Row 1
What are the 3 Macroeconomic goals?
Promoting economic growth
Limiting unemployment
Keeping prices stable
What is the definition of GDP?
The dollar value of all final goods and services produced within a country in one year is
what are the two fiscal policy tools that government has to "fix" the economy?
Government spending and taxes
What is deficit spending?
AND
What is the Federal Funds Rate?
when annual government spending and transfer payments are greater than tax revenue.
Deficit spending contributes to the national debt.
FFR is the IR banks charge eachother for borrowing
List the Expenditure approach to GDP
C+I+G+(Xn)
What is the best way to measure the overall health of a country? How do you measure it?
GDP Per capita
GDP/Population
How can the government use fiscal policy to close an inflationary gap (Contractionary Fiscal Policy)
increase taxes or decrease govt spending
What 3 tools does the Fed have to increase or decrease the money supply
Discount Rate
Reserve Requirement
Open Market Operations (buying bonds)
What is the unemployment rate and how do you calculate it?
new-old/oldx100 OR
current-previous/previousx100
what is the Natural Rate of Unemployment and what percentage represents NRU?
Natural Rate of Unemployment (4-6%) Structural and frictional
How can the government use fiscal policy to close an Recessionary gap (Expansionary Fiscal Policy)
increase govt spending or decrease taxes
Explain the Discount rate ( what is it)
Interest Rate the FED charges banks to borrow money from commercial banks
What is CPI and how do you calculate it?
Consumer price index- measures the spending of consumers
Price of basket of goods
______________________ X 100
Price of Market Basket in Base year
What are the 4 phases of the business cycle
Expansion – Peak – Contraction – Trough
What are the 3 functions of money?
Medium of exchange, unit of account, store of value
Explain the reserve requirement
(What % banks must hold onto when you make a deposit)
For example if the RR is 10% and your deposit $1,000 into the bank, it holds onto $100 and loans $900 out
What are some limitations of GDP?
GDP per capita does not accurately measure all of the spending that takes place in a country.
Time spent collecting trash from the side of the road
Donations collected at a local church for the town’s food pantry
Money spent of illegal drugs
List and describe the four types of unemployment
Frictional unemployment-between jobs
Seasonal unemployment
Structural unemployment-Technology
Cyclical unemployment-Recession
What is the FED and what is the job of the FED?
regulate banks and make sure people have faith in the U.S. financial system.
What are Open Market Operations?
FED buy and sell bonds