Final Practice Exam Terms

Economics 1102 with Pieters at University of Minnesota - Twin Cities

About this deck

By: Kristen Emmons
Textbook:

Principles of Macroeconomics
Created: 2011-05-06
Size: 31 flashcards
Views: 67

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Economic System

a set of institutional arrangements to determine how to distribute scarce resources to satisfy people's wants

Market system consists of

1. extensive private property rights

2. freedom of enterprise and choice

3. self interest as the primary motivating force

4. competition

5. existence of market and prices

6. active, but limited government

Economic growth

an increase in GDP per capita

GDP

the market value of final goods and services produced within the borders of a given country within a given period of time

Demand shifters

-change in income

-price of related goods

-taste and preference

-expectations

-# of buyers

Supply shifters

-change in input prices

-technology

-expectations

-# of sellers

Natural Rate of Hypothesis

the claim that unemployment eventually returns to its normal, or natural, rate, regardless of the rate of inflation

Central Bank of USA called

Federal Reserve Bank

Fractional Reserve Banking

banking system in which banks are required to keep a percentage (fraction) of checkable deposits in cash or w. the central bank

crowding out

the decrease in investment that results from decrease in public savings/expansionary fiscal policy

expansionary monetary policy

Money Supply UP

interest rate DOWN

Aggregate demand RIGHT

contractionary monetary policy

Money Supply DOWN

interest rate UP

Aggregate demand LEFT

Expansionary fiscal policy

Government expenditures UP... so that AD UP

Contractionary fiscal policy

Government expenditures DOWN... so that AD DOWN

Monetary Policy 3 Tools

1. Reserve Ratio: regulations on the minimum amount of reserves that banks must hold against deposits.

2. open-market operations: the purchase and sale of US gov't bonds by the fed

3. Discount rate: the interest on loans that the fed makes to the banks

Aggregate demand

1. consumer expenditure C

2. investment spending I

3. government spending G

4. net exports NX

New Keynesians

unexpected shocks to either AD or AS interacting w. sticky prices

monetarists

inappropriate gov't policy

real business cycle

shocks to real factors

coordination failure

people's lack a way to coordinate their actions, and therefore we have events that result from people's expectations, rather than anything fundamental to the economy.

fixed exchange rates

gov't determines exchange rates and make necessary adjustments to their economies to maintain those rates

flexible exchange rates

demand and supply determine exchange rates & no gov't intervention

disadvantages of flexible exchange rates

1. uncertainty & diminished trade

2. terms of trade change

3. instability

most common exchange rate system

managed exchange rate float

four ways gov't controls the exchange rate

1. trade policies

2. exchange rate controls & rationing

3. domestic macroeconomics adjustment

4. currency intervention

groups who gain from USA decreases textile barriers to Pakistan

1. USA consumers (lower prices)

2. Pakistan textile workers (more jobs)

Government limits exports because

1. increase government revenue

2. keep domestic price low

3. increase domestic supply

effects of trade barrier

decline in consumption (Equality DOWN Job DOWN)

increase in production for domestic market (Job UP)

decline in imports (equality DOWN Job UP)

decline in exports (Job UP)

higher cost through lost economies of scale (Job DOWN)

Positive Statement

a claim that attempts to describe the world as it is

Normative Statement

a claim that attempts to describe the world as it SHOULD be

Goods not included in GDP

intermediates

land or inventories of goods

used goods

informal or made at home good

About this deck

By: Kristen Emmons
Textbook:

Macroeconomics (McGraw-Hill Economics)

Principles of Macroeconomics
Created: 2011-05-06
Size: 31 flashcards
Views: 67

About StudyBlue

“Simply amazing. The flash cards are smooth, there are many different types of studying tools, and there is a great search engine. I praise you on the awesomeness.”
Dennis