edpuzzles

A sheep farmer sells wool to a fabric maker for $22. The fabric maker sells the fabric to a seamstress for $35. The seamstress creates a wool suite abd sells the garment to a retail clothing shop etc

$22

Determinants of Demand

1. Future expectations 2. Complimentary/Substitute goods 3.

Fiscal policy meant to address 3 macroeconomic goals

1. low unemployment 2. inflation 3. economic growth

In the U.S the government has 3 primary sources of tax revenue

1. personal income tax 2. corporal income tax 3. Social Security tax or payroll tax makes up tax revenue, taxes such as gas and trades/goods, state tax are lesser compare to these three.

3 types of income tax structures

1. progressive tax 2. proportionate tax (or flat tax) 3. regressive tax with a progressive tax, the tax rate rises as disposable income rises. with a proportionate tax (or flat tax) the same tax rate applies to all income levels. with a regressive tax, the tax rate decreases as income rises. Which type of tax would you prefer?

money multiplier

1/reserve ratio

If actual unemployment is 7% and the NRU is 5%, how much cyclical unemployment is the economy experiencing?

2%

price ceiling

A legal maximum on the price at which a good can be sold

Price floor

A legal minimum on the price at which a good can be sold (It is illegal to sell the product for less that the price floor and government regulated.

nominal value

A statistic that has not been adjusted for inflation!

Normal Good:

As income increases, the consumer's demand increases (direct relationship) or As income decreases, the consumer's demand decreases (direct relationship)

2 consecutive years of contraction

Depression

What backs the dollar value?

Faith/Trust that it will work and trust in government to produce.

United states GDP will *increase* when a U.S consumer buys maple syrup which was made in Canada

False Because it was produced in Canada, the U.S. GDP will NOT increase, Canada's GDP will increase. What country was the good or service made in? That is the country who's GDP will increase.

The Federal Reserve Banking System can conduct Fiscal Policy

False The Fed is NOT part of the Federal Government. Fiscal policy is conducted by any level of government (County, State or National including actions by the President and both the House and Senate.

If a married Couple earns $100,000 per year, they will pay 25% of their total income as taxes (the entire $100,000 will be taxed at the rate of 25%).

False The married couple's first $17k is taxed at 10%, $17k- $70k is taxed at 15% and $70k - $100k is taxed at 25%.

Inferior good

Increase in income causes a decrease in demand.

6 consecutive months of contraction

Is a recession

Fiscal policy

Is changes in government spending and taxation to achieve particular macroeconomic goals Should we use fiscal policy? - It depends. If we think the economy is going to self-adjust then we say no to fiscal policy, but if we don't think it's going to self adjust then once again, it depends.

Which economists believe that the economy is NOT self regulating (the govt. should intervene)

Keynesian

3 goals of economy

Low unemployment, stable prices, high and sustain growth.

In the U.S. the opportunity cost of 1 apple is 3 papayas. In Mexico the opportunity cost of 1 apple is 2 papayas. What country has the smallest opportunity cost when producing one more apple?

Mexico Mexico only has to give up 2 papayas, where the U.S. has to give up the ability to produce 3 papayas.

Transfer payments

Money that the government spends but no good or service os received by the government

Real income=(nominal income)/(CPI)*100

Percentage change income=(new income minus old income)/(old income)*100 (60,000-50,000)/(50,000)*100 Answer: 20% (10,000/50,000)*100=.20*100=20%

Percentage change new minus percentage change old divided by old times one hundred.

Real GDP > 0 is economic growth

Who is the price floor meant to protect?

The seller from selling a product too low

National debt

The sum of government deficits over time.

When the Government has to finance its budget deficit by borrowing money, it causes interest rates to rise and therefore the Govt. has to borrow at higher rates and pay more in the long run

True

What ia included in Government Consumption Expenditure?

Wage payments tp Federal workers

# of unemployed divided by # in labor force timed 100

What is the unemployment rate in a town in which 65,400 persons are employed and 11,000 are unemployed? Answer: 14.4% (11,000)/(65,400+11,000)*100

When Government spending is greater than the Government's income, the country is experiencing ______.

a deficit.

change in quantity demanded

a movement along the demand curve that shows a change in the quantity of the product purchased in response to a change in price

change in demand

a shift of the demand curve, which changes the quantity demanded at any given price

Frictional unemployment

between jobs

If the economy is experiencing an inflationary gap, the government should implement

contractionary fiscal policy

contractionary fiscal policy

decrease government spending and increase taxes

commodity-backed currencies

dollar bills or other currencies with values backed up by gold or another commodity held at bank

If the economy is experiencing a recessionary gap, the government should implement

expansionary fiscal policy

As interest rates rise consumption and investments spending...

falls

NRU (natural rate of unemployment)

frictional unemployment + structural unemployment = ? (4 or 5%)

Fiat Money

has no intrinsic value, but is declared by a government to be the legal tender of a country (what we use now)

Crowding out

is the decrease in private expenditures that occurs as a consequence of increased government spending or of the financing needs of the deficit. effects household and government spending. if the government increase spending and/or decrease taxes it will increase its own deficit then the govern. needs to borrow to compensate for overspending. This demand for credit drives up the interest rates making the graph shift up and right.

commodity money

objects that have value in themselves and that are also used as money

Utility

satisfaction

marginal utility

satisfaction or usefulness obtained from acquiring one more unit of a product

deficit spending

situation in which a government spends more money than it takes in

Yap

stone island money in Micronesia

expansionary fiscal policy

tax cuts or increases in government spending designed to stimulate aggregate demand and move the economy out of recession

unit of account

the measure in which prices and other accounting records are recorded; one of the functions of money

recognition lag

the time needed to identify a macroeconomic problem or a recession has occured

labor force

the total number of workers, including both the employed and the unemployed

Barter

trading one good or service for another good or service highly inefficient

Cyclical unemployment

unemployment caused by a business cycle recession

structural unemployment

unemployment that occurs when workers' skills do not match the jobs that are available

store value

value of goods and services hold the same over time money does not lose its buying power from year to year. It maintains its value over time.