L1
Types of unemployment?
Cyclical, frictional, structural, seasonal.
What is inflation?
Inflation is an increase in the price level
What is the def of GDP
Gross domestic product is a monetary measure of the total market value of all the final goods and services produced and rendered in a specific time period by a country or countries.
Why is real GDP a poor indicator of economic growth?
GDP only counts goods that pass through official, organized markets, so it misses home production and black market activity.
Using a diagram to illustrate an exporting country and an importing country with free trade.
Ask Ms Cong
What are the four important macroeconomic objectives?
economic growth, low and stable inflation, low unemployment, and fair income distribution
Function of WTO
Dispute Settlement
Administering WTO Agreements:The WTO ensures that trade agreements are properly implemented, administered, and monitored by its members.
In macroeconomics, the negative relationship between an economy’s unemployment rate and output (GDP) is referred to as…
Okun’s law
If the Fed changes the amount of money a bank is required to retain rather than lend out, what policy tool is it using?
Changing reserve requirements.
Using a diagram to show the determination of exchange rates in a floating exchange rate system
Ms Cong
What are some costs of high inflation rate
including uncertainty, redistributive effects (borrowers VS lenders; fixed income earners VS flexible income earners), effects on saving, menu costs, shoe leather costs, impact on economic growth etc.
Explain leakages/withdrawals and injections.
leakages/withdrawals (savings, taxes and import expenditure) and injections (investment, government expenditure and export revenue).
How to use the RRR to calculate change in MS?
1/RRR=multiplier, change in MS*Multiplier
What is the money multiplier?
1/reserve ratio. a concept in monetary economics that explains how an initial injection of reserves into the banking system can lead to a greater total increase in the money supply.
Using money market diagram, explain the 3 tools used by the central bank to control money supply:
Required reserve ratio, discount rate,
open market operation
If the central bank of a country decides to reduce the short-term interest rates, this likely means that…
The central bank is worried about an imminent recession and wants to boost output.
what are some pros and cons of using expansionary policies
depends on whether it is fiscal or monetary. if fiscal, "crowding out", "time lag", "debt". If monetary, "depreciation"," time lag", "interest rate cannot go below zero"
what is the PPC
The PPC shows the maximum possible combinations of two goods or services that an economy can produce when all resources are fully and efficiently used, given the level of technology.
What is Multiplier effect and how its formula look like
The multiplier effect is the proportional amount of increase or decrease in final income that results from an injection or withdrawal of spending. M = 1 / (1 - MPC).
Tariff Diagram
Ms. Cong
The exchange rate between the domestic and a foreign currency is determined by…
The laws of supply and demand
Cons of trade protectionism
Higher prices for consumers
Reduced consumer choice
Less incentive for domestic industries to innovate or improve efficiency
Misallocation of resources to uncompetitive sectors
Risk of trade wars and foreign retaliation
Decline in exports due to reduced market access
Slower overall economic growth
Reduced foreign direct investment (FDI)
Harm to global supply chains
Negative impact on developing countries trying to access global market
Why countries may impose trade protectionism
• protection of infant (sunrise) industries
• national security
• health and safety
• unfair competition
• government revenue
• protection of jobs
Discuss the effectiveness of fiscal policy
Strengths:
- able to target at specific economic sectors
- government spending more effective in deep recession as it is more direct than monetary policy which relies on response to incentive
- multiplier effect (HL)
Constraints:
- time lags
- government’s pressure on sustainable debt (the five debate #4)
- introduce debt-to-GDP ratio
- impacts of a high level government indebtedness (including opportunity cost to governments of debt repayments and interest costs; the problem of the ability to repay debt and risk of default; the need to increase taxes and reduce government spending etc.)
- crowding-out effect (HL)
Identify inflationary and deflationary/recessionary gaps on the diagram and suggest policy to alleviate these gaps
Ms. cong