ECON 2020 Flashcards

Vocabulary flashcards for Economics

Short-Run Fluctuation (caused by a decrease in aggregate demand)

A situation where the price level is less than expected and output is less than potential, caused by a decrease in aggregate demand.

Real GDP per capita Growth Rate Formula

Nominal Growth Rate - Inflation Rate - Population Growth Rate = Real GDP per capita growth rate

Decrease in Required Reserve Ratio

When the Federal Reserve decreases the required reserve ratio, the money supply increases and aggregate demand increases.

Unemployment Rate

Unemployment Rate = (Labor Force - Employed Persons) / Labor Force

Returns to Scale (Aggregate Production Function)

When increasing all inputs by the same amount, the aggregate production function exhibits constant returns to scale.

Long-run Equilibrium and Increased Aggregate Demand

A situation In long-run equilibrium, when aggregate demand increases, the price level will be greater than expected and output will be greater than potential.

Tariffs on Imports

When tariffs are placed on imports, consumer surplus decreases and producer surplus increases.

Comparative Advantage

Comparative Advantage: The ability to produce a good or service at a lower opportunity cost than another producer.

Phillips Curve Intersection

Intersection of Short-Run and Long-Run Phillips Curves: Determines the natural rate of unemployment.

Money Supply Formula

Nominal GDP / Velocity of Money = Money Supply

Nominal GDP

Nominal GDP Measures a countries gross domestic product using current prices.

Inflation

Inflation The rate at which the general level of prices for goods and services is rising.

Human Capital

Human Capital Skills attained through education and experience.

Nominal Exchange Rate Increase

Whenever the nominal exchange rate rises, net exports decrease and GDP decreases.

Potential GDP

Potential GDP: The amount of GDP that an economy produces whenever the unemployment rate is at the natural rate.

Contractionary Monetary Policy

Contractionary Monetary Policy: Federal Reserve increases the discount rate

Economic Growth

Economic growth is shown as a shift to the right in long-run aggregate supply

Purchasing Power Parity

Purchasing Power Parity If the Federal Reserve increases the money supply, we expect the U.S. dollar to depreciate

Liquidity Trap

Liquidity Trap Whenever interest rates are lower and expansionary monetary policy is ineffective, the economy is said to be facing a liquidity trap

World Market

World Market When the demand for US goods and services on the world market begins to decrease, you would expect the value of the US dollar in the exchange markets to decrease