Test 2 Study guide
Economics 1015 with Lee at University of Missouri- Columbia
About this deck
By: Jonathan Roberts
Textbook:
Macroeconomics with MyEconLab XL Access Kit (3rd Edition)
Created: 2010-10-26
Size: 30 flashcards
Views: 110
Textbook:
Macroeconomics with MyEconLab XL Access Kit (3rd Edition)Created: 2010-10-26
Size: 30 flashcards
Views: 110
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BUSINESS CYCLE
Peak & Trough, Expansion, Contraction, Recession, Depression
Real GDP
the production of goods and services valued at constant prices
Employment (unemployment) & Price level are closely related
employment affects GDP
Natural rate of Unemployment
amount of unemployment that the economy normally experiences
Potential GDP
highest level of real gross domestic product that could persist for a substantial period without raising the rate of inflation
Consumer Confidence
degree of optimism that consumers feel about the overall state of the economy and their personal financial situation;;
based on a monthly survey of 5,000 households
occasionally be helpful in predicting sudden shifts in consumption patterns
based on a monthly survey of 5,000 households
occasionally be helpful in predicting sudden shifts in consumption patterns
Procyclical vs. Countercyclical Measures:
measures to affect unemployment, GDP, cons and prod confidenceTaxes, Transfer payments
Benefit of recession
Prices decrease
Marginal Propensity to Consume (MPC)
fraction of extra income that a household consumes rather than saves
Marginal Propensity to Save (MPS)
fraction of extra income that a household saves rather than consumes
MONETARY POLICY (p. 232)
setting of the money supply by policymakers in the central bank
FISCAL POLICY (p. 371)
the setting of the level of gov. spending and taxation by gov policymakers
RECESSIONARY GAP (aka. Okun gap, Output gap)
Potential GDP > Real GDP: A below full-employment equilibrium
Looser Monetary Policy, Expansionary Fiscal Policy
Looser Monetary Policy, Expansionary Fiscal Policy
INFLATIONARY GAP
Potential GDP < Real GDP: An above full-employment equilibrium
Tighter Monetary Policy, Contractionary Fiscal Policy
Tighter Monetary Policy, Contractionary Fiscal Policy
At full-employment equilibrium
Potential GDP = Real GDP
Two objectives of policymakers in designing a tax system
null
How FEDERAL TAX SYSTEM evolved?
- Raise tax Revenue
- be fair
- influence behavior: excise tax on spirits
“VOLUNTARY” COMPLIANCE: THE INTERNAL REVENUE SERVICE (IRS)
relies on individuals to report income freely and voluntarily, calculate their tax liability correctly, and file a tax return on time
Average Tax Rates
(total taxes paid/total income) X 100%
Marginal tax rate
(extra taxes paid on additional dollar of income) X 100
BENEFITS PRINCIPLE:
Example: gasoline tax: revenue from this tax used to finance highway system
ABILITY-TO-PAY PRINCIPLE
Example: vertical and horizontal systems
VERTICAL EQUITY
ppl with more income should pay more in taxesRegressive Tax: high-income tax payers pay less than low-income payers.
Progressive Tax: high-income payers pay more than low-income payers
Proportional Tax: everybody pays the same fraction of income
HORIZONTAL EQUITY:
idea that taxpayers w/ similar abilities to pay taxes should pay the same amts.Marriage Tax: couple pays as single taxpayer
The FAIR TAX:
PROS:
CONS:
CONS:
R INTEREST RATE(R) = N INTEREST RATE (I) – INFLATION RATE
If expected inflation ≠ actual Inflation, what happens?
Tax on Interest
After-tax Nominal Interest Rate:
After-tax Real Interest Rate:
After-tax Real Interest Rate:
The Inflation Tax
null
THE LAFFER CURVE: TAX REVENUE & TAX RATE
null
Lump sum tax
same amt for every person regardless of earnings or any actions that the person might take.
do not influence a person's decision on how much to work
do not influence a person's decision on how much to work
About this deck
By: Jonathan Roberts
Textbook: Macroeconomics with MyEconLab XL Access Kit (3rd Edition)
Created: 2010-10-26
Size: 30 flashcards
Views: 110
Textbook:
Macroeconomics with MyEconLab XL Access Kit (3rd Edition)Created: 2010-10-26
Size: 30 flashcards
Views: 110
About StudyBlue
STUDYBLUE makes things that make you better at school.
Things like online flashcards with photos and audio.
Things like personalized quizzes and friendly reminders about when (and what) to study next.
Think of it as a digital backpack™: access to all of your study materials online and on your phone.
STUDYBLUE exists to make studying efficient and effective for every student, for free. Join us.
“I have used this website for three exams, and I see a huge difference in my test results.”
Naj
Naj