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Short Answers
Short Answers
Definitions
Definitions
Definitions
100
Real GDP decreases and the price level decreases.
What happens when Aggregate Demand falls?
100
Real GDP decreases and price level increases.
What happens when Aggregate Supply decreases?
100
The use of government spending and revenue collection to influence the economy.
What is fiscal policy?
100
A plan for the federal government's revenues and spending for the coming year
What is the federal budget?
100
The maximum output that an economy can produce without big increases in inflation
What is productive capacity?
200
Decrease in government spending and an increase in taxes.
What is contractionary fiscal policy?
200
Government spending and a decrease in taxes.
What is What is expansionary fiscal policy?
200
Fiscal and monetary policies that reduce economic growth
What are contractionary policies?
200
Fiscal and monetary policies, like higher spending and tax cuts, that encourage economic growth
What are expansionary policies?
200
The idea that every dollar of spending creates more than one dollar in economic activity.
What is the multiplier effect?
300
Interest on the money we hold as cash. Opportunity cost of what we would do with the money.
What is the cost of holding money?
300
Cash needed on hand, interest rates, price levels in the economy, and general level of income
What factors might affect people's money demand?
300
A graph that shows a relationship between tax revenues and the tax rate
What is the Laffer Curve?
300
A government program that changes automatically depending on GDP and a person's income.
What is an automatic stabilizer?
300
Monetary policy that increases the money supply
What is an easy money policy?
400
1/Required Reserve Ratio
What is the money multiplier?
400
$10,000: RRR = 5
What is the increase in money supply for a $2,000 deposit?
400
Delay in implementing monetary policy
What is an inside lag?
400
The loss of funds for private investment due to government borrowing
What is the crowding-out effect?
400
The time it takes for monetary policy to have an effect
What is an outside lag?
500
Federal Government's Banker, Government Securities Auctions, Issuing Currency, Check Clearing, Supervising Lending Practices, Lender of Last Resort, Regulating Money Supply, Setting Interest Rates
What are the main functions of the Federal Reserve System?
500
Open Market Operations, Setting Reserve Requirement Ratio, Setting Discount Rate/Federal Funds Rate
What is the role of the Federal Open Market Committee?
500
The idea that free markets can regulate themselves
What is classical economics?
500
Form of demand-side economics that encourages government action to increase or decrease demand and output
What is Keynesian economics?
500
A school of economics that believes tax cuts can help and economy by raising aggregate supply.
What is supply-side economics?