question
Components of GDP
answer
Y = C + I + G + (X - M)
Y = GDP
C = Consumption
I = Investment
G = Government Spending
X - M = Net Exports (where X=Exports and M=Imports)
Y = GDP
C = Consumption
I = Investment
G = Government Spending
X - M = Net Exports (where X=Exports and M=Imports)
question
Macroeconomics
answer
Studies the level of overall activity in an economy (NOT individual firms & markets)
question
Gross Domestic Product (GDP)
answer
The market value of all final goods and services produced within a country in a given period of time
question
Aggregate Income = Aggregate Expenditure on Output Produced
answer
...
question
For the purpose of calculating GDP, investment is spending on what?
answer
Capital equipment, inventories, and structures, including household purchases of new housing
question
Is unemployment compensation part of GDP?
answer
No, because it is a transfer payment, not a payment made for a currently produced good or service.
question
Real GDP
answer
Uses constant prices to calculate Real GDP
question
Nominal GDP
answer
Quantities valued at current market prices
question
GDP deflater
answer
GDP Deflater = (Nominal GDP/Real GDP) x 100
question
Inflation
answer
The year-to-year percentage change in the price level
question
Growth rate
answer
...
question
How is consumer price index calculated?
answer
...
question
How is the consumer price index different from the GDP deflater?
answer
- CPI is based on selected consumption goods, while GDP deflater based on all goods in GDP
- CPI is fixed over time, while GDP bundle changes as the consumption of GDP changes
- Inflation measured by the GDP deflater is often a little lower than inflation measured by the CPI
- CPI is fixed over time, while GDP bundle changes as the consumption of GDP changes
- Inflation measured by the GDP deflater is often a little lower than inflation measured by the CPI
question
Indexation
answer
- the automatic correction by law or contract of a dollar amount for the effects of inflation
- contracts may be "indexed" to specify values in real terms over time (wage contracts, Social Security benefits, Tax bracket thresholds, Alimony)
- contracts may be "indexed" to specify values in real terms over time (wage contracts, Social Security benefits, Tax bracket thresholds, Alimony)
question
Formula for Real Interest Rate?
answer
Real Interest Rate = Nominal rate of interest - Rate of inflation
question
The higher the real rate of interest, the higher is the _________ of consuming today.
answer
opportunity cost
question
Employed
answer
Person has a job or is working in his or her own business (self-employed)
question
Unemployed
answer
Person is not employed but is seeking employment and has undertaken specific actions to find a job in the preceding 4 weeks
question
Not in the labor face
answer
Person is not employed but has NOT taken actions to seek employment recently
ex. retirees or full-time students who are not seeking employment
ex. retirees or full-time students who are not seeking employment
question
Labor Force
answer
- Consists of both the employed & unemployed (those who are working and those who are seeking work)
- Must be 16 and over
- Must be 16 and over
question
Formula for Unemployment Rate?
answer
Unemployment Rate = (Unemployed/Labor Force) x 100%
question
Formula for Labor Force?
answer
Labor Force = Employed + Unemployed
question
Formula for Labor Force Participation Rate?
answer
Labor Force Participation Rate = (Labor Force/Adult Population) x 100%
question
Discouraged workers
answer
Individuals who would like to work but have given up looking for a job
question
Is unemployment ever zero?
answer
No
question
Frictional unemployment
answer
Unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills
question
Even when vacancies and job-seekers are balanced, __________ exists.
answer
Frictional unemployment
question
True or False: Unemployment can remain persistently high.
answer
True
question
Aggregate Production Function in equation form
answer
Y = AF(L, K, H, N)
question
What does everything in the Aggregate Production Function stand for?
answer
Y = AF(L, K, H, N)
L=Labor
K=Capital
H=Human Capital (training & education)
N=Quantity of natural resources (land, minerals)
A=Technology variable (When tech. improves, output tends to be higher)
Y=Output
L=Labor
K=Capital
H=Human Capital (training & education)
N=Quantity of natural resources (land, minerals)
A=Technology variable (When tech. improves, output tends to be higher)
Y=Output
question
Ways that savers can interact with those who wish to invest
answer
- Banks
- Bonds
- Stock shares
- Bonds
- Stock shares
question
Bond
answer
Certificate that promises a future payment to a buyer
question
Formula for Present Value?
answer
Present Value = (Future Amount)/(1+r)^N
N=years in the future
r=current interest rate
N=years in the future
r=current interest rate
question
Future Value
answer
...
question
commodity money
answer
Money that has intrinsic value because it is a commodity (ex. gold)
question
fiat money
answer
Money that has value only because it's widely accepted in completing transactions (ex. paper money)
question
What is considered to be money in the US?
answer
- currency & coin
- total balances in checking accounts at financial institutions
- total balances in checking accounts at financial institutions
question
Is a credit card money?
answer
No
question
What is the Federal Reserve System?
answer
- Serves as a bank for banks
- Makes loans to banks
- Regulates banks
- Controls money supply
- Makes loans to banks
- Regulates banks
- Controls money supply
question
How is the Federal Reserve System organized?
answer
- 7 governors, including a Chairman
- 12 District Reserve banks
- 12 District Reserve banks
question
How does the Fed affect the money supply?
answer
...
question
How does behavior of banks and individuals affect the money supply?
answer
...
question
Federal Open Market Committee (FOMC)
answer
- Makes decisions about monetary policy
- 7 governors, 5 District Bank presidents
- 7 governors, 5 District Bank presidents
question
If banks hold all deposits as reserves, this is called _______.
answer
100-percent-reserve banking
question
In the US today, banks lend a portion of their deposits, and we have ________.
answer
fractional-reserve banking
question
Money Multiplier
answer
Monetary supply = (1/R)
R=reserve ratio
R=reserve ratio
question
When the Fed buys a bond, does the money supply increase or decrease?
answer
increase
question
What is the primary cause of inflation?
answer
Money growth
question
The price level adjusts so the quantity of money demanded equals the ________.
answer
quantity of money supplied
question
classical dichotomy
answer
- the theoretical separation of nominal and real variables
- real variables (like output) and nominal variables (like prices) are determined independently
- real variables (like output) and nominal variables (like prices) are determined independently
question
monetary neutrality
answer
changes in the quantity of money only affect nominal variables
question
In the ____ run, a change in the quantity of money might affect some real variables.
answer
short
question
In the ____ run, the classical dichotomy prevails.
answer
long
question
The Quantity Equation
answer
MV = PY
M=Quantity of money
V=Velocity of money
P=Price level
Y=Real GDP
M=Quantity of money
V=Velocity of money
P=Price level
Y=Real GDP
question
Velocity equation
answer
V = (PY)/(M)
question
velocity of money
answer
The rate at which money changes hands
question
If M exceeds Md, what will individuals do?
answer
Individuals will take actions to lower their money holdings
question
True or False: In the long run, money neutrality prevails.
answer
True
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
