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