Basic Econ Concepts
The four factors of production.
What is land, labor, capital, and entrepreneurship?
What does GDP measure?
GDP represents the total value of all goods and services produced in a nation within a specific period of time.
The unemployment rate measures...
The percentage of the labor force that is jobless and actively looking for work.
Two tools of fiscal policy
Taxation and spending
What is aggregate demand?
The total amount of demand for all goods and services in an economy.
What is the central bank of the United States called?
The phillips curve demonstrates the relationship between which two factors?
Inflation and unemployment
This is the summary of the country's transactions with other countries.
What is the balance of payments
When you have unlimited wants but limited resources.
What is scarcity?
What is the equation for GDP?
Y = C + I + G + (X-M)
OR
GDP = Consumer Spending + Investment + Gov. Spending + Net Exports
"A phone operator is replaced by an AI chatbot"
What is structural unemployment?
When the Federal government spends more money than it has, this causes a....
What is a budget deficit?
What is short-run aggregate supply?
The total output of goods and services that are produced within a given period of time.
What are one of the goals of the Federal Reserve?
- Encouraging economic growth
- Limiting Inflation
- Controlling the unemployment rate
As shown on the Phillips Curve, as inflation increases, unemployment __________.
Unemployment Decreases
When one currency is able to buy more of a foreign currency.
Appreciation
On a Production Possibilities Curve, a point inside the curve represents _________.
What is an inefficient use of resources?
According to the circular flow model, what two things are exchanged between the resource market and households?
Labor and income!
Who is included in the labor force?
Everyone aged 16+ who is currently working or actively looking for work.
Describe crowding out
Real interest rates increase, making it harder for consumers and businesses to take out loans
Oil rigs in the Gulf of Mexico have been destroyed following a category 5 hurricane. This would shift the _______ curve ________.
SRAS, LEFT
What are the three traditional tools of monetary policy used by the Federal Reserve?
- Bank Reserve Requirements
- Discount Rate
- Open-Market Operations (Bonds)
If aggregate demand shifts to the left, what happens to the Phillips Curve?
The point on the Phillips curve will along the curve to the right.
Expansionary monetary policy will cause what to happen in the balance of trade? Why
We will export more (depreciating currency)
When one country has a lower opportunity cost to produce a good/service when compared to another country.
What is comparative advantage?
Which of the following is not included in calculating nominal GDP?
- Consumer Spending
- Transfer Payments
- Imports
- Government Spending
Transfer Payments!
The cost of inflation linked to supermarkets having to update their price tags as prices increase.
What are menu costs?
What are two fiscal tools used to "heat up" the economy?
Increasing government spending or decreasing taxes.
Which of the following would cause a rightward shift in the LRAS? List all letters if more than one applies.
a. Technological advancements
b. Increased consumer sentiment
c. Nominal wage decreases
d. Increased oil production
A
If the Fed were to raise the interest on reserves rate, what would happen to aggregate demand?
Aggregate demand would decrease as interest rates would increase and banks would be less willing to lend out loans
If aggregate supply shifts to the right, what will happen to the Phillips Curve?
The Phillips Curve will shift to the left.
If real interest rates increase, what will happen to the net capital outflow rate of that country?
More money will flow into the country (Lower outflow)
On a demand and supply graph, the supply curve shifts to the right while the demand curve shifts to the left. What happened to equilibrium prices and quantity?
Prices increased, while quantity remains unknown
How does Real GDP differ from Nominal GDP?
Real GDP adjusts to changes in the inflation rate!
Borrowers with fixed interest rates would be __________ by inflation.
Helped by inflation.
DAILY DOUBLE:
What does Keynesian Economics argue for?
The government should increase spending to stimulate aggregate demand in times of recession.
What is a positive demand shock?
A sudden rightward shift in the aggregate demand curve, usually caused by a sudden or unforeseen change in the global economy.
Draw the Loanable Funds graph. What happens when the government uses deficit spending to pay for expansionary fiscal policy
Should show the demand curve shifting to the right!
What happens in the Phillips Curve during Stagflation? Draw and label it!
Shifts up and to the right
Loanable Funds Graph --> Sets Real Interest Rates --> determines supply of currency --> determines value of currency