Macro Unit 1

An increase in aggregate demand results in

Decrease in inventories Increase in productivity Increase in employment Increase in income

What does FANG stand for?

Facebook, Amazon, Netflix, Google

True/False: Whenever country A imports goods into country B, the currency of country B will appreciate

False (think Japan and US)

If GNP is 7600 and NII is 3400, find GDP

GDP= GNP - NII 7600-3400= 4200

Write the equation for GNP and NNP.

GNP, Y = C + Ig + G + (X-M) NNP= C + Ig + G + (X-M) - CCA or GNP-CCA

difference between GDP and GNP

GNP- counts all things made by american companies, doesn't matter if it's in or out of the country's boarders GDP- counts only things made within the US boarders

This is the term used to describe an economy that is growing "just right"

Goldilocks economy

This is the current chairman of the Federal Reserve

Janet Yellen

This is the individual that set the exchange rate between the Japanese Yen and the USD after World War II

Joseph Dodge

This is the formula for Net Investment Income

NII= money earned by US firms abroad minus money earned by foreign firms in the US

This measure takes into account the nationality of the producers and subtracts CCA

NNP (net national product)

Are transfer payments factored into GDP?

No, because they were factored in GDP the first time the money was generated

economic safety nets

Programs intended to bolster spending in downturns and help moderate recessions

transfer payments

This is money taken from one group and moved to another without expectation of payment

Hollowing out effect

This is when real estate prices in other countries become so cheap that companies move all their facilities except for their headquarters overseas

What is a Barter system?

Trading goods or resources for other goods or resources

what country is the backbone of international economy?

US

what country has largest middle class in proportion to their population?

US why is middle class so important? Because they drive economy because they buy a good balance of durable and nondurable goods

What is a hard landing?

When the economy increases higher than its potential and then ends much lower than its potential

inflation rate in US

about 2.2%

Which of the following countries uses a Monetary System? USA Russia Cuba China

all of them

What is the Economy?

all the transactions made to fulfill wants and needs

why don't consumers like higher prices?

because their fixed income doesn't rise with the price, therefore standard of living decreases bc can afford less

What is not an example of the underground economy? a. Unreported income earned by illegal immigrants b. Getting paid in cash for baby-sitting your neighbor's kids c. Purchasing a gun from an authorized seller d. Growing and selling marijuana in Arkansas (that means it's illegal) e. All are examples of the underground economy

c. Purchasing a gun from an authorized seller

exports

considered an injection (bc making $) depends on income of foreign country (if they have less income they will buy less, and vice versa)

Which one of the following do consumers NOT provide business in the Resource Market?

consumers provide business resource market=land, labor, capital, entrepreneurship DO NOT PROVIDE GOODS AND SERVICES

A country's trade deficit will always cause a ________________ in the currency

depreciation

What are the 3 D's that NBER uses to assess the start and end of a recession? Circle all three a. Depth b. Duration c. Durability d. Dispersion e. Decline

depth duration dispersion

What is the term for someone that isn't actively seeking a job, but might seek a job if market conditions were better?

discouraged worker

These are tax rebates received by low income people

earned income tax credit

U6 unemployment rate

everyone with crappy-part time jobs and discouraged workers who have given up looking for a job are included in this ???also people who are overqualified for the job they're working for???

QE2

failed like first one did added just a little bit more money this time

True/False: Interest rates on durable goods have a positive relationship with Gross National Product (meaning that interest rates and consumption goods increase and decrease together)

false

a injection into businesses in the business cycle would come from where?

firms and financial institutions

This refers to an economy that is "just right"

goldilocks

#1 thing we want out of our economy

goods and services

members of the product market that businesses give households

goods and services

Quantitative easing 1 (Qe1)

gov't first attempt to increase money supply, creased once money stopped flowing into the economy

QE3

gov't last attempt going to gradually pump money into the economy until U6<6% or inflation gets above 2.2% "tapering"--increase MS by $85billion/month and dropped that down to $65 billion/month

This is what the US has accused the People's Bank of China of doing

greatly increasing the money supply to lower interest rates

Which of the following members of the Federal Reserve are opposed to inflation? a. Doves b. Hawks c. Eagles d. Sparrows e. Robins

hawks

This is the formula for Gross Investments

housing + inventory + capital expenditures (k) + CCA

investments

housing, inventory, capital expenditures, CCA

what is not included in GNP?

illegal goods and services underground goods and services volunteer activities intermediate goods (goods that are not ready for consumption ex: car engines)

These are the three primary causes of economic growth post World War II (aka three primary causes of economic growth)

increase quality of resources increase quantity of resources increase technology

increase MS what happens?

increase savings increase consumption increase stock market increase real estate increase buying antiques, art, cars increase buying gold and precious metals decrease interest rates

exports are considered injections or leakages

injections

Which of the following does business give back to consumers in the Resource Market?

interest, rent, profit, wages

In the equation for GDP, what category does housing fall under?

investments

These are the members of the resource market that households give to businesses

land, labor, capital (k), entrepreneurship

nondurable goods

last less than 2 years most of of american money is spent on nondurable goods our income affects how much nondurable goods we buy thus, income is the most important factor in consumption

durable goods

last more than 2 years affected by interest rates "big ticket items" *doesn't include housing* produced by heavy industry (high concentrations of labor and capital)

imports are considered injections or leakages

leakages

what happens to durable goods consumption if they lower or raise interest rates

lower: buy more raise: buy less

why is a little unemployment a good thing?

makes jobs more competitive more efficient workers incentive

Four elements to GDP

market value, new, final, and domestic goods

This group accounts for 66% of US consumption spending

middle class

These are the criteria for unemployment

must be over 16 years of age, not institutionalized, and actively seeking employment

NDP

net domestic product GDP minus CCA

Income earned by US Firms Overseas minus Income earned by foreign firms in the US is known as ___________?

net investment income

NNP

net national product GNP minus CCA

consumption includes?

nondurable and durable goods

Which of the following countries uses a Barter system? USA Russia Cuba China

none

members of the product market that households give businesses

payments for goods and services

This is the highest point of the business cycle and precedes a contraction

peak

This is the formula for the rule of 72. Give what each variable stands for When do you use the rule of 72?

r x n = 72 r= rate of inflation n= number of periods or years when it asks you how long it will take for prices to double?

members of the resource market that businesses give households

rent, wages, interest, profit (pi)

A.C. pigou

said consumption is determined by income and interest rates to a lesser percent 66% of america middle class

What is the Earned Income Tax Credit?

tax rebates given to the poor

Refers to members of the Federal Reserve that are opposed to inflation

the Hawks

GNP definition

the total monetary value of all final legal goods and services produced and exchanged in the market place over a period of time

Which of the following is NOT one of the 3 macroeconomic goals? a. Full Employment b. Price Stability c. Growth d. They are all Macroeconomic goals e. None of the above

they are all macroeconomic goals

a leakage from households in the business cycle would go where?

to firms and financial institutions

why increase MS ?

to inject $ into the financial system as $ becomes more available, interest rates may fall lower interest rates=encourages consumers to spend thus simulating the economy

aggregate demand

total amount of demand for final goods and services in one country in a given time

aggregate supply

total amount of supply of goods and services in a one country in a given time

Minimum output, minimum employment, minimum income, decreasing prices and decreasing interest are all characteristic of which stage:

trough

True/False: As compared to nominal GDP, real GDP is more accurate because it accounts for the inflation of prices.

true

How do you figure out how long it will take for prices to double with ___% inflation rate?

use the rule of 72 r x n =72

tax inversions

when companies put headquarters in other countries to avoid paying corporate income taxes

underground economy

when exchange of money/transaction isn't recorded

bubble economy

when increase MS and therefore increase stk mkt and real estate--> it's not real b/c fueled by air money and bubble will soon pop

underemployment

working a job that you are overqualified for

could you argue that US middle class is backbone of international economy?

yes

equation for GNP

+ - GNP, Y = C (y, i) + Ig + G + (X-M)

These are the three criteria NBER uses to determine the beginning and end of a recession

1) depth 2) dispersion 3) duration

MACRO ECONOMIC GOALS

1) stable prices (low inflation) 2) steady economic growth 3) full employment (tolerable level of unemployment) 4) favorable balance of trade (X>M) 5) equitable distribution of income

These are the five goals of macroeconomics

1) steady economic growth 2) stable prices 3) full employment 4) favorable balance of trade (X>M) 5) equitable distribution of income

4 questions a market needs to ask and what determines all of these?

1) what to produce? 2) how to produce? 3) how much to produce? 4) who are we producing for? PRICE

This is the rate that the economy needs to grow to cover the population growth of the US

1.5%

current population growth in US

1.5%

Great depression unemployment rate

25%

US economy projected growth rate

3.5%

This is the median age of the population?

37

Country X has an annual growth rate of 4%. Approximately long will it take for its economy to double?

4*n=72 72/4=18 18 years

This is the absolute number of people in poverty in the United States

40 million

If GNP is equal to 4000 and NII is equal to 500, then what is GDP?

4000-500=3500

what is current unemployment rate in US?

6%

This is the percentage of middle class spending according to AC Pigou

66%