Macroeconomics Final: James Leggette

Surplus

having an excessive supply of goods or services; having more than what is needed to meet the demand

-quantity supplied > quantity demanded

-causes downward pressure on price

Price Floor

a legal minimum on the price at which a good can be sold my law

Normal Good

a good which people demand more of when their income rises, or less of when their income falls

Inferior Good

a good whose demand drops when people's income rises; the opposite of a normal good

Complementary Good

something that you buy because you bought something else; products which are used together

-EX: if you buy a car you have to buy gas to use it

Substitute Good

a good or service that can replace another; presents the consumer with alternative choices

-if the price of one good increases, the demand of the substitute is likely to increase

-EX: name brand groceries (skippy, lays, etc.) compared to store brand (Kroger, Walmart, etc.)

Circular FLow Model

a model that describes the relationship between supply and demand and shows how it all revolves around the market; a visual model of the economy

Unemployment Rate

percentage of the labor force that is unemployed

Labor Force Participation Rate

percentage of the adult population that is in the labor force

Consumer Price Index (CPI)

a measure of the average costs of goods and services bought by the typical consumer

Inflation

an increase of the overall level of prices

Money Multiplier

the amount of money generated by each dollar of reserves

Velocity of Money

the rate at which money changes hands

Frictional Unemployment

voluntary unemployment; unemployment that results from someone transitioning from one job to another or someone entering the workforce for the first time

Federal Open Market Committee

part of the 'fed' which conducts monetary policy; regulates money supply by buying or selling government securities

Bank Run

when depositors seek to withdraw all of their money from a bank at the same time

Medium of Exchange

items used by buyers and sellers to conduct transactions

What is the difference between real and nominal values? Why is this an important thing to understand?

-nominal values are values in terms of strictly cash

-real values are values determined in terms of the amount of goods and services received for another

-it is important to understand the difference because nominal values cannot be adjusted for inflation over time w/o the use of additional information. real values need no additional information to be adjusted for inflation.

EX: $20 fifteen years ago may not be $20 today, but nominally they are the same

How does inflation impact interest rates?

inflation is the increase of overall prices of items over time, so tighter inflation will lead to higher interest rates

GDP can be expressed as follows: GDP=Y=C+I+G+NX

What are these elements of GDP?

GDP = gross domestic product

Y = variable

C = consumption

I = investment

G = government spending

NX = net esports

What is the difference between a movement and a shift in either a supply or demand curve?

-a movement is just moving up or down the supply and demand

EX: a price increases from $4 to $5 the dot just moves up the line

-a shift is when the whole graph shifts

-a shift also affects the equilibrium, however a movement does not

What is a normal and inferior good? How do they relate to income?

-a normal good has higher demand when income is up, and lower demand when income is down

-an inferior good is the opposite, higher demand when income is down, lower demand when income is up

What is the fundamental economic problem that faces all of society and how does it relate to the study of economics?

-society's virtually unlimited wants and needs, while having limited resources

-economics is the study of the production, distribution, and consumption of goods and services. so basically it's the study of how society deals with the economic problem

-the economic problem deals with supply and demand, which we study in economics. when we discuss unlimited needs with limited resources we could say we have a limited supply with an unlimited demand