Ap microeconomics unit 3 learning targets

Describe the organization of the Federal Reserve System

A network of 12 Federal Reserve Banks and 24 branches make up the Federal Reserve Systemunder the general oversight of the Board of Governors. Reserve Banks are the operating arms of the central bank. ... The Reserve Banks serve banks, the U.S. Treasury, and, indirectly, the public.

Explain how the fed use their tools to promote price stability, full employment and economic growth. Use graphic organizer

As the price of goods increases, the value of money decreases. ... As inflation increases, the value of money decreases and the Federal Reserve counters by increasing the interest rates. During times when job growth is low and the economy is stagnant, the Federal Reserve lowers the interest rates to spur economic growth.

Explain how the government's taxing and spending policies promote price stability, full employment and economic growth. Use graphic organizer

Both taxation and government spending can be used to reduce or increase the total supply of money in the economy—the total amount, in other words, that businesses and consumers have to spend. When the country is in a recession, the appropriate policy is to increase spending, reduce taxes, or both.

Define fiscal policy

Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy. It is the sister strategy to monetary policy through which a central bank influences a nation's money supply.

List and explain the 4 types of unemployment.

For those textbooks that list four, the types are structural, frictional, cyclical, and seasonal.

Explain the roles, types and characteristics of money.

In order for money to function well as a medium of exchange, store of value, or unit of account, it must possess six characteristics: divisi- ble, portable, acceptable, scarce, durable, and stable in value.

Who benefits and who loses from unexpected inflation.

Inflation is good for borrowers and bad for lenders because it reduces the value of the money paid back to the lenders. The inflation rate is built in to the nominal interest rate, which is the sum of the real interest rate and expected inflation.

Define monetary policy

Monetary policy is the policy adopted by the monetary authority of a country that controls either the interest rate payable on very short-term borrowing or the money supply, often targeting inflation or the interest rate to ensure price stability and general trust in the currency.

Define the tools of monetary policy

The Fed can use four tools to achieve its monetary policy goals: the discount rate, reserve requirements, open market operations, and interest on reserves.

Define Gross Domestic Product (GDP). Write the formula and explain each component.

The components of GDP include personal consumption expenditures plus business investment plus government spending plus (exports minus imports). Now that you know what the components are, it's easy to calculate a country's gross domestic product using this standard formula: C + I + G + (X - M).

List the 3 macroeconomic goals for the economy. Describe each of them.

To maintain a strong economy, the federal government seeks to accomplish three policy goals: stable prices, full employment, and economic growth. In addition to these three policy goals, the federal government has other objectives to maintain sound economic policy.

Define deficit spending and national debt. Explain their relationship.

When spending exceeds revenue—or income—it's called deficit spending. On a government-level, the national debt is the accumulation of each year's deficit. For a business or individual, this would be their total debt. When the revenue exceeds the spending, it creates a budget surplus. A surplus will reduce debt.

Define the unemployment rate, Consumer Price Index (CPI), inflation, real GDP, aggregate supply, and aggregate demand. Explain how each is used to evaluate the goals from

`unemployment rate is defined as the percentage of unemployed workers in the total labor force. Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. Aggregate supply is the total quantity of output firms will produce and sell—in other words, the real GDP. ... The downward-sloping aggregate demand curve shows the relationship between the price level for outputs and the quantity of total spending in the economy.Real gross domestic product (real GDP for short) is a macroeconomic measure of the value of economic output adjusted for price changes (i.e. inflation or deflation).