MACRO REVIEW (copy)

What happens to unemployment during a recession?

It rises

Which unemployment rises during a recession?

Cyclical

If the cost of living increases at a nice slow steady rate what does that mean for prices?

They are stable

What are the four phases of a business cycle?

Expansion, peak, recession, trough

Tools of fiscal policy?

Taxing, government spending, borrowing money

Income, consumption, and production are all part of what?

National income (NI)

What happens if your job is moved to a different factory or place?

Structural unemployment

Restriction on imports means what to export?

Exports decrease as other countries restrict their imports

The ability to produce more output of one good relative to another good?

Comparative Advantage

Opposite of comparative advantage?

Absolute advantage, produce the most of everything

The graph/trade off between unemployment and inflation?

Phillips Curve

Name of unemployment that combines structural and frictional?

Natural unemployment

If it is an automatic policy would it be discretionary or not discretionary?

Not discretionary

When they just passed the debt limit?

Discretionary

What does the term real mean?

adjusted for inflation

What’s real GDP?

GDP adjusted for inflation

What does real GDP measure?

Economic growth from year to year

What follows a trough?

Expansionary

16 years olds are considered part of what?

Working age/ civilian population

Interest rates banks charge to other banks?

discount rates

The amount of income that consumers have to spend?

purchasing power

Relationship between price and quantity demanded?

Downward sloping (inverse)

Relationship between price and quantity supplied?

Upward sloping (direct)

Buying and selling of bonds and US securities?

Open Market Operations (OMO)

Do banks want to hold their reserves or do they want to minimize it?

Minimize

Payment from the government to a business?

Subsidies

In the circular flow model, households supply what?

factors of production aka resources

Does the federal reserve system collect taxes?

No

What's known as the central bank system of the US?

The Federal Reserve

What's the money supply?

Money supply is M1 and M2, it is the money currently in circulation

What is fiat money backed by?

The government

If the government said our money is good, are we confident?

yes

If there's a large increase in interest rates what would people do?

Save more, spend less, loan less (Hold money)

Which economy is more complex, money or barter?

Money economy

What are the three functions of money?

store of value, unit of account, and medium of exchange

What is the medium of exchange?

Any asset that is sold or accepted as payment

Programs that guarantee benefits to anyone who exceed the eligibility requirements?

Entitlement program

A point inside the PPC shows what?

Inefficient use of resources

What is the rate of full unemployment (percentages)?

4\.5-5.5%

What reduces purchasing power tends to leave an increase in interest rates?

real wages

Select a base year.The base year is 100. Calculate the index years from one year to the next.

CPI

Low interest rates mean what?

High liquidity

Disposable Income

Consumption + Savings

If a government generates more taxes then expenditure, they are…

reducing the federal debt, due to surplus

If taxes equal expenditures what will the budget deficit equal?

Zero

If you are lending money to the US government…

You buying government bonds?

What's the lagging indicator doing?

The time it takes for something to pass through government

Bonds are made to who?

Businesses and governments

Blue chip stocks can be?

Stable income, defensive, issued by large corporations/companies

Google, Amazon, Coca-Cola

corporations, part of Dow Jones

Expansionary fiscal policy can cause a reduction in the private sector, can it crowd out business?

YES

What is contractionary fiscal policy going to do with prices?

Reduce price levels

If there is a contractionary gap and the short run curve is upward sloping then…

they’re going to use fiscal policy to increase aggregate demand

Fiscal policy is associated with what individual in the 1930s?

John Maynard Keynes

What is fiscal policy telling the government to do?

To spend

What does AD equal?

GDP

What does the multiplier change?

level of real national income

Total planned expenditures equal to real national income means what in the macroeconomy?

Equillibrium

What is price of labor influenced by?

supply and demand

What hinders supply and demand

Minimum wage

Will dividends increase or decrease common stock?

Increase

What is investment spending indirectly related to?

interest rates

Average propensity to save is…

when consumers try to save at some level

Do investors receive interest on preferred stock?

No, you get dividends.

What type of investment tools receive interest?

Bond

Does consumption flow of income vary?

yes

When does economic growth takes place?

when aggregate supply increases

Economic growth can be thought of as…?

an increase in long run aggregate supply

One effect of a strong dollar is…

the reduction of americans exports and increase in american imports.

What causes flexibility with wages?

Contracts and unions

Basic ownership of a corporation takes voting rights away from a?

common stock.

According to Adam smith invisible hand leads to individuals to do what is best known to society as?

Self interest

Who coined the term classical model?

John Keynes

What is aggregate supply?

the sum of all planned production in the economy

Aggregate Demand is based off the sale of all

planned expenditures for the economy.

Open - Market in the early 70s was

a form of aggregate shock

If the AD falls

then there will be a contractionary gap

How Is the short run aggregate supply curve sloping

upward sloping

The Long Run Aggregate Supply graph is

vertical

Aggregate Demand graph is

sloping down

Most important source of economic growth comes from

entrepreneurial concepts

The concept of absolute comparative advantage came from who?

David Ricardo

What does the PPC curve illustrate?

How to maximize efficiency between 2 items

How many items are in a PPC?

2

If all income is consumed in a year then investment spending will be…

zero

To consume more in the future

society must consume less now

Productivity activity relates to producing more output with

fewer labor hours

Economic growth is measured by

increases in GDP

Disposable personal income has

the smallest dollar value

The largest factor of gross domestic income is?

Wages

Durable goods now last for how long?

1 year

Income approach and expenditure approach are the things measuring?

GDP

GDP doesn’t include intermediate goods because of

double counting

Total income is defined as

the income earned by resource earners

Circular flow of income is

global

Circular flow of income will____ as long as their is no leakage

remains the same

What are external shocks?

War oil and weather

What does a greater inflation rate mean?

A decrease in purchasing power

What does inflation refer to?

The average rate of all prices are increasing.

What was the large increase in the labor force due to?

An increase in women joining the workforce