuses on a rightward shift of the aggregate supply curve through tax cuts (or other changes that increase production incentives)
Arthur Lawfuler - if reduce income tax, then gov spending would increase supply of goods
cycle of poverty
children in families that receive welfare may end up on welfare themselves when they grow up
welfare reform
a 1996 overhaul of the welfare system that imposed a lifetime welfare limit of 5 yrs per recipient and other conditions
benefits-received tax principle
those who receive more benefits from the gov program funded by a tax should pay more of that tax
ability-to-pay tax principle
those with a greater ability to pay (ppl with a higher income) should pay more of a tax
tax incidence
indicates who actually bears the burden of a tax
proportional taxation
the tax takes the same percentage of income from all income groups
also called a flat tax
progressive taxation
the tax as a % of income increases as income increases
regressive taxation
the tax that takes a larger % of income from low-income groups than from high-income groups
average tax burden decreases with income
marginal tax rate
the % of each additional dollar of income that goes to pay a tax
gov budget
a plan for gov spending and revenues for a specified period (usually a yr)
payroll taxes
taxes deducted from pay to support Social Security & Medicare programs
Frictional Unemployment
Time it takes to bring together labor suppliers and labor demanders
Structural Unemployment
When job seekers do not have the skills demanded by employers. Those unemployed may need to retrain to develop new skills.
Seasonal Unemployment
unemployment that occurs with seasonal jobs throughout the year (ex. lifeguards)
Cyclical Unemployment
An increase in unemployment caused by the recession phase of the business cycle. Increases during recessions and decreases during expansions.
disinflation
reduction in the rate of inflation
deflation
decrease in the price level (experienced during the Great Depression)
16th Amendment
Congress shall have power to lay and collect taxes on incomes
john maynard keynes
economist, decrease inflation, founder of modern macroeconomics
free-riders
ppl who use public goods but dont pay taxes
adam smith
invisible hand, no gov involvement
user fees
toll roads, national parks taxes
sin taxes
alcohol, tobacco and gambling taxes
medium of exchange
anything generally accepted by all parties in payment
inflation ___ since WW2
increasing
70’s
stagflation = unemployment & high inflation
90’s
trying to steady the debt
Reagan said to ___
cut personal income tax rates
consequence of welfare system
higher taxes
seigniorage
revenue earned from printing paper money
Federal Reserve System (the fed)
central bank & monetary authority of US
set interest rates, does transactions
the SEC
security exchange commissions
unit of account
standard on which to base all pricess
store of value
retains its purchasing power over time
stock = amt measured
flow = amt received
token money
money whos exchange value exceeds its cost of production
bank notes
pieces of paper promising the bearer a specific amt of gold/silver
bank loans
help banks/financal institutions “create money”
fiat money
money of no value
depository intuitons
accept deposits from the public and make loans from these
commercal banks
historically lent primarily to commercial ventures (businesses rather than household)
thrifts
savings and loan assosiactons
reserve bank
holds the reserves of other member banks, doesnt deal with public
charter
right to operate
networth
asset minus liabilities
required reserve ratio
min fraction of deposits the bank must kep in reserve
required reserves
total $ amt of the required reserves (reserves not loaned out)
excess reserves
reserves that a bank has on hand in excess of the required reserves
money multiplier
the multiple by which the money supply can increase as a result of an increase in excess reserves in the banking system
Note 
Flashcard (24)