Econ 211 vocab and definition review (test 2)

what is CPI and what does it measure

Consumer Price index, it measures the average price of a market of goods and services

define recession

a decline in real output for a least 2 consecutive quarters

what is inflation and what is it caused by

a general increase in prices of goods and services, caused by the change of supply and demand, and the change in the money supply

define depression

a long lasting and severe recession

define boom

a sudden increase in economic activity

how do banks created money

lending out money left over after the rr then by earning interest

define trough

lowest point of economic activity in a business cycle

what's included in m1 and m2

m1-- liquids m2-- less liquid form and m1

Functions of Money

medium of exchange, unit of account, and store of value

The major difference between nominal GDP and real GDP is:

nominal GDP measures the value of output in current-year prices, while real GDP measures output using constant prices.

how many categories and items in CPI

over 80,000 items and 200 categories

How do we promote economic growth

policies to increase human capital policies that promote savings and investment policies that support research and development

what is the fisher equation

real interest rate equation, the lenders reward and the borrower's cost for borrowing money

in the national income approach to GDP what are the payments for the following resources: land, labor capital, and entrepreneurial ability

rent, wages, interest and profits & losses

what is depreciation

represents the income used t replace capital

what does the Y/POP formula mean

the average output per worker and the share of the total population that is working

what does real GDP measure

the constant dollar value of all final final goods and services over a fixed period in time

what is liquidity

the ease with which an asset can be converted into an economy's medium of exchange

who is included in the labor force

the employed and unemployed

When economists talk about the "standard of living," they are generally referring to?

the level of overall well-being enjoyed by an economy

define peak

the output level grows towards and economy's full capacity

what does the labor participation rate measures

the percentage of the population over 16 who are participating in the labor force

what is the unemployment rate

the percentage of the workers in the labor force who are unemployed

what is a business cycle

the short term fluctuation (ups and downs) experienced in an economy due to changes in levels of activity

GDP does not include the purchase of illegal goods. true or false

true

a change in m2 will affect the money supply. true or false

true

for example If Italy's unemployment rate were to increase, it would result in a reduction in Italy's output. This does not change what is possible, since those resources now just become idle. true or false

true

what is cyclical unemployment

unemployment caused by recession or anything in the business cycle

the transaction demand for money is

vertical

what is the natural rate of unemployment

when an economy is near full employment

what is frictional unemployment

when an individual is searching for a job and waiting

what is structural unemployment

when an individual's skills are obsolete so they become unemployed

define expansion

when real output level grows toward an economy's full capacity

can Economic Growth move the PPF?

yes

what is the FOMC and what do they do

Federal Open Market Comitee, they determine the monetary policy and determines the supply of money in the economy

what is real GDP per capita

Real GDP per person

who is the president of the kansas city fed (which oversees NE and lincoln)

Ester george

how many regional feds are there, where is the majority

12, in the eastern half of the US

what are the six determinants of average labor productivity (labor participation rate) and how do they influence economic growth

Human Capital (increases the labor force and entrepreneurial ability), Physical Capital (increases production of certain goods or services), Land and other Natural Resources (increases resources available to an economy), and Technology (new tech can increase productivity, such as new machines, better training)

what is Fractional Reserve Banking

banks have to keep a fraction of checkable deposits on hand, called reserve requirement

existing resources can become more productive, give some examples

better training for employees and better education

what is nominal income

actual dollar amount recieved in exchange for resources

what is real income

amount of goods and services that can be purchased with nominal income, its the purchasing power

what is money

any item that both buyers and sellers will accept in exchange for goods in services

how do you find the total demand for money

asset demand plus transaction demand

who are members of the fed, how many are there and for how long do they serve, who appoints them

board of governors, 7 members for 14 year term, the president and the senate approves

regarding money, what does it mean when it's a store of value

can be used to transfer wealth and purchasing power from the present to the future

regarding money, what does it mean when it's a unit of account

communicates the market value of goods and services

what is net foreign factor income

difference from payments from resources they own in foreign countries from resources they own domestically

the asset demand for money is

downward sloping

regarding money, what does it mean when it's a medium of exchange

facilitates trade between buyers and sellers

credit is part of m2. true or false

false it's part of neither m1 or m2

fiscal policies are made by the FOMC. true or false

false, its made by the government

the banks and the FDIC are part of the fed. true or false

false. banks are but the FDIC is not

what are the different types of unemployment

frictional, structural, and cyclical

who is Janet Yellen

head of the fed, first women to be

what does the rule of 72 measure

how many years it will take for an economy's GDP to double

describe the open market operations by the FOMC, for example by purchasing or selling bonds to influence the supply of money

increase supply by purchasing and decrease the supply by selling

Why is GDP an Imperfect Measure?

it GDP does not include the purchase of illegal goods

what is the federal reserve system (the fed)

it oversees the banking system and regulates the quantity of money in the economy

what does the GDP price index do and what can it be used for

it tracks prices from year to year, it can be used to deflate nominal GDP, to adjust inflation