Long run growth
Savings and Investment
fiscal policy
C+I
Monetary Policy
100
This term refers to the time it takes for an economy to double GDP.
What is Rule of 70
100
When taxes > Government spending
What is a Budget surplus
100
Name the three lags in fiscal policy.
recognition lag, administrative lag, operational lag.
100
1/MPS
What is the multiplier?
100
money supply/ monetary base
What is the money multiplier?
200
These are the sources of production growth?
What is Physical capital, Human capital, and Technology.
200
This is what happens to the equilibrium interest rate when there is an increase in the supply of loanable funds.
What is a decrease in the interest rate.
200
What is the difference between mandatory and discretionary spending?
Mandatory spending is set on how much you spend on each portion of mandatory spending. Discretionary spending must be approved by congress every year. So this spending can change year to year.
200
What is the consumption function?
a+MPC*Yd
200
Reserve requirement, discount rate, open market operations.
What are the ways the fed controls the money supply.
300
A change ____ and ____ shift the productivity function, while a change in ____ moves along the curve.
What is Human capital and technology, physical capital
300
Describe the crowding out effect.
When government's run a deficit, they increase demand for loanable funds, which increases the interest rate, which lowers investment spending.
300
This is the type of fiscal policy that tries to close an inflationary gap.
What is contractionary fiscal policy
300
How does an expected change in future income affect the consumption function?
If people expect more income in the future then the consumption function would shift up because they'll be more inclined to spend money now knowing they will have more income in the future.
300
Fed Funds Rate = 2.07 +1.28 * inflation rate - 1.95*unemployment rate
What is the Taylor Rule.
400
What is the role of government in promoting economic growth? (6 things, name 3 of them)
What is subsidies to infrastructure, subsidies to education, subsidies to R&D, financial system, property rights, political stability.
400
If the nominal interest rate is 7%, the inflation rate is 2%, what is the real interest rate?
real interest = nom. interest - inflation. real interest = 7- 2 = 5%.
400
What are the pros and cons of Gov. Spending compared to taxes and transfers?
Gov. spending takes longer to implement, but has a very high MPC.
400
What factors affect planned investment spending?
Interest rate, productive capacity and expected future real GDP.
400
What is the long run effect of increasing the money supply on an economy?
What is inflation.
500
Give an example of a proximate cause of economic growth and an example of a fundamental cause.
Proximate causes- savings and investment, education, r&d, natural resources(though not important anymore) Fundamental- geography, culture, institutions, colonization.
500
What happens to the interest rate when the government runs a deficit?
The interest rate increases because a deficit increases demand for loanable funds.
500
What happens to the aggregate price level during expansionary fiscal policy?
the price level would increase.
500
What does it mean when AEPlan > Real GDP?
Unplanned would be negative, which means firms ran out of inventory, so they would produce more bringing them back to equilibrium.
500
if the Fed conducts an open market sale, the the money supply will _____ and then the aggregate demand will ____.
decrease, decrease.
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