Economy final - Assignment Essays

question

Structural unemployment

answer

Unemployment that occurs because individuals lack skills valued by employers

question

Frictional unemployment

answer

unemployment that occurs as workers move between jobs

question

Cyclical unemployment

answer

unemployment closely tied to the business cycle, like higher unemployment during a recession

question

Velocity

answer

the speed with which money circulates through the economy; calculated as the nominal GDP divided by the money supply

question

Federal funds rate

answer

the interest rate at which one bank lends funds to another bank overnight

question

Expansionary monetary policy

answer

a monetary policy that increases the supply of money and the quantity of loans

question

Contractionary monetary policy

answer

a monetary policy that reduces the supply of money and loans

question

Basic quantity equation of money

answer

money supply x velocity = nominal GDP

question

Central bank

answer

Institution which conducts a nation's monetary policy and regulates its banking system

question

Efficiency wage theory

answer

The theory that the productivity of workers, either individually or as a group, will increase if the employer pays them more.

question

Labor force participation rate

answer

This is the percentage of adults in an economy who are either employed or who are unemployed and looking for a job

question

Natural rate of unemployment

answer

the unemployment rate that would exist in a growing and healthy economy from the combination of economic, social, and political factors that exist at a given time.

question

Underemployed

answer

individuals who are employed in a job that is below their skills

question

Unemployment rate

answer

the percentage of adults who are in the labor force and thus seeking jobs, but who do not have jobs

question

Aggregate demand

answer

the amount of total spending on domestic goods and services in an economy

question

Aggregate demand curve

answer

the total spending on domestic goods and services at each price level

question

aggregate demand/aggregate supply model

answer

a model that shows what determines total supply or total demand for the economy, and how total demand and total supply interact at the macroeconomic level

question

aggregate supply

answer

the total quantity of output firms will produce and sell

question

aggregate supply curve

answer

the total quantity of output that firms will produce and sell at each price level

question

Keynes' law

answer

demand creates its own supply

question

Keynesian zone

answer

portion of the SRAS curve where GDP is far below potential and the SRAS curve is flat

question

Long run aggregate supply curve

answer

vertical line at potential GDP showing no relationship between the price level for output and real GDP in the long run

question

Neoclassical economists

answer

economists who generally emphasize the importance of aggregate supply in determining the size of the macroeconomy over the long run

question

neoclassical zone

answer

portion of the SRAS curve where GDP is at or near potential output where the SRAS curve is steep

question

Potential GDp

answer

the maximum quantity that an economy can produce given full employment of its existing levels of labor, physical capital, technology, and institutions

question

Say's law

answer

supply creates its own demand

question

Short run aggregate supply cuve

answer

positive short run relationship between the price level for output and real GDP, holding the prices of inputs fixed

question

Stagflation

answer

an economy experiences stagnant growth and high inflation at the same time

question

Contractionary fiscal policy

answer

tax increases or cuts in government spending designed to decrease aggregate demand and reduce inflationary pressures

question

Expansionary fiscal policy

answer

tax cuts or increases in government spending designed to stimulate aggregate demand and move the economy out of recession

question

Sticky wages and prices

answer

a situation where wages and prices do not fall in response to a decrease in demand, or do not rise in response to an increase in demand

question

Budget deficit

answer

when the federal government spends more money that it receives in taxes in a given year

question

budget surpluse

answer

when the government receives more money in taxes than it spends in a year

question

Crowding out

answer

federal spending and borrowing causes interest rates to rise and business investment to fall

question

Discretionary fiscal policy

answer

the government passes a new law that explicitly changes overall tax or spending levels with the intent of influencing the level of overall economic activity

question

Implementation lag

answer

the time it takes for the funds relating to fiscal policy to be dispersed to the appropriate agencies to implement the programs

question

Legislative lag

answer

the time it takes to get a fiscal policy bill passed

1 of 37

question

Structural unemployment

answer

Unemployment that occurs because individuals lack skills valued by employers

question

Frictional unemployment

answer

unemployment that occurs as workers move between jobs

question

Cyclical unemployment

answer

unemployment closely tied to the business cycle, like higher unemployment during a recession

question

Velocity

answer

the speed with which money circulates through the economy; calculated as the nominal GDP divided by the money supply

question

Federal funds rate

answer

the interest rate at which one bank lends funds to another bank overnight

question

Expansionary monetary policy

answer

a monetary policy that increases the supply of money and the quantity of loans

question

Contractionary monetary policy

answer

a monetary policy that reduces the supply of money and loans

question

Basic quantity equation of money

answer

money supply x velocity = nominal GDP

question

Central bank

answer

Institution which conducts a nation's monetary policy and regulates its banking system

question

Efficiency wage theory

answer

The theory that the productivity of workers, either individually or as a group, will increase if the employer pays them more.

question

Labor force participation rate

answer

This is the percentage of adults in an economy who are either employed or who are unemployed and looking for a job

question

Natural rate of unemployment

answer

the unemployment rate that would exist in a growing and healthy economy from the combination of economic, social, and political factors that exist at a given time.

question

Underemployed

answer

individuals who are employed in a job that is below their skills

question

Unemployment rate

answer

the percentage of adults who are in the labor force and thus seeking jobs, but who do not have jobs

question

Aggregate demand

answer

the amount of total spending on domestic goods and services in an economy

question

Aggregate demand curve

answer

the total spending on domestic goods and services at each price level

question

aggregate demand/aggregate supply model

answer

a model that shows what determines total supply or total demand for the economy, and how total demand and total supply interact at the macroeconomic level

question

aggregate supply

answer

the total quantity of output firms will produce and sell

question

aggregate supply curve

answer

the total quantity of output that firms will produce and sell at each price level

question

Keynes' law

answer

demand creates its own supply

question

Keynesian zone

answer

portion of the SRAS curve where GDP is far below potential and the SRAS curve is flat

question

Long run aggregate supply curve

answer

vertical line at potential GDP showing no relationship between the price level for output and real GDP in the long run

question

Neoclassical economists

answer

economists who generally emphasize the importance of aggregate supply in determining the size of the macroeconomy over the long run

question

neoclassical zone

answer

portion of the SRAS curve where GDP is at or near potential output where the SRAS curve is steep

question

Potential GDp

answer

the maximum quantity that an economy can produce given full employment of its existing levels of labor, physical capital, technology, and institutions

question

Say's law

answer

supply creates its own demand

question

Short run aggregate supply cuve

answer

positive short run relationship between the price level for output and real GDP, holding the prices of inputs fixed

question

Stagflation

answer

an economy experiences stagnant growth and high inflation at the same time

question

Contractionary fiscal policy

answer

tax increases or cuts in government spending designed to decrease aggregate demand and reduce inflationary pressures

question

Expansionary fiscal policy

answer

tax cuts or increases in government spending designed to stimulate aggregate demand and move the economy out of recession

question

Sticky wages and prices

answer

a situation where wages and prices do not fall in response to a decrease in demand, or do not rise in response to an increase in demand

question

Budget deficit

answer

when the federal government spends more money that it receives in taxes in a given year

question

budget surpluse

answer

when the government receives more money in taxes than it spends in a year

question

Crowding out

answer

federal spending and borrowing causes interest rates to rise and business investment to fall

question

Discretionary fiscal policy

answer

the government passes a new law that explicitly changes overall tax or spending levels with the intent of influencing the level of overall economic activity

question

Implementation lag

answer

the time it takes for the funds relating to fiscal policy to be dispersed to the appropriate agencies to implement the programs

question

Legislative lag

answer

the time it takes to get a fiscal policy bill passed

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