Shifters
Fiscal Policy
AD/AS Practice
Vocab
MISC
Formulas
Unemployment
Microeconomics
Monetary Policy
FOREX/BoP
Phillips Curve
GRAB Bag
100
Government spends $10 on defense spending
What is Government Spending?
100
What is the difference between discretionary and non-discretionary fiscal policy?
Discretionary is an action by government, where non-discretionary is already in place
100
Resource prices decrease, this happens to AD/AS
What is AS shifts right
100
The simultaneous occurrence of high rates of inflation and unemployment
What is stagflation?
100
What will an increase in capital stock do in the long run?
Shift LRAS to the RIGHT.
100
GDP Deflator =
(Nominal GDP / Real GDP)*100
100
Seasonal Unemployment
Frictional Unemployment
100
Draw a PPC/PPF with consumer goods on the X and capital goods on the Y. Show and increasing opportunity cost with the a point to show that the economy is in a recession.
A curved PPC that has a point anywhere underneath the curve with Capital on the y and Consumer on the x.
100
The X and Y axis for the Money Market Model
X=Quantity of Money
Y= Nominal Interest rate
100
What is the effect on net exports if currency appreciates?
Net exports decrease
100
In a short-run Phillips curve, low inflation corresponds to this level of unemployment.
What is high unemployment?
100
The other name for a Production Possibilities Curve. (PPC)
Productions Possibility Frontier
200
Personal income taxes are reduced significantly
What is consumer spending?
200
The 2 forms of expansionary fiscal policy
What is increase spending and decrease taxes?
200
Consumer spending increases
What is AD shifts right?
200
When the government increases spending without increasing taxes they will increase the annual deficit and the national debt. This is called?
What is deficit spending?
200
A change in which of the following will cause the AD curve to shift?
a-energy prices, b-productivity rates. c-consumer wealth, d- price of inputs, e-prices of consumer goods.
C - what is consumer wealth?
200
The expenditure approach to GDP.
What is C + I + G + Xn
SPENDING: Consumption, Investment, Government, Exports - Imports
200
Temporary unemployment or being between jobs. Individuals are qualified with transferable skills.
Frictional Unemployment
200
The second best choice you gave up when you chose the first (best) choice.
Opportunity Cost
200
The X and Y axis on the Ample Reserves Model
X=Quantity of Reserves
Y=Policy Rate
200
What will happen to the value of a currency if real interest rates rise?
The value of the currency will increase (The currency appreciates)
200
Draw the SRPC and LRPC. Use 5% as the NRU, the expected inflation rate as 7% and the current inflation rate as 4%.
The intersection of SRPC and LRPC is the expected rate. The actual rate should be a point to the left of the LRPC.
200
What is the similarity between “2 + 2 = 5” and your left hand?
Both are not right
300
When the price of oil increases
What are resource prices?
300
This kind of fiscal policy would be used if the economy was in an inflationary gap
What is contractionary fiscal policy?
300
Draw a recessionary gap
equilibrium to the left of LRAS
300
Government spending increases interest rates and decreases private investment
What is crowding out?
300
If Charlie Brown's disposable income increases from $600 to $650 and her personal consumption expenditures increases from $480 to $520 her marginal propensity to save is?
What is .2?
40/50 = .8
MPC = .8
MPS 1-.8 = .2
300
Unemployment rate =
(number of unemployed / Number in the Labor Force) *100
300
Unemployment due to changes in the labor force making skills obsolete.
Structural Unemployment
300
The ability of an economy to produce a good at a lower opportunity cost than another country.
Comparative Advantage
300
Does SR represent ample and limited reserves?
Ample Reserves
300
What would happen to the U.S dollar if Europeans prefer vacationing in the U.S? What would happen to the Euro?
U.S dollar appreciates and demand increases
The Euro depreciates and supply increases
300
Education is an investment in this because it increases workers' ability to produce.
What is HUMAN CAPITAL?
300
Ceteris Paribus
All else equal
All other variables held constant
400
Inflation is expected to increase by 2%
What is inflationary expectations?
400
This occurs when a government increases spending in a recession
What is a deficit?
400
Inflationary Gap (draw the model)
equilibrium to the right of LRAS
400
The total available capital in a country. When businesses make investments in big assets it adds to this.
What is Capital Stock?
400
The SRAS curve slopes upward because
a-the wealth effect, b- sticky wages and prices,
c- the law of diminishing returns, d-the NRU
d-the multiplier
What are sticky wages and prices (b)?
400
Consumer Price Index =
(price of market basket / price of market basket in base year) * 100
400
Unemployment caused by a recession.
Cyclical Unemployment
400
The workers that produce Thingamajigs go on strike for 3 months. Identify shifter, which curve shifts and what direction and the effect on P and Q.
Supply decreases, resources, P increase and Q decrease
400
What can the FED do to encourage member banks to deposit more excess reserves at the Central Bank?
What is increase the IOR (Interest on Reserves)?
400
When the US purchases more Foreign assets than foreign countries purchase of assets from the US what happens to the US CFA?
What is Net Capital Outflow (Debit - Deficit)
400
These are used to make other goods or services. They tend to increase economic growth.
What are CAPITAL GOODS?
400
What kind of food do mummies eat?
A wrap
500
The government simultaneously decreases spending and decreases taxes. What happens to PL and unemployment?
What is PL decrease and unemployment increase?
500
The economy is in a recessionary gap of $100 million. How much would the government have to change spending to return to equilibrium? MPC=.8
What is $20 million increase in spending?
(100mill = 5X
100/5 = 20)
500
In the short run when aggregate supply increases price level and unemployment will...
Price level decreases
Unemployment decreases
500
Non-discretionary Fiscal Policy is private spending or taxation laws enacted to work counter cyclically to stabilize the economy. Examples: Welfare, Unemployment, Income Tax
What are automatic stabilizers?
500
What's the difference between the Keynes (Fiscal Policy) and Classical models?
FISCAL/KEYNES - Prices and wages are sticky and the only way to get out of a recession is to increase AD and to get out of an inflation is to decrease AD. CLASSICAL - In the long run prices and wages are flexible therefore the economy will fix itself.
500
Labor Force Participation rate (LFPR) =
(Labor Force / Population) *100
500
The Natural Rate of Unemployment rate AND types of unemployment included.
NRU= 4-6%
Structural and Frictional Unemployment
500
Comparative Advantage in each? Hank and Jeff are fishermen that catch Bluefish and Cod. In one day they catch...
Hank 4 Bluefish and 6 Cod
Jeff 24 Bluefish and 12 Cod
Jeff has comparative advantage for Bluefish and Hank has comparative advantage for Cod
500
What are the 3 Monetary Policy tools a limited reserve Central Bank could use to influence the economy?
Required reserve ratio, discount rate, Open Market Operations (buying and selling bonds)
500
The financial flows recorded in the capital financial account are also part of this market
Loanable Funds
500
Draw AS-AD and the PPC models. Start with the economy in equilibrium. Then show what would happen if the purchase of big machinery caused an increase in productivity which eventually created sustained productivity.
Show outward shift of PPC AND a shift of AD, AS and LRAS (in that order)
500
If real output is 10,000, and the price level is 2, and the velocity of money is 4 then the money supply is
4M=10,000 * 2
20,000/4 = 5,000
M=5,000