Econ 2030 Exam 2 Stern - Assignment Essays

question

Inflation rate

answer

the percentage increase in the price level from one year to the next and shows the change in the cost of living

question

1. GDP deflator
2. CPI (Customer Price Index)
3. PPI (Producer Price Index)

answer

the 3 aggregate price levels used to calculate inflation rate

question

CPI

answer

an average of the goods and services purchased by a typical urban family of four.

question

1. Substitution
2. Increase in quality
3. New product
4. Outlet

answer

4 biases that make the CPI overstate

question

Substitution bias

answer

as some goods get more expensive, consumers substitute them with cheaper goods

question

Increase in quality bias

answer

some increases in prices reflect an increase in quality of goods and are not just pure inflation

question

New product bias

answer

some new goods (especially electronics) get considerably cheaper immediately after they're introduced to customers

question

Outlet bias

answer

internet shopping becomes increasingly popular

question

Nominal interest rate

answer

the interest rates that banks charge; the stated interest rate on a loan

question

Real interest rate

answer

nominal interest rate - inflation rate

question

Long-run economic growth

answer

an upward trend of real GDP over time

question

Potential GDP

answer

sometimes, economic growth is called...

question

Labor productivity

answer

the quantity of goods and services that can be produced by one worker, or by one hour of work

question

1. the quantity of capital per hour worked
2. the level of technology

answer

2 key factors that determine labor productivity

question

Capital

answer

the manufactured goods that are used to produce other goods and services

question

Investment

answer

acquisition of capital by firms

question

Technological change

answer

an increase in the quantity of outputs firms can produce using a given quantity of inputs

question

Financial system

answer

the system of financial markets and financial intermediaries through which firms acquire funds from households to make investments

question

Financial markets

answer

markets where financial securities, such as bonds, are bought and sold

question

Financial intermediaries

answer

firms, such as banks, mutual funds, pension funds, and insurance companies that borrow funds from savers and lend them to borrowers

question

Total saving

answer

total investment should equal...

question

Market for loanable funds

answer

the interaction of borrowers and lenders that determines the market interest rates and the quantity of loanable funds exchanged

question

1. Households (private saving)
2. Government (public saving)

answer

2 main sources of supply of loanable funds

question

1. Households (private loans)
2. Government (issues government bonds)
3. Corporations (issue bonds and stocks)

answer

3 main sources of demand for loanable funds

question

Industrial revolution

answer

the mechanical power in the production of goods

question

1. Labor
2. Capital
3. Technology

answer

3 inputs to model aggregate output

question

1. the usual physical capital
2. human capital

answer

2 forms of capital

question

Global Convergence

answer

the theory that poor countries should grow faster than rich countries

question

1. Lack of economic freedom and private property rights
2. Political instability
3. Low rates of savings and investments
4. Poor public education and health

answer

Why isn't the whole world rich?

question

Aggregate Expenditure Model

answer

a macroeconomic model that focuses on the relationship between total spending and real GDP, assuming that the price level is constant

question

1. Consumption
2. Gov. purchases
3. Planned investments
4. Net exports

answer

4 components of aggregate expenditure

question

Macroeconomic equilibrium

answer

occurs where total spending equals total production

question

Consumption

answer

the biggest component of aggregate expenditure

question

current disposable income
household wealth
expected future income
price level
real interest rate

answer

5 factors of consumption

question

current disposable income

answer

the most important determinant of consumption

question

Marginal propensity to save (mps)

answer

measure a change in saving as a result of a $1 change in income

1 of 36

question

Inflation rate

answer

the percentage increase in the price level from one year to the next and shows the change in the cost of living

question

1. GDP deflator
2. CPI (Customer Price Index)
3. PPI (Producer Price Index)

answer

the 3 aggregate price levels used to calculate inflation rate

question

CPI

answer

an average of the goods and services purchased by a typical urban family of four.

question

1. Substitution
2. Increase in quality
3. New product
4. Outlet

answer

4 biases that make the CPI overstate

question

Substitution bias

answer

as some goods get more expensive, consumers substitute them with cheaper goods

question

Increase in quality bias

answer

some increases in prices reflect an increase in quality of goods and are not just pure inflation

question

New product bias

answer

some new goods (especially electronics) get considerably cheaper immediately after they're introduced to customers

question

Outlet bias

answer

internet shopping becomes increasingly popular

question

Nominal interest rate

answer

the interest rates that banks charge; the stated interest rate on a loan

question

Real interest rate

answer

nominal interest rate - inflation rate

question

Long-run economic growth

answer

an upward trend of real GDP over time

question

Potential GDP

answer

sometimes, economic growth is called...

question

Labor productivity

answer

the quantity of goods and services that can be produced by one worker, or by one hour of work

question

1. the quantity of capital per hour worked
2. the level of technology

answer

2 key factors that determine labor productivity

question

Capital

answer

the manufactured goods that are used to produce other goods and services

question

Investment

answer

acquisition of capital by firms

question

Technological change

answer

an increase in the quantity of outputs firms can produce using a given quantity of inputs

question

Financial system

answer

the system of financial markets and financial intermediaries through which firms acquire funds from households to make investments

question

Financial markets

answer

markets where financial securities, such as bonds, are bought and sold

question

Financial intermediaries

answer

firms, such as banks, mutual funds, pension funds, and insurance companies that borrow funds from savers and lend them to borrowers

question

Total saving

answer

total investment should equal...

question

Market for loanable funds

answer

the interaction of borrowers and lenders that determines the market interest rates and the quantity of loanable funds exchanged

question

1. Households (private saving)
2. Government (public saving)

answer

2 main sources of supply of loanable funds

question

1. Households (private loans)
2. Government (issues government bonds)
3. Corporations (issue bonds and stocks)

answer

3 main sources of demand for loanable funds

question

Industrial revolution

answer

the mechanical power in the production of goods

question

1. Labor
2. Capital
3. Technology

answer

3 inputs to model aggregate output

question

1. the usual physical capital
2. human capital

answer

2 forms of capital

question

Global Convergence

answer

the theory that poor countries should grow faster than rich countries

question

1. Lack of economic freedom and private property rights
2. Political instability
3. Low rates of savings and investments
4. Poor public education and health

answer

Why isn't the whole world rich?

question

Aggregate Expenditure Model

answer

a macroeconomic model that focuses on the relationship between total spending and real GDP, assuming that the price level is constant

question

1. Consumption
2. Gov. purchases
3. Planned investments
4. Net exports

answer

4 components of aggregate expenditure

question

Macroeconomic equilibrium

answer

occurs where total spending equals total production

question

Consumption

answer

the biggest component of aggregate expenditure

question

current disposable income
household wealth
expected future income
price level
real interest rate

answer

5 factors of consumption

question

current disposable income

answer

the most important determinant of consumption

question

Marginal propensity to save (mps)

answer

measure a change in saving as a result of a $1 change in income

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