Macroeconomics study guide

What is supply sided - economics?

1970's school of thought that argues economic growth can be most effectively created by lowering barriers for business. -Income Tax -Capital gains tax -Less regulation

Fiscal policy are

Actions taken by congress

Monetary policies are

Actions taken by the federal reserve bank

What are open market operations?

The fed... buys government securites to increase money supply and then sell government securities to contract money supply

What is macroeconomics?

The study of a large economy as a whole.

What is fractional reserve banking system

a fraction of the reserve is in the bank.

How does the government stabilize the economy?

by fiscal and monetary policies

Contractionary Fiscal policy

laws that reduce inflation, decrease gdp, decrease gov't spending and increase tax. (When there's a surplus, leads to inflation AKA Brakes)

How are discount rates used?

the fed charges interest on loans to financial institutions, High discount rate = brakes fights; inflation Low discount rate=gas pedal ; fights recession

Discretionary fiscal policy is

when congress creates a new bill designed to change government spending or taxation, as an example of this during a recession congress would lower taxes.

What is GDP and Why is it important.

It is the dollar value of all final goods and services produced with in a countries borders in a year. IT is important because it measures how well the U.S. is doing financially

What is keynesian economics?

John Maynard Keynes, 1930's revolution in econ thinking. Governments can step in to compensate for the lack of demand.

3 major economic goals are

Keep prices stable, promote economic growth, limit unemployment

Expansionary fiscal policy

Laws that reduce unemployment and increase GDP, also increase gov't spending and decrease taxes. AKA the gas.

What is classical economics?

Original school of econ thought. Adam Smith 1776 "wealth of nations" A system where the individual sought his or her monetary gain. Markets can regulate themselves "Laissez Faire"

Non- Discretionary Fiscal policy is

Permanent spending or taxation laws enacted to work counter cyclically to stabilize the economy. Ex: Welfare or unemployment

Some problems with GDP

It does not account for current prices or inflation

What is not included in measuring GDP?

Intermediate goods, Non production transactions, Non-market illegal goods.