ECON 203 Final

frictional unemployment

unemployment that occurs when people take time to find a job

cyclical unemployment

unemployment that rises during economic downturns and falls when the economy improves

seasonal unemployment

unemployment that occurs as a result of harvest schedules or vacations

What is an AE function?

the sum of planned induced expenditure and planned autonomous expenditure

What is the 45 degree line?

shows all points where aggregate expenditures and output are equal.

In a private closed economy

when aggregate expenditures equal GDP:

The circular flow diagram is...

Is a visual model of the economy that shows how dollars flow through markets among households and firms.

M1

money in circulation plus checkable deposits in banks.

M2

All of M1 + less immediate (liquid) forms of money to include savings

M2+

M2 plus similar deposits at other financial institutions

Ceteris paribus

"all other things held constant"

Gresham's law

bad money drives out good money

The Bank of Canada implements its monetary policy by way of

Setting the overnight interest rate to keep the overall interest rate within a target range

Hysteresis refers to a.....

A phenomenon in which the NAIRU is affected by the current level of unemployment.

"The Bank of Canada has decided to reduce the overnight rate for the third time this year." What does the bank want to do?

The Bank wants to stimulate the economy

The potential output line (Y*) shows...

The maximum sustainable output that can be produced from the existing set of inputs.

The Canadian dollar appreciates

value increases over time

The Canadian dollar depreciates

Value decreases over time

Sources of long-run economic growth:

Growth in labor force

Trade Balance

The difference between exports and imports

Suppose the government is running a $50 billion dollar deficit and is making $5 billion dollars in debt service payments in a given year. Find the government's primary budget deficit/surplus.

$45 billion deficit

An American tourist in the Netherlands buys tulips from a local producer. This is an example of a(n) \________ by the tourist.

Import

The balance of payments system requires that the current account and the capital account sum to

0

A country has a current account deficit of -$100 billion.... What does this mean

Payments to foreigners exceed payments received from foreigners

Which list contains only actions that increase the money supply?

open-market purchases

lowering the reserve requirement ratio

excess reserves

Long time lags associated with monetary policy can cause....

a destabilizing effect

The multiplier is a number that predicts the size of:

The increase in equilibrium real GDP caused by an increase in autonomous expenditure.

If a country is at full employment then:

The unemployment rate is positive

he purchase of an Italian bond by a Canadian firm would be recorded as a \_______ in the \___________ account. (debit

current

capital

Which of the following are used to calculate the natural rate of unemployment?
a. Cyclical unemployment.
b.Frictional unemployment.
c.Structural unemployment.
d.Only B and C.

d. Frictional and structural

If the government increases spending this should...

Have an expansionary effect on national income.

Purchasing power parity formula

(Cost of good X in currency 1)
\-------------------------------
(cost of good x in currency 2)

A rise in investment confidence is shown by...

An upward shift in the AE curve.

what is the significance of the 45-degree line?

It connects all points where desired consumption equals actual disposable income.

twin deficit

Occurs when a nation has both a current account deficit and a budget deficit.

Main goal of Mercantilists is....

To maximize the nation's export surplus

The NAIRU is affected by all the following except...

a recession

The phillips curve

short-run relationship between the unemployment rate and the inflation rate

The long-run Phillips curve:

is vertical at the natural rate of unemployment

budget deficit

occurs when the federal government's spending exceeds its revenues