Chapter 9
What is income that is not spent on consumption goods?
Savings
A fund where professionals hand pick your stocks, often times charging higher fees.
What is an unemployed worker?
Adults who do not have a job, but who are looking for work.
GDP deflator
A significant, widespread decline in real income and
employment.
Who is the Suppliers and Demanders of Loanable funds?
Suppliers= Savers
Demanders= Borrowers
120 experts flip a coin for 4 years, How many will guess correctly on every single coinflip by the end of the 4 years?
7-8 people
what is the unemployment rate?
The percentage of the labor force without a job.
What is real price?
Price adjusted for inflation.
What does an Aggregated Demand Curve do?
Shows all the combinations of inflation and real growth for
a given rate of nominal spending growth.
If there is a shortage of loanable funds, the interest rate will do what?
Increase
What is the efficient Markets hypothesis?
Stock prices already reflect all publicly available
information.
What is the formula to find unemployment rate?
Unemployed/unemployed+employed or (Unemployed/Labor Force) X 100
what do each variable stand for in MV=PYr
M= Money supply
V= Velocity
P=Price level(inflation)
Yr= Real GDP
How do you calculate spending growth from an Aggregate Demand Curve?
Inflation+ Real GDP growth rate= Spending Growth
What do financial Intermediaries do?
reduce the costs of moving savings from savers to borrowers and mobilize savings toward productive uses. These are middlemen!
What does diversification do for your stock portfolio?
It lowers risk.
What are the three situations that are considered shortcomings of the unemployment rate?
Discouraged Workers
Partial Employment
Underemployment
What is the difference between MV=PYr and M+V=P+Yr?
M+V=P+Yr is used for finding growth
What is the relationship betwen Long Run Aggregated supply (LRAS) and inflation?
There is no correlation between LRAS and inflation.
Why is a stock not considered an investment?
A brand new stock is considered an investment, however, a standard stock is not considered an investment due to the fact that it is not a new investment.
What is the rule of 70?
You must put the percent of return that you will recieve and put it under 70 to find out how many yeras it will take for your investment to double.
What are the three Sources of Unemployment?
Frictional (Search) Unemployment
Structural (Institutional) Unemployment
Fictional (Incentive) Unemployment
What is shoe-leather cost and Menu Cost?
shoe-leather cost is the effort to spend money more frequently in an environment of inflation
Menu Cost is restaurants have to continuously print
new menus as a result of high prices
What does a Postive real shock do?
Drives the inflation rate down and the growth rate up.