Macro Exam 2

studied byStudied by 3 people
5.0(1)
Get a hint
Hint

price index shows

1 / 100

flashcard set

Earn XP

Description and Tags

101 Terms

1

price index shows

how the price of the market basket changes through time

New cards
2

consumer price index is the

average level of the prices of goods consumed by an urban family

New cards
3

cpi is published monthly by the

bureau of labor

New cards
4

step one of calculating the cpi

find the cost of the basket at base period prices

New cards
5

step two of calculating the cpi

find the cost of the basket at current period prices

New cards
6

step three in calculating the cpi

calculate the cpi for the current period

New cards
7

cpi equation is

basket in current year / basket at base prices x 100

New cards
8

the inflation rate is the

percentage change in price level from year to year

New cards
9

first stage of constructing the cpi

selecting the cpi basket

New cards
10

second stage of constructing the cpi

conducting a monthly price survey

New cards
11

third stage of constructing the cpi

using the prices and the basket to calculate the cpi

New cards
12

4 cpi biases

new goods bias, quality change bias, commodity substitution bias, outlet substitution bias

New cards
13

money illusion is

using nominal dollars rather than real dollars to gauge income or wealth

New cards
14

the inflation formula is

(cpi this year - cpi last year) / cpi last year x 100

New cards
15

pure inflation is when

prices of all goods rise by the same percentage over the year

New cards
16

hyperinflation is an

extremely rapid inflation rate with devastating impact

New cards
17

disinflation

declining inflation rate

New cards
18

deflation

rate of downward movement in price level

New cards
19

two sources of pressure on the price level and inflation

demand pull and cost push

New cards
20

demand pull inflation starts because

aggregate demand increases by any factor

New cards
21

cost push inflation results from

an initial increase in resource costs

New cards
22

cost push inflation occurs when AS shifts

left

New cards
23

cost push inflation is

self limiting

New cards
24

self limiting means it will

die out or cure itself

New cards
25

stagflation is the combination of a

rise in price level and drop in real GDP

New cards
26

purchasing power

measure of how much dollar can buy

New cards
27

nominal income

actual number of dollars received over a year

New cards
28

real income

purchasing power of nominal income

New cards
29

inflation does what to borrowers, including the government

helps them

New cards
30

inflation does what to real income

redistributes it

New cards
31

2 main effects of inflation are

redistribution of income and departure from full employment

New cards
32

the nominal interest rate is the price a borrower pays for

the amount loaned and the devaluing of the money

New cards
33

the real interest rate is the

price paid by a borrower to compensate only for the amount loaned

New cards
34

the core inflation rate attempts to

reveal the underlying inflation trend

New cards
35

rational expectation is

the forecast that is based on all relevant information

New cards
36

recession is a period during which

real gdp decreases for at least 2 successive quarters

New cards
37

deflation

falling price level

New cards
38

the phillips curve shows the relationship between

inflation and unemployment

New cards
39

two types of phillips curves

short run and long run

New cards
40

the phillips curve seeks

price level stability

New cards
41

in the phillips cure, the rate of inflation and unemployment are

inversely related

New cards
42

4 phases of the business cycle

peak, trough, recession, expansion

New cards
43

a peak is when the economy is

at full employment and highest level of real gdp

New cards
44

recession is when real gdp

decreases

New cards
45

trough is where real domestic output and unemployment

bottom out at lowest levels

New cards
46

expansion is a period during which

real gdp increases

New cards
47

secular trend

expansion or contraction over a long period of time

New cards
48

the population is divided into two groups

the working age population and people too young to work or in institutional care

New cards
49

the working age population consists of

people aged 16 or older who are not in jail, hospital, or institutional care

New cards
50

the working age population is divided into two groups

people in the labor force and people not in the labor force

New cards
51

the labor force is the sum of

employed and unemployed workers

New cards
52

labor force is the number of people who are

over 16 and employed or actively seeking a job

New cards
53

job separation

when a worker quits or is fired or is laid off

New cards
54

job search

process of looking for a job

New cards
55

job finding

when unemployed worker accepts new job

New cards
56

entrants

people who are entering the labor force

New cards
57

reentrants

people who have previously withdrawn from the labor force

New cards
58

the unemployment rate is the percentage of people

in the labor force who are unemployed

New cards
59

equation for unemployment rate

number of people employed / labor force x 100

New cards
60

marginally attached worker

a person who is neither working nor looking for a job but has indicated that they want and are available for a job and has looked for work in the past

New cards
61

discourage worker

a marginally attached worker who has stopped looking after repeated failure

New cards
62

the labor force participation rate is the percentage of

the working age populating who are members of the labor force

New cards
63

equation for labor force participation rate

labor force / working age population x 100

New cards
64

employment to population ratio is the percentage of

people of working age who have jobs

New cards
65

equation for employment to population ratio

number of people employed / working age population x 100

New cards
66

aggregate hours

total hours worked by all people employed during a year

New cards
67

real wage rate

quantity of goods that can be purchased with an hour’s work

New cards
68

three types of unemployment

frictional, structural, cyclical

New cards
69

frictional unemployment arises from

people entering and leaving the labor force and the creation and destruction of jobs

New cards
70

frictional unemployment increases when

more people enter the labor market or when unemployment compensation payments increase

New cards
71

structural unemployment arises when

changes in technology or change in skills or location necessary for a job

New cards
72

cyclical unemployment arises from

fluctuations in the business cycle

New cards
73

cyclical unemployment increases during a

recession

New cards
74

cyclical unemployment decreases during an

expansion

New cards
75

is cyclical unemployment included in the natural rate of unemployment?

no

New cards
76

full employment

unemployment rate = natural rate of unemployment

New cards
77

classical theory believes the the economy is

self regulating and always at full employment

New cards
78

in classical theory, government interference

is not needed

New cards
79

classical theory takes which viewpoint

long run

New cards
80

in classical theory, the most significant influence on both AD and AS is

technological change

New cards
81

in classical theory, taxes

blunt people’s incentives to work

New cards
82

say’s law states that

supply creates it own demand

New cards
83

say’s law states that overproduction

is not possible

New cards
84

Keynesian theory is based on the

herd instincts

New cards
85

in the keynesian theory, when the economy is left alone

it would operate at full employment

New cards
86

K theory says that to achieve and maintain full employment

fiscal and monetary policy is required

New cards
87

fiscal policy

help from the government

New cards
88

monetary policy

help from the central bank

New cards
89

in keynesian theory, money wages are

sticky, especially downward

New cards
90

monetarist theory says the economy is

self regulating and will normally operate at full employment

New cards
91

monetarist theory says the most significant influence on AD is

the quantity of money

New cards
92

in monetarist theory, all recessions result from

inappropriate monetary policy

New cards
93

in monetarist theory, tax rates should

be kept low

New cards
94

real business cycle theory states the main source of economic fluctuations are

random fluctuations in productivity and resource availability

New cards
95

RBC cycles are just variations in growth because of

change of pace in technology change

New cards
96

other sources of changes in rates in RBC are

international disturbances, climate fluctuations, natural disasters

New cards
97

theory of creative destruction

monopolies are destroyed by new industries

New cards
98

theory of contestable markets

there are barriers to enter

New cards
99

in the theory of contestable markets, there is difficulty

switching resources

New cards
100

theory of creative destruction is basically: “if you don’t

change, you will die

New cards

Explore top notes

note Note
studied byStudied by 89 people
... ago
5.0(3)
note Note
studied byStudied by 82 people
... ago
5.0(1)
note Note
studied byStudied by 67 people
... ago
5.0(1)
note Note
studied byStudied by 31 people
... ago
5.0(2)
note Note
studied byStudied by 36 people
... ago
5.0(5)
note Note
studied byStudied by 11 people
... ago
5.0(1)
note Note
studied byStudied by 80 people
... ago
5.0(6)

Explore top flashcards

flashcards Flashcard (38)
studied byStudied by 3 people
... ago
5.0(1)
flashcards Flashcard (60)
studied byStudied by 454 people
... ago
5.0(1)
flashcards Flashcard (29)
studied byStudied by 5 people
... ago
5.0(1)
flashcards Flashcard (60)
studied byStudied by 40 people
... ago
5.0(1)
flashcards Flashcard (25)
studied byStudied by 4 people
... ago
5.0(1)
flashcards Flashcard (67)
studied byStudied by 2 people
... ago
5.0(1)
flashcards Flashcard (20)
studied byStudied by 3 people
... ago
5.0(1)
flashcards Flashcard (39)
studied byStudied by 1 person
... ago
5.0(2)
robot