GDP
What does GDP stand for?
What is gross domestic product
The rise of prices over time
Who is included in the labor force?
16+ years old
Physically/mentally able to work
Looking for work
Give an example of mandatory spending
Social security, health care like Medicare and Medicaid, interest on debt
What is the federal reserve?
The central bank of the US that sets monetary policy
Billy cuts his own grass every week. Is this included in GDP?
No, the government can not track services people perform for themselves
What happens to purchasing power has inflation rises?
Purchasing power goes down. You cannot buy as much as before
What are the four types of unemployment. Define them
Frictional, seasonal, structural, cyclical
How is the federal budget created?
The president creates it and Congress approves it every year.
What is the goal of the Fed?
To keep inflation low
List one limitation of GDP
Does not include services people complete themselves, does not include under the table wages, does not measure quality of life
Name TWO Causes of inflation
Printing too much money, demand pull inflation (demand is high so suppliers raise the price), Supply push inflation (things become more expensive to make so suppliers raise the prices)
What is the formula for unemployment?
Unemployed people/the labor force x 100
What are the three types of taxes and explain them.
Progressive- The more you make the bigger percent you pay
Proportional- Everyone pays the same percent
Regressive- The burden of the tax is felt more by lower class
At what point in the business cycle is GDP high, unemployment is low, and inflation is high?
Peak
What is an intermediate good? Give an example.
A good used to make something else. Answers may vary
What is the consumer price index?
A basket of household goods that the government tracks to see how prices change
What is considered a "natural rate" of unemployment?
Frictional+Seasonal+ structural
What type of tax is a sales tax?
Regressive tax
What is the reserve requirement?
The amount of money banks are required to keep in their vaults and cannot loan out.
All the final goods, sold in a country's borders, in a given year
Increase production
Increase taxes or interest rates
Price ceilings and price floors
What is the desired rate of unemployment?
4-6%
What is a tax base? Can you give an example?
The things the government can place taxes on. Income, property tax, sales tax, corporate tax
The economy is facing an economic downturn. What might the federal reserve do to help brace the downturn?
Lower interest rates, Possibly lower the reserve rate, buy bonds back, lower discount rates between banks