Chapters 1-5
Without this, it wouldn't matter how we allocated resources.
What is scarcity?
The phase of the business cycle right after the contractionary phase, i.e. the lowest point of real GDP
What is the trough?
This economic model tries to model the economy using consumption, investment, exports/imports, and government spending/taxes, and the spending and savings habits of individuals.
What is Aggregate Expenditures Model?
The central bank of the United States
What is the Federal Reserve?
The measurement of risk in financial assets
What is beta?
Instead of going to college, you could have gone into the workforce. Going into the workforce is your ______ ____
What is opportunity cost
GDP =
C+I+G+NX
Consumption, Investment, Government purchases, net exports
The concept that for each dollar of income, a certain percentage is spent on consumption (goods and services).
What is Marginal Propensity to Consume?
The Federal Reserve requires a certain percentage of reserves to be held by banks. These are called ____
What are required reserves?
In the long run, and increase in aggregate demand will increase ________
The four primary economic resources.
What are land, labor, capital, and entrepreneurial ability?
According to the rule of 70, if a country is growing at 5% a year, how many years will it take for the economy to double?
14
The multiplier in the aggregate expenditures model
What is 1/Marginal Propensity to Save
or
Change in GDP/Initial Increase in Expenditure
The three functions of money
Medium of Exchange
Store of Value
Unit of Account
The Federal Reserve selling securities on the open market will _______ the money supply. This is ______ monetary policy.
decrease; contractionary
India builds roads in a remote village, connecting it to the rest of the country. All of the small businesses get to benefit from this even though they had little personally to do with the road's constructions. This is an example of a ______ __________
Positive Externality
What are the three types of unemployment?
Cyclical, Frictional, Structural
Government purchases cause an effective increase in interest rates, reducing the amount of private investment
What is the crowding out effect?
Two kinds of rate of return in financial investments
What are time preference and risk premium?
Name three out of the four shifters of the consumption schedule
Based on the Production Possibilities Frontier model, a country is producing efficiently and at its capacity (think, full-employment) when it produces a combination of two goods that are located where?
On the curve
The country of Computerland sold $3,000 of computers to its citizens and exported $1,000 worth to other countries. Business had $2,000 worth of capital and $500 in inventories. The government build $500 worth of roads and has a $300 welfare program. The country also imported $600 worth of ice cream
$6,400
Suppose that MPC is 0.8. After an increase of investment spending of $1 billion, GDP will increase by
$4 billion
The total reserves in the banking system is $1 billion. The reserve requirement changes from .1 to .2. If the total money expansion was $10 billion, what will the what will the new money expansion be?
Marginal Propensity to Consume is 0.9
Marginal Propensity to Save is 0.1
A lump sum increase in taxes of $1 million (no increase in spending) will decrease GDP by ______