question
What is a barter
answer
Cash-less system in which everything is traded in negotiations
question
What is money
answer
Something that is accepted as a medium in economic exchange (something that holds economic value)
question
Functions of money
answer
medium of exchange, store of value, unit of account
question
What are the six characteristics of a good currency
answer
durability, portability, divisibility, uniformity, limited supply, and acceptability
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Commodity money
answer
its value comes from the the material in which it was money (ex: gold and silver)
question
Representative money
answer
government produced money (dollar bills) backed by commodity money (gold and silver)
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Fiat money
answer
obtains value from government (peoples trust in its value makes it valuable)
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M1
answer
Money that can be spent very easily such as cash, checks, and debit cards
question
M2
answer
everything that is included in M1 but now index saving deposits, deposits under $100,000 and retail mutual funds
question
What is the Fractional Reserve System and the RRR
answer
Makes banks hold onto a certain percentage of deposits in case people want to withdraw money.
question
Required rate of return
answer
minimum return that an investor is expecting to receive from their investment
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What is a loan for the purpose of buying real estate called
answer
mortgage
question
What does the Federal Reserve do?
answer
Monitors the financial system, its risks and its action abroad in order to create and healthy economy
Lender of last resort- who you turn to when you urgently need funds
Watch banks-
Lender of last resort- who you turn to when you urgently need funds
Watch banks-
question
What is the FDIC
answer
The Federal Deposit Insurance Corporation- backs up banks (like insure for banks) The limit is $250,000 (the max a bank usually has in cash)
question
What is the gold standard
answer
When's country's currency or paper money is linked to gold. The US is no longer on the gold standard and instead on the fiat standard
question
Stagflation
answer
a period of slow economic growth and high unemployment (stagnation) while prices rise (inflation)
question
Deflation
answer
When consumer prices decrease over time and the purchasing power increases
question
What does the Consumer Price Index (CPI) do
answer
measures the overall change in consumer prices based on a representative basket of goods and services over time
question
What is the producer price index (PPI)
answer
a measure of the change in prices that domestic producers receive for their goods and services
question
What is a fiscal year?
answer
is a one-year period that companies and governments use for financial reporting and budgeting. A fiscal year is most commonly used for accounting purposes to prepare financial statements. Although a fiscal year can start on Jan. 1 and end on Dec.
question
What is a trade deficit?
answer
the amount by which the cost of a country's imports exceeds the value of its exports
question
What is capital deepening?
answer
refers to an increase in the quantity of capital available to each worker.
question
What are the 4 theories of inflation
answer
increase in the money supply
worker shortages and rising wages
supply chain disruption
fossil fuel policies
worker shortages and rising wages
supply chain disruption
fossil fuel policies
question
What is a trade war?
answer
A situation in which countries try to damage each other's trade, typically by imposition of tariff and quota restrictions.
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What is a trade barrier?
answer
Anything that slows down or prevents one country from exchanging goods with another
question
What is the European Union (EU)
answer
an association of European nations formed in 1993 for the purpose of achieving political and economic integration. Incorporating the European Community
question
What is NAFTA?
answer
The North American Free Trade Agreement (NAFTA) is a treaty entered into by the United States, Canada, and Mexico; it went into effect on January 1, 1994.
question
What is Okun's Law?
answer
Relation between growth in real GDP and decline in unemployment rate. Generally a 1% increase in real GDP growth above trend (3%) lowers unemployment by ½%
question
What is a LDC?
answer
low-income countries that face significant structural challenges to sustainable development
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Why are the leading indicators important?
answer
predictive variable that anticipates (or "leads") turning points in the business cycle by around 7 months
question
What is the business cycle?
answer
expansion, peak, contraction, trough
question
How does a strong or weak dollar impact trade?
answer
When the dollar is weak, we export more, import less
When the dollar is strong, we import more, export less
When the dollar is strong, we import more, export less
question
seasonal unemployment
answer
unemployment that occurs as a result of harvest schedules or vacations, or when industries slow or shut down for a season
question
frictional unemployment
answer
unemployment that occurs when people take time to find a job
question
structural unemployment
answer
unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one
question
cyclical unemployment
answer
unemployment that rises during economic downturns and falls when the economy improves
question
Define absolute advantage
answer
the ability to produce a good using fewer inputs than another producer
question
Define comparative advantage
answer
the ability to produce a good at a lower opportunity cost than another producer
question
What is deflation
answer
reduction of the general level of prices in an economy.
question
How do you keep the business cycle going?
answer
Business investment, interest rates and credit, consumer expectations, external shocks
question
What is economic growth?
answer
the ability of the economy to increase the production of goods and services
question
What group after the American Revolution supported a Federal Bank? Who was against one?
answer
Federalist against the Anti-Feds- Federalist wanted a strong central bank while Anti-Feds did not
question
Banking Act of 1933 (Glass-Steagall Act)
answer
It separated commercial banking from investment banking (made it so the bank couldnt get too big and fail and lose people money= more stable)
question
What act created the Federal Reserve?
answer
Federal Reserve Act of 1913
question
How many Federal Reserve Banks are there?
answer
12 banks
question
What was the Feds first great challenge?
answer
Great Depression
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