Fiscal Policy
This is the tool the government uses that includes taxation and government spending to correct economic issues.
What is fiscal policy?
3 Types of expansionary monetary policy.
What are lower interest rates, lower R.R., increase money supply?
The result of lowering interest rates by the FED
What is increase in AD?
The maximum change in the money supply given new deposits of $10 million and a reserve ratio of 10%.
What is $100 million?
A combination of rising inflation and falling RGDP
What is stagflation?
These policies will be used to resolve a recessionary gap.
What is expansionary (lower taxes or increase gov't spending)?
This is the formula for the banking money multiplier
What is 1/reserve requirement?
The result of a massive increase in the world price of oil.
What is a decrease in AS or stagflation?
Labor force divided by population.
What is the labor force participation rate?
The combination of checkable deposits, currency in circulation, and traveler's checks.
What is M1?
unemployment compensation payment to unemployed workers and progressive taxes are both examples of this.
What is automatic stabilizer?
The favorite method to shrink the money supply by the Fed. in a limited reserve environment
What is selling bonds through OMOs?
The reason why we have a distinction between short run and long run aggregate supply and why Keynes feels that classical theory is inaccurate.
What is sticky wages/prices?
The new CPI, following the base year, when inflation is 5%.
What is 105?
The formula that explains why an increase in the money supply causes inflation
What is the quantity theory of money: VxM = PxQ?
These Policies would be used to close an inflationary gap.
What is contractionary (raise taxes/lower gov't spending)?
This is the hoped for result of lowering interest rates by the Fed.
What is increase AD?
How the graph is affected by increases in interest rates.
What is a decrease in AD?
what is determined when we calculate current year quantities and base year prices.
What is RGDP?
why consistent budget deficits contribute to inflation.
What is the need of a government to print money to pay debts which increases the money supply.
Discretionary fiscal policy may fail to effectively stabilize the economy due to this.
What are lags in policy?
This is how the FED changed their approach to monetary policy after the 2008 banking crisis.
They started paying interest on the ample reserves banks held.
The level of RGDP that the economy would produce if all prices, including wages, were fully flexible.
What is LRAS (potential output) Yf?
Stocks, imports of foreign made goods, intermediate goods, American products manufactured outside the U.S, all have what in common in macroeconomics?
What is spending not included in GDP?
The phase of the business cycle that follows a trough and what happens during that phase.
What is a recovery (expansion) and cyclical unemployment declines while RGDP increases.