econ extra must know - Assignment Essays

question

keynesian cross

answer

graph that has a 45 degree line that shows the relationship between the real aggregate expenditure and real GDP

question

real AE and real GDP

answer

the Keynesian Cross is a graph with a 45 degree line displaying the equilibrium point possibilities between _____ and ______

question

increases

answer

whenever planned AE is less than real GDP, some firms will experience unplanned ______ in inventories.

question

inventories

answer

If firms do not cut back their production promptly when spending declines, they will accumulate _______

question

produce at normal levels

answer

If firms accumulate excess inventories, then even if spending quickly returns to its normal levels, firms will have to sell their excess inventories BEFORE they can ________

question

cpi (consumer price index)

answer

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

question

education, medical care, apparel, housing, food

answer

What are some examples of things a family of four would care about purchasing in reference to the CPI?

question

increasing, prices

answer

When demand for a product increases, firms usually respond by ______ production, but they are also likely to increase ______

question

production and prices

answer

According to AD, when demand falls, ___ and ____ fall, too

question

fall

answer

increases in the price level will cause aggregate expenditure to _____

question

consumption

answer

a rising price level decreases ______ by decreasing the real value of household wealth; a falling price has the reverse effect

question

more, less

answer

If the price level in the US rises relative to the price levels in other countries, US exports will become relatively _____ expensive, and foreign imports become relatively _____ expensive causing NET EXPORTS TO FALL (imports > exports)

question

consumption, planned investment and net exports

answer

If price levels rise, what 3 things will fall causing the AE line to shift downward?

question

AD curve

answer

The relationship between the price level and the level of planned AE

question

SRAS curve

answer

a curve that shows the relationship in the short run between the price level and quantity of real gdp supplied by firms

question

because fall in price level increases quantity of real GDP

answer

Why is the AD curve downward sloping?

question

decreases, consumption

answer

according to the wealth effect, when the price level rises, the real value of household wealth _____ and so does ______

question

increases, decreases

answer

According to the interest rate effect, if you have a higher price level, interest rate _____ and investment spending _____

question

price level

answer

If anything other than the _____ changes, then AD will shift

question

left (higher interest rates raise the cost to firms and households of borrowing)

answer

An increase in interest rates will cause AD to shift _____

question

right

answer

An increase in government purchases will cause AD to shift _____

question

left (consumption spending falls when personal taxes rise)

answer

An increase in personal income tax or business tax will cause AD to shift _____

question

left (consumption spending increases)

answer

An increase in household's expectations of their future incomes will cause AD to shift _____

question

answer

Shows how a change in the price level will affect the quantity of goods and services

question

LRAS

answer

shows the relationship in the long run between the price level and the quantity of real GDP supplied

question

price level

answer

In the long run, changes in the _____ do not affect AS

question

increase

answer

The SRAS curve is upward sloping because, over the short run, as the price level increases, the quantity of goods and services firms are willing to supply will ______

question

menu costs

answer

the costs to firms of changing prices

question

increase

answer

According to menu costs, if price level rises, then quantity of goods and services provided will ______

question

sticky

answer

menu costs make some prices _____

question

right

answer

An increase in the labor force will cause SRAS to shift _____

question

right

answer

An increase in productivity will cause SRAS to shift _____

question

left (workers and firms increase wages and prices, so must decrease production)

answer

An increase in the expected future price level will cause SRAS to shift_____

question

left (workers and firms increase wages and prices)

answer

An increase in workers and firms adjusting to having previously underestimated the price level will cause the SRAS curve to shift _____

question

left (costs of producing output rises)

answer

An increase in the expected price of an important natural resource will cause SRAS to shift ____

question

half base times height

answer

How do you calculate DWL?

question

substitution effect

answer

the change in the quantity demanded of a good that results from a change in price, making the good more or less expensive relative to other goods that are substitutes

question

income effect

answer

The change in the quantity demanded of a good that results from the effect of a change in the good's price on consumers' purchasing power

question

larger

answer

when the price of a good falls, the increased purchasing power of consumers' incomes will usually lead them to purchase a _____ quantity of the good

question

marginal propensity to consume

answer

the amount by which consumption spending changed when disposable income changes

question

change in consumption over change in disposable income

answer

How do you calculate MPC?

question

taxes

answer

Firms focus on the profits that remain after they have paid _____

question

y plus tr minus c minus t

answer

What is the formula for private saving?

question

t minus g minus tr

answer

What is the formula for public saving?

question

y minus c minus g

answer

What is the formula for total savings?

question

negative

answer

Right now, are public savings positive or negative?

question

budget surplus

answer

when earnings are higher than expenditures

question

budget deficit

answer

when earnings are less than expenditures

question

answer

A recession must be ___ consecutive quarters with a decline in GDP

question

NBER (national bureau of economic research)

answer

Who decides if we are in a recession?

question

production, spending

answer

The Aggregate Expenditure model shows the relationship between ______ & _______

question

production, expenditures

answer

Business cycles are concerned with _____ VS ______

question

planned investment plus unplanned changes

answer

what is the formula for actual investment?

question

planned product line plus planned build up of inventory

answer

What is the formula for planned investment?

question

increase, decrease

answer

If production > expenditure, there will be a ______ in inventory and a ______ in employment

question

decrease, increase

answer

If production < expenditure, there will be a ______ in inventory and a ______ in employment

question

consumption plus planned investment plus net exports plus government expenditures

answer

What is the formula for aggregate expenditure?

question

MPC (marginal propensity to consume)

answer

This is the concept of for every dollar you earn, how much are you spending on consumption

question

production

answer

In macro-equilibrium, AE will equal __________

question

economy, government

answer

national income is all of the income in the ______, NOT the income of the ____

question

spend

answer

For every amount of more income we receive, we will _____ more

question

price level

answer

A movement along the AD curve would be indicated by a change in __________

question

contracts and menu costs

answer

Give 2 reasons why prices are "sticky"

question

SRAS (BUT THE OPPOSITE ISNT ALWAYS TRUE!)

answer

Everything that change LRAS will change _____

question

automatic stabilizers

answer

government spending and taxes that automatically increase or decrease along with the business cycle

question

fiscal policy

answer

changes in federal taxes and purchases that are intended to achieve macroeconomic policy objectives

question

WWII

answer

since the end of ____, the federal government has been committed under the Employment Act of 1946 to intervening in the economy

question

answer

Do state and local governments changing their taxing and spending policies to aid their economies count as fiscal policy?

question

no (it is an environmental policy action)

answer

Is cutting taxes of people who buy hybrid cars a fiscal policy action?

question

taking action, not

answer

The main difference between fiscal policy and automatic stabilizers is ____________ VS ______

question

increasing, decreasing

answer

expansionary fiscal policy involves ______ government purchases, or ______ taxes

question

money supply or interest rate

answer

The Fed can either use ______ or ______ as its monetary policy target

question

interest rate, money supply

answer

The Fed generally focuses more on _______ than _______ as its monetary policy target

question

federal funds rate

answer

For purposes of monetary policy, the Fed has targeted the interest rate known as the ___________

question

short term, long term

answer

Because the federal funds rate is a _______ nominal interest rate, the Fed sometimes has difficulty affecting _______ real interest rates

question

expansionary monetary

answer

The Fed will use ________ _______ policy when AD is below macroeconomic equilibrium

question

contractionary monetary

answer

The Fed will use ________ _______ policy when AD is above macroeconomic equilibrium

question

shift right

answer

If the Fed is using expansionary monetary policy, the AD curve will ___________ and vice versa with contractionary policy

question

Bernanke

answer

Who is the Chairman of the Federal Reserve?

question

fiat

answer

money such as paper currency, that is authorized by a central bank or governmental body and that does not have to be exchanged by the central bank for gold or some other commodity money

question

commodity

answer

a good used as money that also has value independent of its use as money (deerskin)

1 of 81

question

keynesian cross

answer

graph that has a 45 degree line that shows the relationship between the real aggregate expenditure and real GDP

question

real AE and real GDP

answer

the Keynesian Cross is a graph with a 45 degree line displaying the equilibrium point possibilities between _____ and ______

question

increases

answer

whenever planned AE is less than real GDP, some firms will experience unplanned ______ in inventories.

question

inventories

answer

If firms do not cut back their production promptly when spending declines, they will accumulate _______

question

produce at normal levels

answer

If firms accumulate excess inventories, then even if spending quickly returns to its normal levels, firms will have to sell their excess inventories BEFORE they can ________

question

cpi (consumer price index)

answer

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

question

education, medical care, apparel, housing, food

answer

What are some examples of things a family of four would care about purchasing in reference to the CPI?

question

increasing, prices

answer

When demand for a product increases, firms usually respond by ______ production, but they are also likely to increase ______

question

production and prices

answer

According to AD, when demand falls, ___ and ____ fall, too

question

fall

answer

increases in the price level will cause aggregate expenditure to _____

question

consumption

answer

a rising price level decreases ______ by decreasing the real value of household wealth; a falling price has the reverse effect

question

more, less

answer

question

consumption, planned investment and net exports

answer

If price levels rise, what 3 things will fall causing the AE line to shift downward?

question

AD curve

answer

The relationship between the price level and the level of planned AE

question

SRAS curve

answer

a curve that shows the relationship in the short run between the price level and quantity of real gdp supplied by firms

question

because fall in price level increases quantity of real GDP

answer

Why is the AD curve downward sloping?

question

decreases, consumption

answer

according to the wealth effect, when the price level rises, the real value of household wealth _____ and so does ______

question

increases, decreases

answer

According to the interest rate effect, if you have a higher price level, interest rate _____ and investment spending _____

question

price level

answer

If anything other than the _____ changes, then AD will shift

question

left (higher interest rates raise the cost to firms and households of borrowing)

answer

An increase in interest rates will cause AD to shift _____

question

right

answer

An increase in government purchases will cause AD to shift _____

question

left (consumption spending falls when personal taxes rise)

answer

An increase in personal income tax or business tax will cause AD to shift _____

question

left (consumption spending increases)

answer

An increase in household's expectations of their future incomes will cause AD to shift _____

question

answer

Shows how a change in the price level will affect the quantity of goods and services

question

LRAS

answer

shows the relationship in the long run between the price level and the quantity of real GDP supplied

question

price level

answer

In the long run, changes in the _____ do not affect AS

question

increase

answer

The SRAS curve is upward sloping because, over the short run, as the price level increases, the quantity of goods and services firms are willing to supply will ______

question

menu costs

answer

the costs to firms of changing prices

question

increase

answer

According to menu costs, if price level rises, then quantity of goods and services provided will ______

question

sticky

answer

menu costs make some prices _____

question

right

answer

An increase in the labor force will cause SRAS to shift _____

question

right

answer

An increase in productivity will cause SRAS to shift _____

question

left (workers and firms increase wages and prices, so must decrease production)

answer

An increase in the expected future price level will cause SRAS to shift_____

question

left (workers and firms increase wages and prices)

answer

An increase in workers and firms adjusting to having previously underestimated the price level will cause the SRAS curve to shift _____

question

left (costs of producing output rises)

answer

An increase in the expected price of an important natural resource will cause SRAS to shift ____

question

half base times height

answer

How do you calculate DWL?

question

substitution effect

answer

the change in the quantity demanded of a good that results from a change in price, making the good more or less expensive relative to other goods that are substitutes

question

income effect

answer

The change in the quantity demanded of a good that results from the effect of a change in the good's price on consumers' purchasing power

question

larger

answer

when the price of a good falls, the increased purchasing power of consumers' incomes will usually lead them to purchase a _____ quantity of the good

question

marginal propensity to consume

answer

the amount by which consumption spending changed when disposable income changes

question

change in consumption over change in disposable income

answer

How do you calculate MPC?

question

taxes

answer

Firms focus on the profits that remain after they have paid _____

question

y plus tr minus c minus t

answer

What is the formula for private saving?

question

t minus g minus tr

answer

What is the formula for public saving?

question

y minus c minus g

answer

What is the formula for total savings?

question

negative

answer

Right now, are public savings positive or negative?

question

budget surplus

answer

when earnings are higher than expenditures

question

budget deficit

answer

when earnings are less than expenditures

question

answer

A recession must be ___ consecutive quarters with a decline in GDP

question

NBER (national bureau of economic research)

answer

Who decides if we are in a recession?

question

production, spending

answer

The Aggregate Expenditure model shows the relationship between ______ & _______

question

production, expenditures

answer

Business cycles are concerned with _____ VS ______

question

planned investment plus unplanned changes

answer

what is the formula for actual investment?

question

planned product line plus planned build up of inventory

answer

What is the formula for planned investment?

question

increase, decrease

answer

If production > expenditure, there will be a ______ in inventory and a ______ in employment

question

decrease, increase

answer

If production < expenditure, there will be a ______ in inventory and a ______ in employment

question

consumption plus planned investment plus net exports plus government expenditures

answer

What is the formula for aggregate expenditure?

question

MPC (marginal propensity to consume)

answer

This is the concept of for every dollar you earn, how much are you spending on consumption

question

production

answer

In macro-equilibrium, AE will equal __________

question

economy, government

answer

national income is all of the income in the ______, NOT the income of the ____

question

spend

answer

For every amount of more income we receive, we will _____ more

question

price level

answer

A movement along the AD curve would be indicated by a change in __________

question

contracts and menu costs

answer

Give 2 reasons why prices are "sticky"

question

SRAS (BUT THE OPPOSITE ISNT ALWAYS TRUE!)

answer

Everything that change LRAS will change _____

question

automatic stabilizers

answer

government spending and taxes that automatically increase or decrease along with the business cycle

question

fiscal policy

answer

changes in federal taxes and purchases that are intended to achieve macroeconomic policy objectives

question

WWII

answer

since the end of ____, the federal government has been committed under the Employment Act of 1946 to intervening in the economy

question

answer

Do state and local governments changing their taxing and spending policies to aid their economies count as fiscal policy?

question

no (it is an environmental policy action)

answer

Is cutting taxes of people who buy hybrid cars a fiscal policy action?

question

taking action, not

answer

The main difference between fiscal policy and automatic stabilizers is ____________ VS ______

question

increasing, decreasing

answer

expansionary fiscal policy involves ______ government purchases, or ______ taxes

question

money supply or interest rate

answer

The Fed can either use ______ or ______ as its monetary policy target

question

interest rate, money supply

answer

The Fed generally focuses more on _______ than _______ as its monetary policy target

question

federal funds rate

answer

For purposes of monetary policy, the Fed has targeted the interest rate known as the ___________

question

short term, long term

answer

Because the federal funds rate is a _______ nominal interest rate, the Fed sometimes has difficulty affecting _______ real interest rates

question

expansionary monetary

answer

The Fed will use ________ _______ policy when AD is below macroeconomic equilibrium

question

contractionary monetary

answer

The Fed will use ________ _______ policy when AD is above macroeconomic equilibrium

question

shift right

answer

If the Fed is using expansionary monetary policy, the AD curve will ___________ and vice versa with contractionary policy

question

Bernanke

answer

Who is the Chairman of the Federal Reserve?

question

fiat

answer

money such as paper currency, that is authorized by a central bank or governmental body and that does not have to be exchanged by the central bank for gold or some other commodity money

question

commodity

answer

a good used as money that also has value independent of its use as money (deerskin)

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