Economics part 4
labor
"All men were created to busy themselves with _____... for the common good." --John Calvin
Progressive Tax
a tax for which the percentage of income paid in taxes increases as income increases
tariff
a tax on imports
corporation
an association of individuals, created by law or under authority of law.
needs
goods or services that are essential for life
imports
goods services and capital assets purchased from other countries
Durable Goods
goods that last for a relatively long time, such as refrigerators, cars, and DVD players
scarcity
the concept of many individuals desiring something of which there is limited availability
Money wealth effect
(AD curve) a fall in the price level will make the holders of money richer, so they buy more
International effect
(AD curve) as the price level falls (assuming the exchange rate does not change), net exports will rise
Interest rate effect
(AD curve) the effect that a lower price level has on investment expenditures through the effect that a change in the price level has on interest rates
Characteristics of a Contraction in GDP
-Decreased spending by businesses and consumers -Negative external shocks -Higher unemployment rates
Quintile
20% of the population of a group
The US current world rank in GDP is
3rd
tax year
= financial year
GDP Deflator
A Measure of inflation
Which of the following terms implies the least degree of confidence in an economic generalization?
A hypothesis
Oligopoly
A market dominated by a few firms
Wealth
A stock of assets e.g. property, shares and money held in a savings account
Unit cost
Average cost per unit of output
14. An upward shift of the aggregate expenditures schedule might be caused by: A. a decrease in exports, with no change in imports. B. a decrease in imports, with no change in exports. C. an increase in exports, with an equal decrease in investment spending. D. an increase in imports, with no change in exports.
B. a decrease in imports, with no change in exports.
5. For a private closed economy, an unintended decline in inventories suggests that: A. aggregate expenditures are less than the business sector expected them to be. B. aggregate expenditures exceed production. C. actual investment exceeds saving. D. planned investment is greater than consumption.
B. aggregate expenditures exceed production.
17. In the above diagram, if the aggregate supply curve shifted from AS0 to AS1, and the aggregate demand curve remains at AD0 we could say that: A. aggregate supply has increased, equilibrium output has decreased, and the price level has increased. B. aggregate supply has decreased, equilibrium output has decreased, and the price level has increased. C. an increase in the amount of output supplied has occurred. D. aggregate supply has increased and the price level has risen to G.
B. aggregate supply has decreased, equilibrium output has decreased, and the price level has increased.
15. Other things equal, an excessive increase in the money supply will: A. increase the purchasing power of each dollar. B. decrease the purchasing power of each dollar. C. have no impact on the purchasing power of the dollar. D. reduce the price level.
B. decrease the purchasing power of each dollar.
21. Suppose the Federal government had budget deficits of $40 billion in year 1 and $50 billion in year 2 but had budget surpluses of $20 billion in year 3 and $50 billion in year 4. Also assume that it used its budget surpluses to pay down the public debt. At the end of these four years, the Federal government's public debt would have: A. increased by $90 billion. B. increased by $20 billion. C. decreased by $70 billion. D. decreased by $20 billion.
B. increased by $20 billion.
8. In the theory of comparative advantage, a good should be produced in that nation where: A. the production possibilities line lies further to the right than the trading possibilities line. B. its cost is least in terms of alternative goods that might otherwise be produced. C. its absolute cost in terms of real resources used is least. D. its absolute money cost of production is least.
B. its cost is least in terms of alternative goods that might otherwise be produced.
4. An increase in nominal GDP increases the demand for money because: A. interest rates will rise. B. more money is needed to finance a larger volume of transactions. C. bond prices will fall. D. the opportunity cost of holding money will decline.
B. more money is needed to finance a larger volume of transactions.
41. According to Dallas Federal Reserve economist W. Michael Cox, taken to its extreme, the logic of "buying American" implies that: A. we should buy everything from abroad. B. people should only consume what they can produce themselves. C. consumers should only buy goods from other states. D. the best quality goods are found in the United States.
B. people should only consume what they can produce themselves.
13. Refer to the above data. The domestic opportunity cost of: A. producing a ton of chips in Alpha is 1/5of a ton of fish. B. producing a ton of chips in Beta is 6 tons of fish. C. catching a ton of fish in Alpha is 5 tons of chips. D. catching a ton of fish in Beta is 6 tons of chips.
B. producing a ton of chips in Beta is 6 tons of fish.
39. Refer to the above diagrams. The numbers in parentheses after the AD1, AD2, and AD3 labels indicate the levels of investment spending associated with each curve. All figures are in billions. Which of the following would shift the money supply curve from MS1 to MS3? A. an increase in the discount rate B. purchases of U.S. securities by the Fed in the open market C. sales of U.S. securities by the Fed in the open market D. an increase in the reserve ratio
B. purchases of U.S. securities by the Fed in the open market
14. If the economy has a cyclically-adjusted budget surplus, this means that: A. the public sector is exerting an expansionary impact on the economy. B. tax revenues would exceed government expenditures if full employment were achieved. C. the actual budget is necessarily also in surplus. D. the economy is actually operating at full employment.
B. tax revenues would exceed government expenditures if full employment were achieved.
21. A recessionary expenditure gap is: A. the amount by which the full-employment GDP exceeds the level of aggregate expenditures. B. the amount by which equilibrium GDP falls short of the full-employment GDP. C. the amount by which investment exceeds saving at the full-employment GDP. D. the amount by which aggregate expenditures exceed the full-employment level of GDP.
B. the amount by which equilibrium GDP falls short of the full-employment GDP.
15. If aggregate demand decreases, and as a result, real output and employment decline but the price level remains unchanged, it is most likely that: A. the money supply has declined. B. the price level is inflexible downward and a recession has occurred. C. cost-push inflation has occurred. D. productivity has declined.
B. the price level is inflexible downward and a recession has occurred.
Deadweight loss
Decrease in production and trade as a result of a tax
Supply
How much of a product there is.
You should decide to go to a movie
If the marginal benefit of the movie exceeds its marginal cost
Inflation
If you make kore koney, prices go up
Even though local newspapers are very inexpensive, people rarely buy more the one of them each day: This fact:
Implies that, for most people, the marginal benefit of reading a second newspaper is less than the moarginal cost
Cournot Model
In duopoly, each firm knows supply provided by the other. By subtracting the quantity supplies from the market demand curve the firm can construct its own MR curve for production and determine profit maximization.
Unit account
In which method of accounting is a participant's account balance reflected as units instead of shares?
How to improve development
Increase producivity
An economic hypothesis:
Is a possible explation of cause and effect
Developing country
Less productive economy low stardard of living
Scarcity
Limited Quantities of resources to meet unlimited wants.
Equation of Exchange
MV = PY M = real money supply V = Velocity of money P = Price level Y = real GDP
In constructing models, economists:
Make simplifying assumptions
Productivity
Making things or services that have exchange value.
Capital
Man made resources.
Satisficing
Managers aim to make a satisfactory profit
Perfect Competition
Market situation in which there are numerous buyers and sellers, and no single buyer or seller can affect price.
Perfect Competition
Market structure where there are very many buyers and sellers such that no individual can buy or sell at any price other than the going price
Free markets
Markets that are allowed to operate without undue interferance from the government
Scarcity
Not being able to have all wants satisfied
Representative Money
Objects that have value because the holder can exchange them for something else of value . Ex. diamonds.
Goods
Objects that satisfy people's wants
Economically inactive
People of working age who are neither employed nor unemployed
Net savers
People who save more than they borrow
Target savers
People who save with a target figure in mind
Collective Bargaining
Process by which a union representing a group of workers negotiates with management for a contract
Imports
Products bought from abroad
Needs
Products people ise for survival
Wants
Products people use dor enjoyment
Exports
Products sold abroad
Super Normal Profit
Profit in excess of normal profit
SEC
Securities and Exchanges Commission- agency that regulates the stock market and its practices, created by an act of Congress in 1934
Rational people
Systematically and purposefully do the best they can to achieve their objectives, given the available opportunities.
Average Revenue
TR/Q
Business
Takes in revenue, pay, expenses, to make a profit
Optimal Tax
Tax equal to marginal external cost (persuading profit maximising firms to choose socially optimal production)
Tariff
Tax on imports or exports
Cost Benefit Analysis
Technique to assess whether public sector projects are likely to produce net gains in welfare to society
Scarcity
The belief that there are not enough goods and services to meet people's wants
Interest Rates
The cost of borrowing money
Profit
The difference between the total revenue and the total cost of a business.
Poverty Trap
The disincentive to work when someone on benefits faces a very high effective marginal rate of tax if they start work
Inflationary noise
The distortion of price signals caused by inflation
Medium of exchange
The function of money when used to purchase goods and services
If someone produced too much of a good, this would suggest that:
The good was produced to the point where its marginal cost exceeded it marginal benefit
Overheating
The growth in aggregate demand outstripping the growth in aggregate supply, resulting in inflation
Scarcity
The limited amount of resources available.
Real interest rate
The nominal interest rate minus the inflation rate
Average Revenue
The revenue per unit of output
Comparative Advantage
This occurs when a country has an abundance of resources and/or can produce certain products more efficiently and in greater quantity than a competing nation.
Cyclical unemployment
Unemployment arising from a lack of aggregate demand
Collusion
Where firms agree not to compete on price
Actual incidence
Who bears the cost of tax through increase in price paid (buyer) or decrease in the price received (seller)
Services
Work done for a fee
Hint
You will need to know the difference between income and wealth.
Net Income
Your income AFTER taxes are taken out.
deregulate
[often passive] ___something to free a trade, a business activity, etc. from rules and controls ___d financial markets bãi bỏ qui định
depreciate
[transitive] ___something (business) to reduce the value, as stated in the company's accounts, of a particular asset over a particular period of time The bank ___s PCs over a period of five years. sụt giá, mất giá
the Treasury
___ [singular + singular or plural verb] (in Britain, the US and some other countries) the government department that controls public money
state bank
a bank chartered by a state government
future
a contract to buy or sell a stock on a specific future date at a preset price
recession
a decline in real output that persists for more than two consecutive quarters of a year
depression
a deep and prolonged recession
money
anything that people will accept in exchange for goods and services
representative money
backed by something tangible
stockbroker
buys and sells securities for customers
Countercyclical fiscal policy
fiscal policy in which the government offsets any change in aggregate expenditures that would create a business cycle
wage or salary
fixed or regular payment for work completed or services performed
scarcity
inability to satisfy all wants at the same time
Scarcity
inability to satisfy all wants at the same time.
Savings
income not used for consumption
economic growth
increase in output of goods and sevices in the U.S. econlmy during a year
production
is the combining of resources to make goods or provide services.
Specialization
is the concentration of individuals on certain aspects of production
Economic Leading Indicators
key variables used to predict a new phase of a business cycle
scarcity
lack of goods or resources compared to what is needed or wanted
scarcity
lack of goods or services you want
alleviate
làm nhẹ bớt
real interest rate
nominal interest rate - expected inflation rate
tax-exempt
not subject to tax by federal or state governments
percapita output
output divided by the total population
stock
ownership in a corporation
producers
people who make or grow goods or provide services
human resources
people who makes goods and services
Entrepreneurship
people who take on the risk of organizing other resources to produce goods and services
capital
previously manufactured goods used to make other goods and services.
Capital Deepening
process of increasing the amount of capital per worker
law of supply
producers offer more of a good as its price increases and less as its price falls
intermediate products
products used as input in the production of some other product
capital gain
profit made from the sale of securities
return
profit or loss made on an investment
human capital
skills that help you make $, gained often from education
Bond coupon
stated interest on a bond
cyber economy
term for the new type of economy in developed nations that emphasizes the role that information plays as people try to combine the traditional four factors of production in the best ways possible
Aggregate Supply
the TOTAL amount of goods and services in the economy available at all possible price levels
marginal revenue
the additional income from selling one more unit of a good; sometimes equal to price
Finance
the management of money
consumption
using goods and services
Consumption
using goods and services.
Retail
: the sale of goods to individuals or the public
Production
Is the combining of resources to make goods and services
Choice
Selecting an item or action from a set of alternatives
Real GDP
The country's output measured in constant prices and so adjusted for inflation
entrepreneur
a person who takes a risk and starts a business
over budget
(= spent too much money).
Quota
A limit on imports
Trade
Exchange of goods and services in an international market
budget
a plan for spending your money
Standard of living
economic level
goods
items made to sell
services
work that one person does for another
28. Which of the following would not help to relieve the Social Security and Medicare shortfalls? A. Extending the Social Security tax to a higher level of earnings. B. Restricting immigration of skilled working-age adults. C. Increasing the retirement age for collecting Social Security and Medicare benefits. D. Reducing Social Security and Medicare benefits for wealthier individuals.
**B. Restricting immigration of skilled working-age adults.
Profit
: financial gain; the amount earned after the cost spent in making a product
Price
: the amount of money expected or required in payment for something
Raw Materials
: the basic material from which a product is made
Merger
: the combination of two or more companies into one
Wholesale
: the sale of goods in large quantities to be retailed by others
Fiscal Multiplier
= 1 / [ 1 - MPC (1 - t) ]
Money Multiplier Equation
= 1/ ( reserve requirement )
Real GDP Equation
= Consumption Spending + Investment + Government Spending + Net Exports
Real Exchange Rate
= nominal exchange rate * (foreign CPI/domestic CPI)
Elasticity of Demand for Labour
The responsiveness of demand for labour to a change in wage
Elasticity of Supply of Labour
The responsiveness of supply of labour to a change in wage
Diseconomies of Scale
The rise in unit cost as a firm expands its scale of production in the long run
Entrepreneurship
The risk-taking that occurs when a person starts a new business.
Job seeker's allowance
A benefit paid by the government to those unemployed and trying to find job
Resume
A brief account of one's professional or work experience and qualifications, often submitted with an employment application.
Corporation tax
A tax on firms' profits
Protective Tarriff
A tax on imported goods to protect US interests.
Tariff
A tax on imports
Sales Tax
A tax on items you buy
Regressive tax
A tax that takes a greater percentage from the income of the poor
Progressive tax
A tax that takes a higher percentage from the income of the rich
progressive Tax
A tax which a percentage of income paid in taxes increases as income increases.
An hypothesis is:
A tentative, untested statement of possible cause and effect
Budgets
An estimation of the revenue and expenses over a specified future period of time. A budget can be made for a person, family, group of people, business, government, country, multinational organization or just about anything else that makes and spends money. A budget is a microeconomic concept that shows the tradeoff made when one good is exchanged for another.
Deficit
An excess of federal expenditures over federal revenues.
Floating Exchange Rates
An exchange rate that depends on the supply and demand of that currency.
Scenario
An expected or supposed situation or sequence of events
Which of the following is associated with macroeconomics?
An empirical investigation of the general price level and unemployment rates since 1990
8. Refer to the above information. Money supply M1 for this economy is: A. $60. B. $70. C. $130. D. $140.
C. $130.
22. Assuming that Alpha and Beta are the only two nations in the world, the equilibrium world price of steel must be between: A. $5 and $4. B. $4 and $3. C. $3 and $2. D. $2 and $1.
C. $3 and $2.
3. In the data above for a private closed economy, if gross investment is $12 billion, equilibrium GDP is: A. $380. B. $370. C. $360. D. $350.
C. $360.
16. Assume the MPC is .8. If government were to impose $50 billion of new taxes on household income, consumption spending would initially decrease by: A. $100 billion. B. $90 billion. C. $40 billion. D. $50 billion.
C. $40 billion.
9. At equilibrium in the above market for money, the total amount of money demanded is: A. $500. B. $480. C. $460. D. $440.
C. $460.
16. After a deposit of $10 billion of new currency into a checking account in the banking system, excess reserves will increase by: A. $0 billion. B. $7 billion. C. $9 billion. D. $10 billion.
C. $9 billion.
18. Refer to the above diagram. At the equilibrium exchange rate: A. $8 will buy 1 euro. B. 0.8 euros will buy $1. C. 1.25 euros will buy $1. D. $1 will buy 8 euros.
C. 1.25 euros will buy $1.
yield curve
a curve that shows the relationship between interest rates and bonds' time to maturity
Opportunity Cost
What is given up when a choice is made
Opportunity cost
What is given up when a choice is made
Benefit
What you get out of something.
Opportunity Cost
What you give up to get something else
opportunity cost
What you give up when you make a decision. The value of your second best choice.
Innovation
When a company updates old products or creates entirely new products to keep the consumers happy.
Trade Deficit
When a country buys more than they sell to another country
Deficit Spending
When a government's expenditures exceed its revenues, causing or deepening a deficit. This excess spending needs to be financed through borrowing, likely from foreign governments. The increased government spending can help stimulate the economy as more money flows in, but the jump in borrowing can have an adverse effect by raising interest rates.
Substitution effect
When consumers react to an increase in a good's price by consuming less of that good and more of a substitute good
brokerage firm
a company that is in the business of buying and selling securities (stocks and bonds)
mutual fund
a company that offers a service to people by investing their money in various different businesses
unit trust
a company that offers a service to people by investing their money in various different businesses Investing in a ___ reduces risks for small investors. công ty đầu tư tín thác
total revenue
a company's income from selling its products
competition
a competition between companies to win more businesses
inflation
a continual rise in the price level
Partnership
a contract between two or more persons who agree to pool talent and money and share profits or losses
franchise
a contract that gives a single firm the right to sell its goods within an exclusive market
fixed cost
a cost that does not change, no matter how much of a good is produced
variable cost
a cost that rises or falls depending on the quantity produced
Crowding Out
a decrease in investment that results from government borrowing
1. International transactions fall into what two broad categories? A. Manufacturing trade and services trade. B. International trade and international asset transactions. C. Currency transactions and services trade. D. Newly created assets and preexisting assets.
B. International trade and international asset transactions.
Cyclical unemployment
Changes in the general level of economic activity
Nash Equilibrium
Choices of all firms makes no firm better off
Pure Competition
Closest in USA agriculture.
Demand-pull inflation
Increases in the price level caused by increases in aggregate demand
Cost-push inflation
Increases in the price level caused by increases in the costs of production
Market economy
Individual consumers and producers made decisions(capitalism)
proprietorship
a form of business organization with one owner who takes all the risks and all the profits.
partnership
a form of business organization with two or more owners who share the risks and the profits
Partnership
a form of business organization with two or more owners who share the risks and the profits.
partnership
a form of business organization with two or more owners who share the risks and the profits.
cartel
a formal organization of producers that agree to coordinate prices and production
market forces
a free system of trade in which prices and wages rise and fall without being controlled by the government
Inflation
a general and progressive increase in prices
inferior goods
a good that consumers demand less of when their incomes increase
normal goods
a good that consumers demand more of when their incomes increase
durable
a good that does not get used up after each use
non-durable
a good that gets used up
embargo
a government order stopping trade with another country to put pressure on the government of that other country
subsidy
a government payment that supports a business or market
price ceiling
a government-imposed limit on how high a price can be charged
increasing marginal returns
a level of production in which the marginal product of labor increases as the number of workers increases
patent
a license that gives the inventor of a new product the exclusive right to sell it for a specific period of time
quota
a limit placed on the number of imports that may enter a country
market demand schedule
a listing of how much of an item all consumers are willing to purchase at each price.
demand schedule
a listing of how much of an item an individual is willing to purchase at each price
Monopolistic Competition
a market structure in which many companies sell products that are similar but not identical
monopolistic competition
a market structure in which many companies sell products that are similar but not identical
Oligopoly
a market structure in which only a few sellers offer similar or identical products
Emerging Market
a nation with social or business activity in the process of rapid growth and industrialization.
NASDAQ
a nationwide electronic system that links dealers across the nation so that they can buy and sell securities electronically
recession
a period of an economic contraction, sometimes limited in scope or duration.
structural stagnation
a period of protracted slow growth and high unemployment
depression
a period when there is little economic activity and many people are poor or without jobs The country was in the grip of (an) economic ___. the great ___of the 1930s tình trạng trì trệ, đình đốn
regulator
a person or an organization that officially controls an area of business or industry and makes sure that it is operating fairly Ofgas, the gas industry ____ banking ____s
stockbroker
a person who buys and sells equities for clients
consumer
a person who buys and uses goods and sirveces
Consumer
a person who buys goods or services for personal use
entrepreneur
a person who has an idea for a product and starts a new business
producer
a person who makes goods or provides services
consumer
a person who purchases goods and services to satisfy needs and wants
Income Tax
a personal tax levied on annual income
tax haven
a place where taxes are low and where people choose to live or officially register their companies because taxes are higher in their own countries
Monetary policy
a policy of influencing the economy through changes in the banking system's reserves that influence the money supply, credit availability, and interest rates in the economy
Contractionary monetary policy
a policy that decreases the money supply and increases the interest rate, and it tends to decrease both investment and output shifts the AD curve to the left
Expansionary monetary policy
a policy that increases the money supply and decreases the interest rate and it tends to increase both investment and output shifts the AD curve to the right
Socialism
a political and economic theory of social organization that advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.
socialism
a political and economic theory of social organization that advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.
Communism
a political theory derived from Karl Marx, advocating class war and leading to a society in which all property is publicly owned and each person works and is paid according to their abilities and needs.
commodity
a product, such as petroleum or milk, that is considered the same no matter who produces or sells it
price war
a series of competitive price cuts that lowers the market price below the cost of production
barrier to entry
any factor that makes it difficult for a new firm to enter a market
disequilibrium
any price or quantity not at equilibrium; when quantity supplies is not equal to quantity demanded in a market
law of diminishing control
any regulation will become less effective over time as individuals or firms being regulated will figure out ways to circumvent those regulations through innovation, technological change, and political pressure
Goods
any tangible product; anything you can touch; a table.
business cycle
a short-run, temporary upward or downward movement of economic activity, or real GDP, that occurs around the growth trend
buyout
a situation in which a person or group gains control of a company by buying all or most of its shares a management ___
interdependent
a situation in which each country needs the other to meet the needs and wants of its people
hyperinflation
a situation in which prices rise very fast, causing damage to a country's economy
Shortage
a situation in which quantity demanded is greater than quantity supplied
Surplus
a situation in which quantity supplied is greater than quantity demanded
trade deficit
a situation in which the value of a country's imports is greater than the value of its exports
equilibrium
a state of balance, especially between opposing forces or influences The point at which the solid and the liquid are in ____is called the freezing point. Any disturbance to the body's state of ___can produce stress. We have achieved an ____in the economy. trạng thái cân bằng
supply shock
a sudden shortage of a good
interest
a sum paid or charged for the use of money or for borrowing money.
economic model
a theory or simplified representation that helps explain and predict economic behavior in the real world.
central bank
a type of banker's bank whose financial obligations underlie an economy's money supply
nonprice competition
a way to attract customers through style, service, or location, but not a lower price
Labor
a worker or group of workers
inverted yield curve
a yield curve in which the short-term rate is higher than the long-term rate.
Income Approach for calculating GDP
adds up all income earned by factors of production, in the course of producing all goods and services within a country in a given year.
technology
advance in knowledge leading to new and improved goods and services and better ways of producing them.
one way the internet can reduce start up costs
advertising through social media
human resources
also called labor
Human resources
also called lobor
Trade-Off
alternatives that must be given up when one is chosen over another
savings
amount of income that is put aside for future use
price
amount of money exchanged for a good ans service
price
amount of money exchanged for a good or service.
Price
amount of money exchanged for a good or services.
bailout
an act of giving money to a company, a foreign country, etc. that has very serious financial problems The airline was saved by a government ___.
price fixing
an agreement among firms to charge one price for the same good
price fixing
an agreement among firms to charge one price for the same good (can be a result of collusion)
collusion
an agreement among firms to divide the market, set prices, or limit production
hypothesis
an assumption involving two or more variables that must be tested for validity
Capitalism
an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state.
stagflation
an economic situation where there is high inflation (= prices rising continuously) but no increase in the jobs that are available or in business activity
Capitalism
an economic system based on private ownership of capital
Socialism
an economic system based on state ownership of capital
Expenditure Approach for calculating GDP
calculating GDP by adding up SPENDING on all final goods and services produced in the nation during the year.
specialization
process in which businesses and people focus on producing one or a few parts of an entire product
comparative advantage
produces a particular good of a lower opportunity cost than another country.
specialization
producing only a few products instead of many different products
commodity
product that is the same no matter who produces it, such as petroleum, notebook paper, or milk
dividends
profits from a corporation distributed to stockholders
retained earnings
profits not distributed to owners
conditionality
refers to the macroeconomic requirements made by the World Bank land the IMF before the granting of loans.
stored-value card
represents money that the holder has on deposit with the issuer
factors of production
resources of land, labor, capital, and entrepreneurship used to produce goods and services
renewable resources
resources that can be replaced
nonrenewable resources
resources that cannot be replaced
trade-off
sacrificing one good or service to purchase or produce another.
equity financing
sale by a corporation of shares of stock as a way to raise capital (money)
Choice
selecting an item or action from a set of alternatives
choice
selecting an item or action from a set of alternatives.
predatory pricing
selling a product below cost for a short period of time to drive competitors out of the market
predatory pricing
selling a product below cost to drive competitors out of the market
Dumping
selling of a good in another country at a price below the domestic price or below its cost of production
price war
series of competitive price cuts that lowers the market price below the cost of production
Social Security
social welfare program in the U.S., An act passed in 1935 gave government-payed pensions to American citizens over the age 65 as well as provided help for the unemployed, the disabled, and the needy.
consumers
someone who buys and uses goods or services
producer
someone who makes and sells goods
Asset
something of value; a resource; an advantage
goods
something that can be made or grown and can be bought and used
store of value
something that holds its value over time
currency
something that is used as a medium of exchange; money
services
something that someone does for you like a haircut
Services
something that you pay for and have done for you; a haircut.
capital resources
something used to produce a good or service
Economic Decisions (how are these made)
sort of like opportunity cost; you want to do something but you have to be careful in other places in life to for-fill the decision.
selling short
speculators who think the value of a stock is going down, called "Bears"
labor
term for any work that contributes to the production of goods and services
capitalist
term for anyone who owns producer goods
natural resources
term for land and other raw materials
entrepreneurship (management)
term for the intelligent direction and supervision of natural and human economic resources
private capitalism
term for the system in which the majority of a nation's capital is owned and controlled by private individuals and businesses
Aggregate Demand
the TOTAL amount of goods and services in the economy that will be purchased at all possible price levels
Demand
the ability and desire to purchase goods and services
operating cost
the cost of operating a facility, such as a factory or a store
marginal cost
the cost of producing one more unit of a good
international trade
the exchange of capital, goods, and services across international borders or territories
barter
the exchange of goods and services without using money
market
the exchange of goods,services and resources between buyers and sellers
start up costs
the expenses a firm must pay before it can begin to produce and sell goods
start-up cost
the expenses a new business must pay before it can begin to produce and sell goods
predatory pricing
the fact of a business company selling its goods at such a low price that other companies can no longer compete and have to stop selling similar goods
Contractionary Monetary Policy
the federal reserve's adjusting the money supply to increase interest rates to reduce inflation
Expansionary Monetary Policy
the federal reserve's increasing the money supply and decreasing interest rates to increase real GDP
information
the fifth main factor of production
Equilibrium price
the price at which the amount producers are willing to supply is equal to the amount consumers are willing to buy
Bond par value
the principle or total amount of money borrowed that must be repaid to the lender at maturity
human resources
the skills, knowledge, and hard work that people bring to their jobs
Arbitration
the use of an outside person to settle a dispute or disagreement
Automation
the use of automatic equipment to make goods
Specialization
when a place, a person or a group of people has a specialty; knowledge in a specific field of expertise, study, science or craft.
capital flight
when foreign currencies flow out of a country to seek a "safe haven" in another country
Insider Trading
when individuals with information about a company buy or sell securities before the news is public, is illegal
opportunity cost
when making a choice, what it costs you to have another opportunity; what you don't choose
specialization
when people produce a smaller amount of goods and services; a focus on certain goods services
Law of demand
when prices go down, quantity demanded increases,. When prices go up, quantity demanded decreases.
shortage
when quantity demanded is more than quantity supplied
surplus
when quantity supplied is more than quantity demanded
bear market
when stock market prices decline steadily over time
bull market
when stock market prices rise steadily over time
Bull Market
when stock prices are going up
store of value
you can hold on to your money and save it for another day (not so with hamburgers or kisses)
capital resources
capital resources are the things that are used to produce goods po services
Capital Account
capital transfers, sales/purchases of nonfinancial assets
interdependence
depending on one another
casual
describes an employee who works only when needed
inelastic
describes demand that is not very sensitive to price changes
elastic
describes demand that is very sensitive to a change in price
unitary elastic
describes demand whose elasticity is exactly equal to 1
unemployed
describes someone without work who is looking for work that will provide a wage or salary
prospectus
describes the operation of a company that is issues new securities
price discrimination
division of customers into groups based on how much they will pay for a good/service
classical economists
economists who believe that business cycles are temporary glitches, and who generally favor laissez-faire, or nonactivist, policies
Keynesian economists
economists who believe that business cycles reflect underlying problems that can be addressed with activist government policies
Short-run
equilibrium is where the SAS and AD curves intersect and point E is short-run equilibrium
Infrastructure
essential facilities that add to the capital stock of the economy, necessary for economic activity and provide by government
barter
exchange for goods and services (trade)
international trade
exchange of goods and services between nations
exports
exchange of goods and services between people and businesses
International trade
exchange of goods and services between people and businesses in different nations
capital resource
goods made by people and used are used to make other goods and services
Capital resources
goods made by people and used to produce other goods and services
substitutes
goods that are used in place of one another
compliments
goods that are used together, so a rise in demand for one increases the demand for the other
opportunity cost
how a person decides to spend their income; what they have to give up when they make their choice
interdependence
how countries depend on each other for resouroes, goods and services
Demand
how much buyers are able to buy at all possible prices any time
demand
how much consumers are willing and able to at all possible prices and times
Productivity
is output per unit of input
An inflationary gap
is the amount by which equilibrium output is above potential output
recessionary gap
is the amount by which equilibrium output is below potential output
Demand
is the amount of a good or service that consumers are willing and able to buy at a certain price
demand
is the amount of a good or service that consumers are willing and able to buy at a certain price.
supply
is the amount of a good or service that producers are willing and able to sell at a certain price
Supply
is the amount of a good or service that producers are willing and able to sell at a certain price.
supply
is the amount of a good or service that producers are willing and able to sell at a certain price.
Demand
is the amount of a good or servivce that consumers are willing and able to buy at a certain price
potential output
is the amount of goods and services an economy can produce when both capital and labor are fully employed
production
is the combining of resources to make goods or provide services
Production
is the combining of resources to make goods or provide services.
Fiscal policy
is the deliberate change in either government spending or taxes to stimulate or slow down the economy
Social capital
is the habitual way of doing things that guides people in how they approach production
Fed funds rate
is the interest rate banks charge each other for Fed funds
discount rate
is the interest rate the Fed charges for those loans it makes to banks
FDI
is the long-term investment by foreign firms into the domestic market of another country. Refers to buying and selling of a least 10% of a companies shares, by an investor into another country.
Development aid
is the name for long(or short)term grants and technical assistance for the purpose of increasing the living standard of another country.
Dependency ratio
is the percentage of old-age adults and below working age children relative to the number of working age adults
The reserve requirement
is the percentage the Fed sets as the minimum amount of reserves a bank must have
Division of labor
is the splitting up of a task to allow for specialization of production
gross domestic product GDP
is the total market value of all final goods and services produced in an economy in a one year period
NGO's
is typically a non-profit group that is created for a set of specific, public action purposes, including development work.
Long-run equilibrium
is where the LAS and AD curves intersect
debit card
it can be used like an ATM card or like a check
collateral
items that can be seized (taken) by the bank if a borrower fails to pay back a loan
Wealth
money you have.
government monopoly
monopoly created by the government
infant industries
newly developed and have not had the opportunity to develop the economies of scale and low costs that are achieved by selling to a large market
E. I. du Pont
nineteenth-century American gunpowder entrepreneur whose company manufactures hundreds of products today, including carpets and non-stick coating
wants
non-essential goods and services work
common stock
ownership in a corporation, common stockholders can elect a board of directors and vote on corporate policy but in the event a company goes out of business, common stockholders get paid last
preferred stock
ownership in a corporation, usually preferred stockholders get higher dividends
currency
paper money and coin
currency
paper money and coins
underemployed
part-time workers who want to work full-time or people working below their skill level
income
pay that people earn from their jobs
money
payment for goods and services
income
payments received by households,businesses and governments in a given time period that may be spent or saved
transfer payments
payments to individuals that do not involve production by those individuals
upturn to
peak
free enterprise system
people can own and run their own business
traditional economy
people make a living the way their parents did
mixed market capitalism
people own businesses and prices are set by demand for product
bottom
people stop buying or using the products of a particular industry The ___has fallen out of the travel market.
supply-side
people take action, tax cuts for individuals and businesses, trickle down
entrepreneurship
people who take the risk of organizing other resources to produce goods and services
consumer
people whose wants are satisfied by using goods and services
consumers
people whose wants are satisfied by using goods and services.
extremely rare market structure
perfect competition
inflation
persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of currency.
consumer
person who buys goods or services
Enterpreneur
person who takes a risk to produce goods and services in search of a profit.
entrepreneur
person who takes a risk to produce goods and services in search of a profit.
goods
physical items that satisfy needs and wants
benefits
positive results
Price
Amount of money exchanged for a good or service
The market system's answer to the fundamental question"What will be produced?" is essentially:
"Goods and serives that are profitable"
Laissez faire
"Hands off"-gov't should not get involved in the marketplace (business)
Caveat Emptor
"Let the Buyer Beware", given the facts, investors should be allowed to judge for themselves if an investment is a good one or not
The market system's answer to the fundamental question "How will the good and services be produceds?" is essentially:
"With as much machinery as possible"
Property, private property
"______ is a central economic institution of any society, and _____ ______ is the central institution of a free society." --David Friedman
Fiat Money
$ that has value because the gov't backs it or the gov't orders it so.
Negotiation
: a discussion with the goal of reaching an agreement
Wage
: a payment paid to am employee in exchange for work
Strike
: a refusal to work organized by employees as a form of protest
Market Value
: the amount people are generally willing to pay for a given product
Tradable Permit
A legal right to pollute a fixed amount which can be bought or sold between firms
Increasing Marginal Returns
A level of production in which the marginal product of labor increases as the number of workers increases.
Diminishing Marginal Returns
A level of production in which the marginal production of labor decreases as the number of worker increases.
Voluntary export restraint (VER)
A limit placed on imports from a country with the agreement of that country's government
Production Possibilities Curve
A curve that shows alternative ways to use an economy's resources.
Stagflation
A decline in the real GDP along with a rise in the price level.
Contractionary Fiscal Policy
A decrease in government spending or an increase in taxes
Recession
A fall in real GDP over a period of six months or more
Government bond
A financial asset issued by the central or local government as a means of borrowing money
National Minimum Wage
A floor below which wages cannot legally fall
Corporation
A form of business organization that is authorized by law to act as a legal person regardless of the number of owners
Corporation
A form of business organization that is authorized by the law to act as a legal person regardless of the number of owners.
Proprietorship
A form of business organization with one owner who takes all risks and all the profits
Proprietorship
A form of business organization with one owner who takes all the risks and all the profits
Proprietorship
A form of business organization with one owner who takes all the risks and all the profits.
Partnership
A form of business organization with two or more owners who share the risks and the profits
Partnership
A form of business organization with two or more owners who share the risks and the profits.
Inflation
A general increase in prices.
Labour Force Survey
A measure of unemployment based on a survey using the ILO definition of unemployment
Claimant count
A measure of unemployment that includes those receiving unemployment related benefits
International Labour Organisation (ILO)
A member organisation of the UN that collects statistics on labour market conditions and seeks to improve working conditions
401k
A retirenment plan that automatically takes out money from an employee's paycheck before income taxes and invests it in mutual funds for purposes of retirement savings
Incentives
A set of external goals that make you more motivated to finish/do something.
Predatory Pricing
A short run strategy where a firm undercuts rivals on price to below cost
Positive Externality
A side effect of a good or service that benefits someone else not intended.
26. Refer to the above information and assume that Moolah Bank is "loaned up." If it receives a $100 deposit of currency, the banking system of which Moolah is a part could expand loans by: A. $100. B. $90. C. $900. D. $1000.
C. $900.
24. Refer to the above information. If Moolah Bank is legally "loaned up," the banking system's monetary multiplier must be: A. 5. B. 8. C. 10. D. 20.
C. 10.
31. With a $1 per unit tariff, the quantities sold by foreign and domestic producers respectively will be: A. 1 unit and 15 units. B. 7 units and 4 units. C. 11 units and 4 units. D. indeterminate.
C. 11 units and 4 units.
18. When the legal reserve ratio is 30 percent, the monetary multiplier is: A. 5. B. 4. C. 3.33. D. 2.5.
C. 3.33.
per capita GDP
GDP/population
Natural Resources
Gifts of nature
Imports
Goods and services bought from sellers in another nation
Exports
Goods and services produced in one nation but sold to buyers in another nation
Export
Goods and services produced within country but sold outside the country
Capital Resources
Goods made by people and used to produce other goods and services
Infant Industry
Industries in their early phases that are vulnerable to more established industries
Giffen good
Inferior good for which the negative income effect out eights the positive substitution effect when price falls.
In a competitive economy, prices:
Influence consumer to purchase goods and services, influence buisnesses in their purchases of economic resources, influence workers in makeing occupational choices
Economic resources
Inputs used in production including natural resources (land), labour, capital and enterprise
entrepreneur
It is the _____ who joins together the production factors and makes possible large-scale production and distribution.
The use of money contributes to economic efficiency because:
It promotes specialization by overcoming the problems with barter
Goods
Items for sale
Capital Resouces
Items such as land, buildings, tools, money, etc., that are used in the production of other goods,
Services
Jobs that people do for other people in return for pay.
New classical school
Real business cycle theory emphasizes the effect of real economic variables such as changes in tech and external shocks. Individuals and firms maximize expected utility
Saving
Real disposable income minus spending
Indifference curves
Plots the combinations of two goods that provide equal utility to consumer. They 1. Slope downwards 2. Are convex towards origin. 3. Curves can not cross
Supply-side policies
Policies designed to increase aggregate supply by improving the efficiency of labour and product markets
Expansionary Monetary Policy
Policy rate < Neutral interest rate (real trend rate of economic growth + inflation target)
Profit Maximisation
Price and output are chosen to maximise supernormal profit
premium
Regular payment required to purchase insurance.
Inflation
Rise of prices
Monopsony
Single buyer in a market
Protectionist
Someone who would protect domestic producers with tariffs, quotas, and other trade barriers.
Individual Retirement Account
Special account in which a person saves a portion of income for retirement
Consumer expenditure
Spending by households on consumer products
Government Spending
Spending by the central government and local government on goods and services
NAFTA
The North American Free Trade Agreement. Agreement signed in 1992 that called for the gradual elimination of all tariffs and other trade barriers between the United States, Canada, and Mexico over a fifteen-year period.
Free Enterprise
an economic system in which private business operates in competition and largely free of state control.
free enterprise
an economic system in which private businesses compete with each other without much government control free market, free trade
mixed economy
an economy that blends characteristics of both command and market economies, but falls closer to one form or the other
automated teller machine (ATM)
an electronic device that allows bank customers to make transactions without seeing a bank officer
tariff
an excise tan on an imported good
collusion
an illegal agreement among firms to divide the market, set prices, or limit production
NASDAQ
an index of more than 3,000 stocks listed on the Nasdaq exchange that includes the world's foremost technology and biotech giants such as Apple, Google, Microsoft, Oracle and Amazon
producer
an individual or business involved in the production of goods and services
financial intermediary
an institution that collects funds from savers and invests the funds in financial assets.
scarcity
condition of not being able to have all of the goods and services one wants, because wants exceed what can be made from all available resources at any given time.
fiscal
connected with government or public money, especially taxes ___policies/reforms the country's ___system công khố, tài chính
supply-side
connected with the policy of reducing taxes in order to encourage economic growth
Futures
contracts to buy or sell at a specific date in the future at a price specified today
entrepreneurs
creative, original thinkers who are willing to take risks to create new businesses and products
Laffer Curve
cut marginal tax rates to make more money
services
forms of work people do for other such as cutting your lawn
economic freedom
freedom of choice in employment, buyiing selliing, use of time, other decisions related to our economy
efficiency
getting the maximum outpuf from the resources used to produce goods and services
Natural resources
gifts of nature
natural recource
gifts of nature
gilt
gilts [plural] (British English, finance) gilt-edged investments hạng nhất, bảo đảm chắc chắn
trade
give something for another thing
option
gives an investor the right to buy or sell stock at a future date at a preset price
preferred stock
gives shareholders a share of profits but, in general, no voting rights
common stock
gives shareholders voting rights and a share of profits
normal goods
good that consumers demand more of when their incomes rise
Imports
goods and services bought from sellers from another nation
imports
goods and services bought from sellers in another nation
Exports
goods and services produced in one nation but sold in others
final output
goods and services purchased for their final use
substitutes
goods and services that can be used in place of each other
inferior goods
goods that consumers demand less of when their incomes rise
exports
goods,services and capital assets purchased from other countries.
Keynesian solution
gov't needs to increase overall deman by cutting taxes and/or gov't spending
regulation
government intervention in a market that affects the production of a good
command economy
government owns businesses and sets prices
price floor
government-imposed limits on how low a price can be charged
license
government-issued right to operate a business
Financial Account
government-owned assets abroad, foreign-owned assets in the country
production possibilities curve
graph showing the maximum combinations of goods and services that can be produced from a fixed amount of resources in a given period of time.
demand curve
graphically shows the data from a demand schedule
market demand curve
graphically shows the data from a market demand schedule
Fine-tuning
is used to describe such fiscal policy designed to keep the economy always at its target or potential level of income
Monetary base
is vault cash, deposits of the Fed, and currency in circulation
lender of last resort
lending to banks and other financial institutions when no one else will
patent
license that gives the inventor of a new product the exclusive right to sell it for a certain period of time
perfect commodity
market structure in which a large number of firms all produce the same product
monopolistic competition
market structure in which many companies sell products that are similar but not identical
imperfect competition
market structure that does not meet the conditions of perfect competition
natural monopoly
market that runs most efficiently when one large firm supplies all of the output
quantity-adjusting markets
markets in which firms respond to changes in demand by changing production instead of changing their prices
stock index
measures and reports the change in prices of a set of stocks
Current Account
merchandise and services, income receipts, unilateral transfers
currency
money
income
money a person earns from a job
measure of value
money indicates a fixed standard
income
money received on a regular basis from work, property, investments or welfare payments
wants
money spent on things such as eating at restaurants, going to the movies, or other fun things
Quantitative Theory of Money
money supple x velocity = price x real output
interest
money the bank gives people who keep their money in a savings account in the bank
Income
money you earn.
Law of Demand
consumers buy more of a good when its price decreases and less when its price increases
commodity money
has intrinsic value based on the material from which it is made
liquid
having assets that could readily be converted into cash and money at nonfire sale prices
solvent
having sufficient assets to cover their long-run liabilities, but were not sufficiently liquid
junk bonds
high-risk, high-yield corporate bonds
supply
how much of something is available
demand
how much of something people want
labor
human effort directed toward producing goods and services.
work
human labour — whether paid or unpaid, voluntary or involuntary
Laissez Faire
idea that government should play as small a role as possible in economic affairs
inelastic demand
if quantity demanded changes little as price changes
elastic demand
if quantity demanded changes significantly as price changes
abject
in ___poverty khốn khổ, nghèo rớt mồng tơi
absolute advantage
in comparative advantage theory when one country can produce more of a given product than another
Productivity
The quantity of goods and services produced by an individual, a company, a sector of the economy, or an economy in a given amount of time.
Replacement Ratio
The ratio of unemployment benefits to average earnings
Aggregate Supply
The total amount that producers in an economy are willing and able to supply at a given price level in a given period of time.
Aggregate Demand
The total demand for a country's goods and services at a given price level and in a given time period
Gross Domestic Product (GDP)
The total output of goods and services produced in a country
Gross National Product
The total value of goods and services, including income received from abroad, produced by the residents of a country within a specific time period, usually one year.
Economists:
Use both the economic perspective and the scientific method
Investment
Use of assets to earn income or profit
How can you improve GDP
Use of technology
Patent
a document granting an inventor sole rights to an invention
variable
a factor that can change
tax
a fee citizens and others pay to local, state, or national government
specialization
a focus on certain goods or services
Corporation
a form of business organization that is authorized by law to act as a legal person regardless of the number of owners.
corporation
a form of business organization that is authorized by law to act as a legal person regardless of the number of owners.
proprietorship
a form of business organization with one owner who takes all risks and all the profits
Proprietorship
a form of business organization with one owner who takes all the risks and all the profits.
license
a government-issued right to operate a business
supply curve
a graph of the quantity supplied of a good at various prices
market supply curve
a graph of the quantity supplied of a good by all suppliers at various prices
demand curve
a graphic representation of a demand schedule
scarcity
a lack of goods or services
diminishing marginal returns
a level of production at which the marginal product of labor decreases as the number of workers increases
Depression
a long-term economic state characterized by unemployment and low prices and low levels of trade and investment
monopoly
a market in which a single seller dominates
black market
a market in which goods are sold illegally, without regard for government controls on price or quantity
oligopoly
a market structure in which a few large firms dominate a market
perfect competition
a market structure in which a large number of firms all produce the same product and no single seller controls supply or prices
imperfect competition
a market structure that fails to meet the conditions of perfect competition
natural monopoly
a market that runs most efficiently when one large firm supplies all of the output
natural monopoly
a market that runs most efficiently when one large firm supplies all the output
stock exchange
a market where securities are bough and sold
price ceiling
a maximum price that can legally be charged for a good or service
medium of exchange
a means through which goods and services can be exchanged
elasticity of demand
a measure of how consumers respond to price changes
elasticity of demand
a measure of how responsive consumers are to price changes
elasticity of supply
a measure of the way quantity supplied reacts to a change in price
total revenue test
a method of measuring elasticity by comparing total revenues
price floor
a minimum price for a good or service
minimum wage
a minimum price that an employer can pay a worker for one hour of labor
government monopoly
a monopoly created by the government
Natural monopoly
a monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms
black market
an illegal form of trade in which foreign money, or goods that are difficult to obtain, are bought and sold to buy or sell goods on the ___ a flourishing ___ in foreign currency During the war, there was a thriving ___ in food. You could buy anything you needed on the ____
quantitative easing
a policy of targeting a particular quantity of money by buying financial assets from banks and other financial institutions with newly created money
rent control
a price ceiling placed on apartment rent
Public Good
a product or service that is available for all people to consume, whether they pay for it or not
commodity
a product or service that is indistinguishable from competing seller's products
fad
a product that is popular for a short period of time
Incentive
a reason for doing something; something that stimulates action
collusion
occurs when competing firms in an industry agree to control prices and increase profits
Bourgeoise
of or characteristic of the middle class, typically with reference to its perceived materialistic values or conventional attitudes.
market competition
rivalry among businesses for resoruces and customers
Competition
rivalry between producers/sellers of a good or service
competition
rivalry between producers/sellers of a good or service.
Law of Diminishing Marginal Utility
rule stating that the additional satisfaction a consumer gets from purchasing one more unit of a product will lessen with each additional unit purchased
near money
savings accounts and time deposits that can be converted into cash relatively easily
mortgage-backed securities
securities that are derivatives of mortgages in which thousands of mortgages are packaged with other mortgages into a bundle of mortgages and sold on the securities market
Rising input costs will eventually
shift the SAS curve up so that real output remains unchanged
structural unemployment
situation where jobs exist but do not match the skills of available workers
micro-credit
small loans to promote small business
consumer
someone who buys goods
natural resource
something that is in or supplied by our natural environment and can be consumed or used by people
market product
sum of all individual demands for the product; shows how total quantity demanded of a good varies as price of the good varies
scarcity
supply is limited
tax evasion
sự trốn thuế, sự lậu thuế the crime of deliberately not paying all the taxes that you should pay
Tariff
tax on imported goods
frictional unemployment
temporary unemployment experienced by people changing jobs
entrepreneur
term for a person who undertakes management of economic enterprises on a bold scale, with some danger of losing his investment of money and time
command (planned or directed) economy
term for a system in which a centralized authority determines the production and distribution of goods and services as well as things like savings, investments, and prices
traditional economy
term for a system in which decisions involving the production, distribution, and consumption of goods are based upon custom, heredity, and caste
free enterprise economy (private capitalism/market economy)
term for a system in which people are free to make their own economic choices
state capitalism
term for a system in which the owner of much of the nation's capital is a powerful, centralized apparatus called the collectivist state
mixed economy
term for a system that combines a good measure of free enterprise in some areas with heavy state regulation in others
subsistence economy
term for an economic system that provides barely enough to keep a society alive
factors of production
term for certain resources used in the production of goods
capital (producer goods)
term for goods used to produce other goods
market power
the ability of a company to control prices and total market output
Storage value
the ability of an item to hold value over time
leveraged buyout
the act of a small company buying a larger company using money that is borrowed based on the value of this larger company
Marketing
the action or business of promoting and selling products or services, including market research and advertising.
gross national product GNP
the aggregate final output of citizens and businesses of an economy in a one-year period.
nominal GDP
the amount of goods and services produced measured at current prices.
demand
the amount of something consumers are willing to buy for a certain price
supply
the amount of something that is available at a certain price
quantity supplied
the amount that a supplier is willing and able to supply at a specific price
profits
the amount that is left after compensation to employees, rents, and interest have been paid out.
opportunity cost
the best thing you give up to get something else you want or need
Federal Reserve System
the central bank of the United States
income effect
the change in consumption that results when a price increase causes real income to decline
income effect
the change in the amount that consumers will buy because the purchasing power of their income changes
surplus
the condition in which a quantity is larger than needed
search costs
the financial and opportunity costs that consumers pay when searching for a good or service
protectionism
placement of legal restrictions on international trade, including tariffs, quotas, subsidies and other barriers
African Empires (How did they use their land)
the first to mine and get iron and gold ore from the ground to refine and trade with the other cities; effectively the first place to have a gold rush.
natural resources, labor, capital, and entrepreneurship
the four main categories of factors of production
deflation
the general lowering of prices in an economy
interventionism
the policy or practice of a government influencing the economy of its own country, or of becoming involved in the affairs of other countries
asset-stripping
the practice of buying a company which is in financial difficulties at a low price and then selling everything that it owns in order to make a profit
leverage
the practice of buying an asset with borrowed money
predatory pricing
the practice of charging a very low price for a product with the intent of driving competitors out of business or out of a market
diversification
the practice of distributing investments among different financial assets
economics
the study of how individuals and societies make choices about ways to use scarce resources to fulfill their needs and wants.
Economics
the study of how people seek to satisfy their needs and wants by making choices
Economics
the study of how society manages its scarce resources
macroeconomics
the study of the behavior of the economy as a whole and how major economic sectors, such as industry and government, interact
total cost
the sum of fixed costs plus variable costs
goods
things people buy or sell
services
things people do for others for money
goods
things people make or sell
needs
things people must have to live
natural resources
things that come from nature such as trees, land, and water
incentive
things that motivate or incite people to change a behavior
Incentive
things that motivate or incite people to change a behavior.
distribution
to move goods from where they are made or grown to stores
Boycott
to purposely not use or engage with an individual, group, company
reasons people by stocks
to receive dividends and for capital growth
spend
to use money to pay for goods or services
aggregate income
total of all incomes in an economy, without taking inflation and taxes into account
Per capita output
total output divided by total population
short term financing types
trade credit, bank loans, retained earnings
barter
trade something without using money
downturn to
trough
spillover
unintended consequences of economic activity
goods
objects that satisfy people´s wants
Incentive
Things that motivate or incite people to change a behavior
Wants
Things that people would like to have but can live without, such as TVs.
Merger
combination of two or more companies into a single firm
merger
combination of two or more companies into a single firm
economy
the way people make, buy, use, and sell things
International Trade
Exchange of goods and services between businesses in different nations
Production
Is the combining of resourced to make goods or provide services
Down Payment
The amount of money you give someone on the day of purchase.
The term "other things equal" means that:
A number of relevant variables are assumed to be constant
Hyperinflation
An inflation rate above 50 per cent
Labor
Human work.
Production
Is combining of resources to make goods or provide services
Average Cost
The cost per unit
Frictional unemployment
Time lag between hire/fire
Private property
resources and products owned by individuals or businesses
depreciation
the decrease in an asset's value
Profit motive
A person's motivation to make a profit, and to earn money as an entrepreneur.
Most Favored Nation Clause
A provision allowing a country with such an agreement to receive the same tariff reduction that the United States negotiates with another country.
Land
All natural resources: including land, water, air, and wildlife.
Resource
Anything used to produce goods and services
Law of Demand
Consumers will buy more of a good when its price is lower and less when its price is higher
Privatization
Conversion of state-owned factories and other property to private ownership.
Recession
Decline in business activity.
Expansion
Economic expansion in the business cycle
Depression
Economic growth
Bust
Economic recession in the business cycle
Capitalism
Economic system in which the means of production are privately owned, prices are determined by supply and demand, and business are free to direct resources into activities that promise the greatest profits.
Collectivization
Forced common ownership of factors of production; used in the former Soviet Union in agriculture and manufacturing under Stalin.
Trade Bloc
Group of countries that actively trade with each other.
The World Bank
International agency that makes loans to developing countries.
International Monetary Fund
International organization that offers advice to all nations on monetary and fiscal policy.
Inflation
May be defined as a rise in the general level of prices in an economy.
Developing Country
Nation with low GDP, high rates of illiteracy, high unemployment, and high fertility rates.
Production
Refers to the activity of combing resources to make goods and services.
Investment
Refers to the use of resources by businesses, individuals, or government to increase productive capacity by developing new technology, obtaining new capital resources, or improving the skills of the work force.
Purchasing Power
The actual amount of goods and services that can be bought with a given unit of money.
Business cycle
The continuous sequence of ups and downs in the economy
Demand
The desire to own something and the ability to pay for it
Standard of Living
The level of subsistence of a nation, social class or individual with reference to the adequacy of necessities and comforts of daily life.
Capital
The money, buildings, machinery, and equipment used to produce goods and services.
Opportunity costs
The most important alternative that is given up as a result of a specific economic decision.
Gross Domestic Product (GDP)
The most inclusive measure of an economy's output. It is defined as the market value of the total output of final goods and services produced in one year.
Needs
Things that are required in order to live
Trade Deficit
This occurs when a country imports (which are negative) more than they export (which are positive).
Economic growth
When the economy experiences an increase in the actual amount of goods and services produced in a given time
World Trade Organization
Worldwide trade group organized to establish rules for international trade and help resolve trade disputes
financial asset
a claim on the property of the borrower
investment objective
a financial goal used to determine if an investment is appropriate
producer
a person or business that farms, makes goods, or provides services
demand schedule
a table that lists the quantity of a good a person will buy at various prices in a market
market demand schedule
a table that lists the quantity of a good all consumers in a market will buy at various prices
financial system
all the institutions that help transfer funds between savers and investors
mutual fund
an investment company that gathers money from individual investors and purchases a range of financial assets.
natural resources
naturally ocurring materials that are useful to people
African Empires and the trans-Saharan Caravan
the Berber traders who bartered with other countries and ; the people who supplied the trans-Saharan caravan; giving them gold and iron to trade.
Human Resources
the humans or workers doing the work in a business; the workers or employees.
human resources
the people that make goods or provide services
risk
the possibility for loss on an investment
Capital Resources
the things (including money) that are bought with money for the business; machinery for example.
demand
the want for certain products.
goods
things that people need or want
Wants
things that you would like to have but are not necessary for survival
Supply
what you have; amount of stuff.
Opportunity cost (trade-off)
when you are trying to do something and you come in contact with another choice and you have to choose between the 2.
Scarcity
when you don't have very much of a particular thing or product; scarce.
financial market
where buyers and sellers exchange financial assets
secondary market
where financial assets are resold
capital market
where long-term financial assets are bought and sold
money market
where short-term financial assets are bought and sold
services
work that someone does that does not produce a things
Economic models:
Emphasize basic economic relationships by purposefully simplifying the complexities of the real world
Barter:
Entails the exhange of goods for goods
natural resources
materials from nature
11. The equilibrium price level is: A. 150. B. 200. C. 250. D. 300.
B. 200.
8. The equilibrium level of income (Y) is: A. 360. B. 225. C. 200. D. 135.
B. 225.
Income Elasticity
Positive = Normal Good Negative = Inferior Good
Cross Price Elasticitiy
Positive = Substitute Negative = Complement
government spending
goods and services that government buys
economic flow
interaction of consumers, businesses, and markets.
medium of exchange
what you exchange your labor for (money, hamburgers, kisses)
needs
what you must pay for first, such as electric bills, groceries..
within budget
(= did not cost more money than was planned).
a budget deficit
(= when the government spends more money than it earns)
on a tight budget
(= without much money to spend).
The conomic function of profits losses is to:
Signal that resources should be reallocated
Preferred Stock
Stock whose dividends are based on a fixed annual rate.
Common Stock
Stocks whose dividends are based on market fluctuations.
growth, resources
"The free market is not primarily a device to procure ____. It is a device to secure the most efficient use of _____." --Henry C. Wallich
Which one of the following expressions best states the idea of opportunity cost?
"There is no such thing as a free lunch"
The market system's ansewr to the fundamental question "Who will get the goods and services" is essentially:
"Those willing and able to pay for them"
real output
%change in price level = %change in wages - %change in productivity
Multiplier effect
( AD curve) the amplification of initial changes in expenditures
Fiscal Budget Deficit Equation
( G - T ) = ( S - I ) - ( X - M ) Fiscal budget deficit = Excess of saving over domestic investment + Trade balance
securities exchanges
(12) physical place where buyers and sells meet to exchange securities, such as the NYSE/NASDAQ
gearing
(British English) (North American English leverage) (finance) the relationship between the amount of money that a company owes and the value of its shares
Monopoly
(economics) a market in which there are many buyers but only one seller
deflation
(economics) a reduction in the amount of money in a country's economy so that prices fall or remain the same
Consumption
(economics) the utilization of economic goods to satisfy needs or in manufacturing
portfolio
(finance) a set of shares owned by a particular person or organization an investment/share ___ a ____manager
liquid
(finance) in cash, or that can easily be changed into cash ___assets liquidity(n)
depressed
(of a place or an industry) without enough economic activity or jobs for people an attempt to bring jobs to ____ areas trì trệ, đình trệ
index
(pl. indexes, indices BrE ˈɪndɪsiːz ; NAmE ˈɪndɪsiːz ) a system that shows the level of prices and wages, etc. so that they can be compared with those of a previous date
Factors that shift short run aggregate supply
1. Labor productivity 2. Input prices 3. Expectation of future output prices 4 taxes and subsidies 5. Exchange rates
incentive
1 [countable, uncountable] ___(for/to somebody/something) (to do something) something that encourages you to do something There is no ____for people to save fuel. There is an added ___for you to buy from our catalogue—a free gift with every purchase. 2 a payment or concession (= a reduction in the amount of money that has to be paid) that encourages somebody to do something tax ____s to encourage savings động cơ, sự khuyến khích
quote
1 [transitive] ____something (at something) (finance) to give a market price for shares, gold or foreign money Yesterday the pound was ____d at $1.8285, unchanged from Monday. 2 [transitive] ____something (finance) to give the prices for a business company's shares on a stock exchange Several football clubs are now ____d on the Stock Exchange. định giá
equity
1 [uncountable] (finance) the value of a company's shares; the value of a property after all charges and debts have been paid He plans to raise the company's return on ____to 15%. 2 ___es [plural] (finance) shares in a company which do not pay a fixed amount of interest
duties of fed
1) conducting monetary policy (influencing the supply of money and credit in the economy) 2) supervising and regulating financial institutions 3 )serving as a lender of last resort to financial institutions 4) providing banking services to the US govt 5) issuing coin and currency 6) providing financial services to commercial banks, savings and loan associations, savings banks, and credit unions
Exchange Rate Regimes
1. Formal Dollarization (adopts foreign currency) 2. Monetary Union (common currency) 3. Fixed Peg 4. Target zone 5. Crawling Peg 6. Crawling Bands 7. Manged floating 8. Independently floating
Regional Trading Agreements
1. Free Trade Area (no barriers) 2. Customs Union (common trade policies) 3. Common market (removes labor/capital barriers) 4. Economic Union (economic policy/institutions) 5. Monetary Union (common currency)
Factors that increase aggregate demand
1. Increase in consumer wealth 2. Business expectations 3. Consumer expectations of future income 4. High capacity utilization 5. Expansionary monetary policy. 6. Expansionary Fiscal Policy 7. Exchange rates 8. Global economic growth
Factors that shift long run aggregate supply.
1. Increase in supply and quality of labor 2. Increase in supply of natural resources 3. Increase in the stock of physical capital 4. Technology
Factors affecting SRAS
1. Input prices 2. labor productivity 3. expectations for output prices 4. taxes and subsidies 5. exchange rates
Key role of central banks
1. Sole Supplier of Money 2. Banker to the government and other banks 3. Regulator and supervisor of payment system 4. Lender of last resort 5. Holder of gold and foreign exchange reserves 6. Conductor of monetary policy
Factors affecting AD
1. consumer wealth 2. business expectations 3. income expectations 4. capacity utilization 5. monetary an dfiscal policy 6. exchange rates 7. global economic growth
conditions for monopolistic competition
1. large numbers of buyers and sellers 2. differentiated products 3. free entry and exit in long run
conditions for perfect competition
1. many buyers and sellers 2. sellers that offer identical products 3. well-informed buyers and sellers 4. the right to enter and exit the market freely
Factors affecting LRAS
1. size of labor force 2. labor productivity 3. expectations for output prices 4. stock of physical capital 5. technology
Decile
10% of the population of a group
The US current world rank in GDP Per Capita is
19th
Competition
2 stores competing against each other
Corporation
A form of business organization that is authorized by law to act as a legal person regard less of the number of owners
Fiat
A government decree or order
Partnership
A business organization in which two or more individuals manage and operate the business. Both owners are equally and personally liable for the debts from the business. Partnership doesn't always mean two people. There are many large partnerships who have thousands of partners.
Bonds
A certificate issued by a government or private company which promises to pay back with interest the money borrowed from the buyer of the certificate: The School issued bonds to raise money for a new building.
Monetary Policy Committee (MPC)
A committee of the Bank of England with responsibility for setting the interest rate in order to meet the government's inflation target
continuum
A continuum is something that keeps on going, changing slowly over time, like the continuum of the four seasons
Sunk Costs
A cost which cannot be recouped on exiting the industry
Fixed Costs
A cost which is independent of output in the short run
Variable Costs
A cost which is related to output produced in the short run
Credit Score
A credit score is a numerical expression based on a level analysis of a person's credit files, to represent the creditworthiness of that person.
Friedrich Von Hayek/ The wealth of nations
A famous economist born in Vienna, Austria, in 1899. Friedrich Hayek is well-known for his numerous contributions in the field of economics and political philosophy. Hayek's approach mostly stems from the Austrian school of economics and emphasizes the limited nature of knowledge. He is particularly famous for his defense of free-market capitalism and is remembered as one of the greatest critics of the socialist consensus.
Corporation
A form of buisness organization that is authorized by law to act as a legal person regardless of the number of owners
Proprietorship
A form of buisness organization with one owner who takes all the risks and all the profits
Partnership
A form of buisness organization with two or more owners who share the risks and the profits
Term of Loan
A limited or established period of time that something is supposed to last.
Monopoly
A market dominated by a single seller
Monopoly
A market dominated by a single seller.
Oligopoly
A market structure in which a few large firms dominate a market
Perfect Competition
A market structure in which a large number of firms all produce the same product
Consumer prices index
A measure of changes in the price of a representative basket of consumer goods and services. Differs from the retail price index (RPI) in methodology and coverage.
Elasticity of Demand
A measure of the way quantity supplied reacts to change in price. Inelastic-->gas and medicines Elastic--> soda, Doritos
Niche
A niche market is the subset of the market on which a specific product is focused. The market niche defines the product features aimed at satisfying specific market needs, as well as the price range, production quality and the demographics that is intended to impact. It is also a small market segment.
Embargo
A official ban on trade with another country
Economic rent
A payment to a factor of production about its value in its next highest valued use (opportunity cost). Land in Manhattan.
stagflation
A period of falling output and rising prices
Business Cycle
A period of macroeconomics followed by a period of contraction.
Producer
A person who makes goods or provides services.
entreprenuer
A person who organizes and manages any enterprise, especially a business, usually with considerable initiative and risk
Roth IRA
A personal savings plan; contributions are not tax-deductible; earnings are tax-free
Karl Marx/ The communist manifesto
A philosopher and economist famous for his ideas about capitalism and communism. Born in Prussia in 1818, Marx, in conjunction with Friedrich Engels, published "The Communist Manifesto" in 1848, which explains history as a class struggle between workers and owners of capital and sees a classless, communist society as an inevitable result of this struggle. Later in his life he wrote "Das Kapital," which discussed the labor theory of value.
Budget
A plan for future spending and saving, weighing estimated income against estimated expenses.
Recession
A poor economic time, characterized by unemployment
A well tested economic therory is often called:
A principle
Which of the following terms implies the greatest degree of confidence in an economic generalization?
A principle
Collective Bargaining
A process by which union and company representatives meet to negotiate a new labor contract.
Recession
A prolonged economic contraction.
Depression
A recession that's especially long and severe.
Balance of payments
A record of money flows coming in and going out of a country
Inflation
A rise in prices
Macroeconomic equilibrium
A situation where aggregate demand equals aggregate supply and real GDP is not changing
Unemployment
A situation where people are out of work but are willing and able to work
Full employment
A situation where those wanting and able to work can find employment at the going wage rate
Relative Poverty
A state where a household or person is significantly poorer than the average for the rest of society
Absolute Poverty
A state where a household or person is unable to purchase the basic necessities to sustain a civilised life
Gini Coefficient
A statistical measure of inequality; on Lorenz curve diagram, Gini coefficient = area between line of equality and Lorenz curve/whole area under line of equality
pension
A sum paid regularly to a person after retirement.
Deflation
A sustained fall in the general price level
Inflation
A sustained rise in the price level
Stock Market
A system for buying and selling shares of companies
Market Economy
A type of economy in which consumers make all the decision on the production and distribution of goods and services
Mixed Economy
A type of economy in which some economic decisions are made by the government and others are made by private individuals
Command Economy
A type of economy in which the government makes all the decisions on the production and distribution of goods and services
Frictional Unemployment
A type of unemployment caused by workers voluntarily changing jobs and by temporary layoffs; unemployed workers between jobs.
Command Economy
An economy where the government decides what the producers make and how much the product or service will cost.
15. The commercial banking system has excess reserves of: A. $0 billion. B. $30 billion. C. $60 billion. D. $70 billion.
A. $0 billion.
9. Refer to the above information. Money supply M2 for this economy is: A. $480. B. $130. C. $490. D. $630.
A. $480.
4. In the above diagram for a private closed economy, at the equilibrium level of GDP, investment and saving are both: A. $50. B. $100. C. $20. D. $40.
A. $50.
11. Suppose the balance on the financial account is -$300 billion and the balance on the capital account is +$5 billion. The size of the current account is: A. +$295 billion. B. -$295 billion. C. +$305 billion. D. +$5 billion.
A. +$295 billion.
23. Refer to the above information. If Moolah Bank is legally "loaned up," the reserve requirement must be: A. 10 percent. B. 15 percent. C. 20 percent. D. 25 percent.
A. 10 percent.
4. In the above diagram, the economy's relevant aggregate demand and immediate-short-run aggregate supply curves, respectively, are lines: A. 4 and 3. B. 4 and 1. C. 2 and 4. D. 2 and 3.
A. 4 and 3.
19. The multiplier for this economy is: A. 4. B. 3. C. 2. D. 2.33.
A. 4.
23. The public debt declined in year: A. 6. B. 5. C. 4. D. 3.
A. 6.
21. At a world price of $2: A. Alpha will want to import 20 units of steel. B. Beta will want to export 20 units of steel. C. Alpha will want to export 20 units of steel. D. neither country will want to import steel.
A. Alpha will want to import 20 units of steel.
27. In the above diagram, the value of the multiplier for this economy is: A. BC/hg. B. BC/AB. C. ed/di. D. df/BC.
A. BC/hg.
11. Which of the following does not explain what backs the money supply in the United States? A. It is backed by gold. B. It is widely accepted in transactions. C. It is designated "legal tender" by the Federal government. D. It is relatively scarce.
A. It is backed by gold.
22. Which one of the following might be a plausible explanation for the change in the dollar-yen exchange rate from 1985 to 2003? A. Japan exported much more to the United States during this period than it imported from the United States. B. Japan greatly increased its purchases of military equipment from the United States during this period. C. Japan's economy grew far faster than the U.S. economy during this period. D. Japan's government devalued the yen during this period.
A. Japan exported much more to the United States during this period than it imported from the United States.
34. Which of the following statements is false? A. Studies show that developing nations that have relied on import restrictions to protect domestic industries have had higher growth rates than similar nations pursuing more open economic policies. B. The United States Constitution forbids individual states from levying tariffs. C. The high tariffs of the Smoot-Hawley Act of 1930 and the retaliation they caused worsened the Great Depression. D. The European Union has enhanced prosperity in Western Europe.
A. Studies show that developing nations that have relied on import restrictions to protect domestic industries have had higher growth rates than similar nations pursuing more open economic policies.
17. Which one of the following is true about the U.S. Federal Reserve System? A. There are 12 regional Federal Reserve Banks. B. The head of the U.S. Treasury also chairs the Federal Reserve Board. C. There are 14 members of the Federal Reserve Board. D. The Open Market Committee is smaller in size than the Federal Reserve Board.
A. There are 12 regional Federal Reserve Banks.
The basic purpose of the other-things-equal assumption is to
Allow one to reason about the relationship between variables X and Y without the intrusion of variable Z
9. The production possibilities curves above suggest that: A. West Mudville should specialize in, and export, baseball bats. B. West Mudville should specialize in, and export, both baseballs and baseball bats. C. East Mudville should specialize in, and export, baseball bats. D. workers will try to immigrate from West Mudville to East Mudville.
A. West Mudville should specialize in, and export, baseball bats.
35. A high tariff on imported good X might reduce domestic employment in industry Y if: A. X is an input used domestically in producing Y. B. X and Y are substitute goods. C. X is an inferior good. D. Y is an inferior good.
A. X is an input used domestically in producing Y.
2. If you write a check on a bank to purchase a used Honda Civic, you are using money primarily as: A. a medium of exchange. B. a store of value. C. a unit of account. D. an economic investment.
A. a medium of exchange.
46. The problem of cyclical asymmetry refers to the idea that: A. a restrictive monetary policy can force a contraction of the money supply, but an expansionary monetary policy may not achieve an increase in the money supply. B. the monetary authorities have been less willing to use an expansionary monetary policy than they have a restrictive monetary policy. C. cyclical downswings are typically of longer duration than cyclical upswings. D. an expansionary monetary policy can force an expansion of the money supply, but a restrictive monetary policy may not achieve a contraction of the money supply.
A. a restrictive monetary policy can force a contraction of the money supply, but an expansionary monetary policy may not achieve an increase in the money supply.
7. Refer to the above diagram, in which Qf is the full-employment output. The shift of the aggregate demand curve from AD1 to AD2 is consistent with: A. an expansionary fiscal policy. B. a major recession. C. a contractionary fiscal policy. D. severe demand-pull inflation.
A. an expansionary fiscal policy.
11. In the above diagram for a private closed economy, the upward shift of the aggregate expenditures schedule from (C + Ig)1 to (C + Ig)2 reflects: A. an increase in investment expenditures. B. a decrease in consumption expenditures. C. an increase in the MPC. D. an increase in the APS.
A. an increase in investment expenditures.
40. Refer to the above diagrams. The numbers in parentheses after the AD1, AD2, and AD3 labels indicate the levels of investment spending associated with each curve. All figures are in billions. If the MPC for the economy described by the figures is 0.8: A. an increase in the money supply from $80 to $100 will shift the aggregate demand curve rightward by $50 billion at each price level. B. an increase in the money supply from $80 to $100 will shift the aggregate demand curve leftward by $40 billion at each price level. C. a decrease in the interest rate from 9 percent to 6 percent will shift the aggregate demand curve leftward by $100 billion at each price level. D. a decrease in the interest rate from 6 percent to 3 percent will shift the aggregate demand curve leftward by $50 billion at each price level.
A. an increase in the money supply from $80 to $100 will shift the aggregate demand curve rightward by $50 billion at each price level.
19. Refer to the above diagram. Other things equal, a leftward shift of the supply curve would: A. appreciate the euro. B. cause a shortage of euros. C. increase the equilibrium quantity of euros. D. appreciate the dollar.
A. appreciate the euro.
21. Assume that the listed amounts constitute this bank's complete set of accounts. Moolah's: A. assets are $1,100. B. liabilities are $1,100. C. net worth is $300. D. profit is $1,000.
A. assets are $1,100.
29. Refer to the above diagram for the Federal funds market. If the Fed wants to increase reserves from $200 billion to $300 billion it should: A. buy bonds from banks and the public. B. sell bonds to banks and the public. C. buy bonds from banks and sell them to the public. D. buy bonds from the public and sell them to banks.
A. buy bonds from banks and the public.
10. The money supply is backed: A. by the government's ability to control the supply of money and therefore to keep its value relatively stable. B. by government bonds. C. dollar-for-dollar by gold and silver. D. by gold reserves representing a fraction of the total value of dollars in circulation.
A. by the government's ability to control the supply of money and therefore to keep its value relatively stable.
45. One of the strengths of monetary policy relative to fiscal policy is that monetary policy: A. can be implemented more quickly. B. is subject to closer political scrutiny. C. does not produce a net export effect. D. entails a larger spending income multiplier effect on real GDP.
A. can be implemented more quickly.
4. In the United States, the money supply (M1) is comprised of: A. coins, paper currency, and checkable deposits. B. currency, checkable deposits, and Series E bonds. C. coins, paper currency, checkable deposits, and credit balances with brokers. D. paper currency, coins, gold certificates, and time deposits.
A. coins, paper currency, and checkable deposits.
10. Refer to the above diagram. If the full-employment level of GDP is A, then it would be appropriate fiscal policy for government to: A. decrease spending and increase taxes. B. decrease spending and decrease taxes. C. increase spending and increase taxes. D. increase spending and decrease taxes.
A. decrease spending and increase taxes.
10. Refer to the above data. Zabella's balance on capital and financial account shows a: A. deficit of $5 billion. B. surplus of $10 billion. C. deficit of $10 billion. D. surplus of $5 billion.
A. deficit of $5 billion.
17. The U.S. demand for euros is: A. downsloping because, at lower dollar prices for euros, Americans will want to buy more European goods and services. B. downsloping because, at higher dollar prices for euros, Americans will want to buy more European goods and services. C. downsloping because the dollar price of euros and the euro price of dollars are directly related. D. upsloping because a higher dollar price of euros makes European goods and services more attractive to Americans.
A. downsloping because, at lower dollar prices for euros, Americans will want to buy more European goods and services.
15. Suppose the government purposely changes the economy's cyclically-adjusted budget from a deficit of 0 percent of real GDP to a deficit of 3 percent of real GDP. The government is engaging in a(n): A. expansionary fiscal policy. B. contractionary fiscal policy. C. neutral fiscal policy. D. low-interest rate policy.
A. expansionary fiscal policy.
1. In recent years the United States has: A. exported more services abroad than it has imported. B. had a small goods trade surplus with Japan. C. had a large goods trade surplus with the rest of the world. D. maintained an overall trade surplus (goods and services combined) with the rest of the world.
A. exported more services abroad than it has imported.
24. When aggregate demand declines, the price level may remain constant, at least for a time, because: A. firms individually may fear that their price cut may set off a price war. B. menu costs rise. C. price cuts tend to increase efficiency wages. D. product markets are highly competitive.
A. firms individually may fear that their price cut may set off a price war.
32. Other things equal, economists would prefer: A. free trade to tariffs and tariffs to import quotas. B. free trade to import quotas and import quotas to tariffs. C. import quotas to tariffs and tariffs to voluntary export restrictions. D. import quotas to free trade and free trade to tariffs.
A. free trade to tariffs and tariffs to import quotas.
20. "Subprime mortgage loans" refer to: A. high-interest rate loans to home buyers with above average credit risk. B. home-buying loans that charge interest rates below the prime interest rate. C. loans to buyers of homes that are in need of substantial repair. D. loans from the Federal Reserve to home mortgage lenders to support a greater volume of home-buying loans at affordable interest rates.
A. high-interest rate loans to home buyers with above average credit risk.
20. In the above diagram and other things equal, a shift of the aggregate supply curve from AS0 to AS1 might be caused by a(n): A. increase in government regulation. B. increase in aggregate demand. C. increase in productivity. D. decline in nominal wages.
A. increase in government regulation.
38. Refer to the above diagrams. The numbers in parentheses after the AD1, AD2, and AD3 labels indicate the levels of investment spending associated with each curve. All figures are in billions. If the money supply is MS1 and the goal of the monetary authorities is full-employment output Qf, they should: A. increase the money supply from $80 to $100. B. increase the money supply from $80 to $120. C. maintain the money supply at $80. D. decrease the money supply from $80 to $60.
A. increase the money supply from $80 to $100.
3. The current account in a nation's balance of payments includes: A. its goods exports and imports, and its services exports and imports. B. foreign purchases of domestic assets. C. purchases of foreign assets. D. all of these.
A. its goods exports and imports, and its services exports and imports.
16. A decrease in aggregate demand will cause a greater decline in real output the: A. less flexible is the economy's price level. B. more flexible is the economy's price level. C. steeper is the economy's AS curve. D. larger is the economy's marginal propensity to save.
A. less flexible is the economy's price level.
2. A bank that has assets of $85 billion and a net worth of $10 billion must have: A. liabilities of $75 billion. B. excess reserves of $10 billion. C. liabilities of $10 billion. D. excess reserves of $75 billion.
A. liabilities of $75 billion.
23. Tariffs: A. may be imposed either to raise revenue (revenue tariffs) or to shield domestic producers from foreign competition (protective tariffs). B. are also called import quotas. C. are excise taxes on goods exported abroad. D. are per unit subsidies designed to promote exports.
A. may be imposed either to raise revenue (revenue tariffs) or to shield domestic producers from foreign competition (protective tariffs).
16. In the real world, specialization is rarely complete because: A. nations normally experience increasing opportunity costs in producing more of the product in which they are specializing. B. production possibilities curves are straight lines rather than curves bowed outward as viewed from the origin. C. one nation's imports are necessarily another nation's exports. D. international law prohibits monopolies.
A. nations normally experience increasing opportunity costs in producing more of the product in which they are specializing.
15. The commercial banking system borrows from the Federal Reserve Banks. As a result, the checkable deposits: A. of commercial banks are unchanged, but their reserves increase. B. and reserves of commercial banks both decrease. C. of commercial banks are unchanged, but their reserves decrease. D. and reserves of commercial banks are both unchanged.
A. of commercial banks are unchanged, but their reserves increase.
21. If personal taxes were decreased and resource productivity increased simultaneously, the equilibrium: A. output would necessarily rise. B. output would necessarily fall. C. price level would necessarily fall. D. price level would necessarily rise.
A. output would necessarily rise.
1. The desire to hold money for transactions purposes arises because: A. receipts of income and expenditures are not perfectly synchronized. B. people fear that prices will rise. C. households want money on hand in case a good financial investment opportunity arises. D. low interest rates reduce the opportunity cost of holding money.
A. receipts of income and expenditures are not perfectly synchronized.
26. The most likely way the public debt burdens future generations, if at all, is by: A. reducing the current level of investment. B. causing future unemployment. C. causing deflation. D. reducing real interest rates.
A. reducing the current level of investment.
14. Graphically, demand-pull inflation is shown as a: A. rightward shift of the AD curve along an upsloping AS curve. B. leftward shift of the AS curve along a downsloping AD curve. C. leftward shift of AS curve along an upsloping AD curve. D. rightward shift of the AD curve along a downsloping AS curve.
A. rightward shift of the AD curve along an upsloping AS curve.
19. If the legal reserve ratio falls from 25 percent to 10 percent, excess reserves of this single bank will: A. rise by $6,000 and the monetary multiplier will increase from 4 to 10. B. rise by $60,000 and the monetary multiplier will increase from 4 to 10. C. fall by $6,000 and the monetary multiplier will decline from 30 to 10. D. fall by $2,000 and the monetary multiplier will decline from 10 to 4.
A. rise by $6,000 and the monetary multiplier will increase from 4 to 10.
35. If the Federal Reserve authorities were attempting to reduce demand-pull inflation, the proper policies would be to: A. sell government securities, raise reserve requirements, raise the discount rate, and reduce the amount of reserves available through the term auction facility. B. buy government securities, raise reserve requirements, raise the discount rate, and reduce the amount of reserves available through the term auction facility. C. sell government securities, lower reserve requirements, lower the discount rate, and increase the amount of reserves available through the term auction facility. D. sell government securities, raise reserve requirements, lower the discount rate, and increase the amount of reserves available through the term auction facility.
A. sell government securities, raise reserve requirements, raise the discount rate, and reduce the amount of reserves available through the term auction facility.
18. If the world price for this product is $.50, this nation will experience a domestic: A. shortage of 160 units, which it will meet with 160 units of imports. B. shortage of 160 units, which will increase the domestic price to $1.60. C. surplus of 160 units, which it will export. D. surplus of 160 units, which will reduce the world price to $1.00.
A. shortage of 160 units, which it will meet with 160 units of imports.
14. Refer to the above data. Beta: A. should specialize in catching fish and trade with Alpha for chips. B. should specialize in producing chips and trade with Alpha for fish. C. will not realize gains from specialization and trade. D. will export both fish and chips to Alpha.
A. should specialize in catching fish and trade with Alpha for chips.
25. (Last Word) In recent years: A. significant changes in the price of oil have had much less effect on the U.S. economy than did similar changes in oil prices in previous decades. B. large increases in the price of oil have reduced U.S. aggregate supply and caused significant cost-push inflation. C. large decreases in the price of oil have increased U.S. aggregate supply and caused deflation. D. the United States has become a net exporter of oil.
A. significant changes in the price of oil have had much less effect on the U.S. economy than did similar changes in oil prices in previous decades.
5. If a nation has a current account deficit and it does not have to make any inpayments or outpayments of official reserves, it must have a: A. surplus in its capital and financial account. B. balance of payments deficit. C. balance of payments surplus. D. deficit in its capital and financial account.
A. surplus in its capital and financial account.
2. An economist who favors smaller government would recommend: A. tax cuts during recession and reductions in government spending during inflation. B. tax increases during recession and tax cuts during inflation. C. tax cuts during recession and tax increases during inflation. D. increases in government spending during recession and tax increases during inflation.
A. tax cuts during recession and reductions in government spending during inflation.
19. Research for industrially advanced countries indicates that: A. the more independent the central bank, the lower the average annual rate of inflation. B. the more independent the central bank, the higher the average annual rate of inflation. C. there is no relationship between the degree of independence of a country's central bank and its inflation rate. D. the more independent the central bank, the higher the average annual rate of unemployment.
A. the more independent the central bank, the lower the average annual rate of inflation.
13. Which of the following will increase commercial bank reserves? A. the purchase of government bonds in the open market by the Federal Reserve Banks B. a decrease in the reserve ratio C. an increase in the discount rate D. the sale of government bonds in the open market by the Federal Reserve Banks
A. the purchase of government bonds in the open market by the Federal Reserve Banks
14. The multiple by which the commercial banking system can increase the supply of money on the basis of each dollar of excess reserves is equal to: A. the reciprocal of the required reserve ratio. B. 1 minus the required reserve ratio. C. the reciprocal of the income velocity of money. D. 1/MPS.
A. the reciprocal of the required reserve ratio.
5. Checkable deposits are classified as money because: A. they can be readily used in purchasing goods and paying debts. B. banks hold currency equal to the value of their checkable deposits. C. they are ultimately the obligations of the Treasury. D. they earn interest income for the depositor.
A. they can be readily used in purchasing goods and paying debts.
44. From September 2007 to April 2008 the Fed lowered the Federal funds rate from 5.25 percent to 2 percent in a series of steps. The Fed's actions were largely in response to: A. threats to the financial system from the mortgage default crisis. B. forecasts of higher inflation rates. C. Chinese refusal to allow their exchange rate to reflect market conditions. D. pressure from the President to offset contractionary effects of a tax increase.
A. threats to the financial system from the mortgage default crisis.
27. With free trade, that is, assuming no tariff, the outputs produced by domestic and foreign producers respectively would be: A. v and vz. B. w and wy. C. w and wz. D. vx and xz.
A. v and vz.
Absolute Advantage
Ability to produce more of a good or service than another nation can.
Normal profit
Account profit that makes economic profit 0 ie. Cost to cover implicitly opportunity cost
Economic profit
Accounting profit-implicit cost opportunity or total revenue - total economic costs
Services
Activities a person does for a consumer to satisfy their wants
Marginal Cost
Addition to total cost by producing one more unit
Injections
Additions of extra spending into the circular flow of income
The assertion that "There is no free lunch" means that:
All production involves the use of scarce resources and thus the scarifice of alternative goods
Productive Resources
All resources used in producing goods and services
Workforce
All those of working age either in paid jobs or seeking them
Mixed economy
All three mixed
Profit
The amount of money that a company makes after all the costs of running the business have been paid.
AMEX
American Stock Exchange, now called the NYSE Amex Equities , handles 10% of all securities exchanged in the United States
Price
Amount of money exchange for a good or service
Price
Amount of money exchanged for a good or servic
Adam Smith
An 18th-century philosopher and free-market economist famous for his ideas about the efficiency of the division of labor and the societal benefits of individuals' pursuit of their own self-interest.
futures contract
An agreement to buy or sell a specific commodity or currency at a set price on a set date in the future
Costs
An amount that must be paid or spent to buy or obtain something. The effort, loss or sacrifice necessary to achieve or obtain something.
Credit
An arrangement for deferred payment of a loan or purchase.
John Maynard Keynes/The wealth of nations.
An author and economist who is well-known for his stance that national governments should attempt to smooth out the effects of expansion and contraction in the business cycle by using fiscal and monetary policy.
Command Economy
An economic system in which the government controls a country's economy.
Laissez Faire
An economic theory from the 18th century that is strongly opposed to any government intervention in business affairs.
Mixed Economy
An economy in which private enterprise exists in combination with a considerable amount of government regulation and promotion
Market Economy
An economy where producers are free to make what they want to make and consumers are free to buy what they need/want.
Expansionary Fiscal Policy
An increase in government spending or a reduction in taxes
Entrepreneurship
An individual who, rather than working as an employee, runs a small business and assumes all the risk and reward of a given business venture, idea, or good or service offered for sale. The entrepreneur is commonly seen as a business leader and innovator of new ideas and business processes.
Contestable Market
An industry where there are no significant barriers to entry or exit (no sunk costs)
International Monetary Fund (IMF)
An international organisation that helps co-ordinate the international monetary system
World Trade Organisation (WTO)
An international organisation that promotes free international trade and rules on international trade disputes
Trade Unions
An organisation of workers financed by membership fees which aims to further the interests of its members (e.g. negotiating with management to improve wages and working conditions, a trade union may be a monopoly seller of labour
Labor Unions
An organization of workers that tries to improve working conditions, wages, and benefits for its members.
Benefit
An outcome that promotes well-being.
Cost-Benefit Analysis
Analyzing whether the cost of an item is more than, equal to, or less than the benefit that comes from purchasing that item.
A.P.R.
Annual Percentage Rate or Interest
money
Any token of agreed value used to pay for goods and services
Economic theories:
Are generalizations based on a careful observation of facts
25. Refer to the above information and assume that Moolah bank is "loaned up." If it receives a $100 deposit of currency, it could safely expand its loans by: A. $100. B. $90. C. $900. D. $1,000.
B. $90.
Cost
The amount of money that must be spent to get a certain good or services.
22. In the above table, the after-tax MPC in the economy shown is: A. .5. B. .67. C. .75. D. .8.
B. .67.
6. In the above diagram for a private closed economy, equilibrium GDP is: A. $60 billion. B. $180 billion. C. between $60 and $180 billion. D. $60 billion at all levels of GDP.
B. $180 billion.
6. Assuming the bank loans out all of its remaining excess reserves as a checkable deposit, and has a check cleared against it for that amount, its reserves and checkable deposits will now be: A. $25,000 and $122,000 respectively. B. $22,000 and $110,000 respectively. C. $32,000 and $115,000 respectively. D. $22,000 and $105,000 respectively.
B. $22,000 and $110,000 respectively.
9. Refer to the above data. Zabella's balance on goods and services shows a: A. $5 billion deficit. B. $5 billion surplus. C. $10 billion surplus. D. $15 billion deficit.
B. $5 billion surplus.
18. The equilibrium level of GDP for this economy is: A. $600. B. $530. C. $415. D. $400.
B. $530.
23. In the above table, equilibrium GDP is: A. $40. B. $70. C. $100. D. $130.
B. $70.
36. Which of the following best describes the cause-effect chain of a restrictive monetary policy? A. A decrease in the money supply will lower the interest rate, increase investment spending, and increase aggregate demand and GDP. B. A decrease in the money supply will raise the interest rate, decrease investment spending, and decrease aggregate demand and GDP. C. An increase in the money supply will raise the interest rate, decrease investment spending, and decrease aggregate demand and GDP. D. An increase in the money supply will lower the interest rate, decrease investment spending, and increase aggregate demand and GDP.
B. A decrease in the money supply will raise the interest rate, decrease investment spending, and decrease aggregate demand and GDP.
20. Which of the following fiscal policy actions is most likely to increase aggregate supply? A. An increase in personal income tax rates. B. A reduction in interest rates that encourages consumers to purchase more durable goods. C. An increase in transfer payments to unemployed workers. D. An increase in government spending on infrastructure that increases private sector productivity.
B. A reduction in interest rates that encourages consumers to purchase more durable goods.
7. Assume that by devoting all of its resources to the production of X, nation Alpha can produce 40 units of X. By devoting all of its resources to Y, Alpha can produce 60Y. Comparable figures for nation Beta are 60X and 40Y. We can conclude that: A. the terms of trade will be 3X equals 1Y. B. Alpha should specialize in Y and Beta in X. C. Alpha should specialize in X and Beta in Y. D. there is no basis for mutually beneficial specialization and trade.
B. Alpha should specialize in Y and Beta in X.
6. Paper money (currency) in the United States is issued by the: A. United States Mint. B. Federal Reserve Banks. C. United States Treasury. D. national banks.
B. Federal Reserve Banks.
7. Which of the following would contribute to a United States balance of payments deficit? A. Kawasaki builds a motorcycle manufacturing plant in Kansas City B. United States tourists travel in large numbers to Europe C. a wealthy Mexican citizen builds a mansion in Beverly Hills D. Zaire pays interest on its debt to the United States
B. United States tourists travel in large numbers to Europe
39. The organization created to oversee the provisions of multilateral trade agreements, resolve disputes under the international trade rules, and meet periodically to consider further trade liberalization is called the: A. International Monetary Fund (IMF). B. World Trade Organization (WTO). C. Common Market Organization (CMO). D. International Trade Commission (ITC).
B. World Trade Organization (WTO).
12. Federal Reserve Notes in circulation are: A. an asset as viewed by the Federal Reserve Banks. B. a liability as viewed by the Federal Reserve Banks. C. neither an asset nor a liability as viewed by the Federal Reserve Banks. D. part of M1, but not of M2.
B. a liability as viewed by the Federal Reserve Banks.
13. If the amount of real output demanded at each price level falls by $200, this might have been caused by: A. an increase in net exports. B. a worsening of business expectations. C. an increase in consumer wealth. D. a decrease in the personal income tax.
B. a worsening of business expectations.
30. Refer to the above diagram for the Federal funds market. If the Fed wants to raise the Federal funds rate by one-half of a percentage point, it should: A. act to increase reserves by $50 billion. B. act to reduce reserves by $50 billion. C. pursue an expansionary monetary policy. D. buy bonds from banks and the public.
B. act to reduce reserves by $50 billion.
43. From 2004 to 2006 the Fed raised the Federal funds rate gradually in a series of steps. The Fed's purpose was to raise the prime interest rate so that: A. high inflation rates would fall. B. aggregate demand would continue to grow consistently and with low inflation. C. aggregate supply would grow, increasing output and lowering the price level. D. banks would reduce lending that was building up unmanageable consumer debt.
B. aggregate demand would continue to grow consistently and with low inflation.
17. If the MPC is 2/3, the initial impact of an increase of $12 billion in lump-sum taxes will be to cause: A. a rightward shift in the investment demand schedule. B. an $8 billion downshift in the consumption schedule. C. a $4 billion upshift in the consumption schedule. D. a $12 billion downshift in the consumption schedule.
B. an $8 billion downshift in the consumption schedule.
14. The Federal Reserve Banks sell government securities to the public. As a result, the checkable deposits: A. of commercial banks are unchanged, but their reserves increase. B. and reserves of commercial banks both decrease. C. of commercial banks are unchanged, but their reserves decrease. D. of commercial banks are both unchanged.
B. and reserves of commercial banks both decrease.
37. If the economy were encountering a severe recession, proper monetary and fiscal policies would call for: A. selling government securities, raising the reserve ratio, lowering the discount rate, increasing reserves available through the term auction facility, and a budgetary surplus. B. buying government securities, reducing the reserve ratio, reducing the discount rate, increasing reserves available through the term auction facility, and a budgetary deficit. C. buying government securities, raising the reserve ratio, raising the discount rate, reducing reserves available through the term auction facility, and a budgetary surplus. D. buying government securities, reducing the reserve ratio, raising the discount rate, reducing reserves available through the term auction facility, and a budgetary deficit.
B. buying government securities, reducing the reserve ratio, reducing the discount rate, increasing reserves available through the term auction facility, and a budgetary deficit.
6. Which of the following combinations is plausible, as it relates to a nation's balance of payments? A. current account = $+40 billion; capital account = $+20 billion; financial account = $-50 billion. B. current account = $-50 billion; capital account = $+20 billion; financial account = $+30 billion. C. current account = $+10 billion; capital account = $+40 billion; financial account = $+50 billion. D. current account = $+30 billion; capital account = $-20 billion; financial account = $-50 billion.
B. current account = $-50 billion; capital account = $+20 billion; financial account = $+30 billion.
1. Countercyclical discretionary fiscal policy calls for: A. surpluses during recessions and deficits during periods of demand-pull inflation. B. deficits during recessions and surpluses during periods of demand-pull inflation. C. surpluses during both recessions and periods of demand-pull inflation. D. deficits during both recessions and periods of demand-pull inflation.
B. deficits during recessions and surpluses during periods of demand-pull inflation.
3. The reserves of a commercial bank consist of: A. the amount of money market funds it holds. B. deposits at the Federal Reserve Bank and vault cash. C. government securities that the bank holds. D. the bank's net worth.
B. deposits at the Federal Reserve Bank and vault cash.
11. An increase in the money supply of $20 billion will cause the equilibrium interest rate to: A. fall by 4 percentage points. B. fall by 2 percentage points. C. rise by 4 percentage points. D. rise by 2 percentage points.
B. fall by 2 percentage points.
8. Initially, the bond price = $1000; bond fixed annual interest payment = $100; bond annual interest rate = 10 percent. If the price of this bond increases to $1250, the interest rate will: A. fall to 9 percent. B. fall to 8 percent. C. rise to 11 percent. D. rise to 12 percent.
B. fall to 8 percent.
10. Assuming labor forces of equal size, the production possibilities curves above suggest that workers in West Mudville will have: A. lower wages than workers in East Mudville before trade but equal wages after trade. B. higher wages than workers in East Mudville both before and after trade. C. lower wages than workers in East Mudville both before and after trade. D. higher wages than workers in East Mudville before trade but lower wages after trade.
B. higher wages than workers in East Mudville both before and after trade.
7. In the above diagram, a shift from AS2 to AS3 might be caused by a (n): A. decrease in interest rates. B. increase in business taxes and costly government regulation. C. decrease in the prices of domestic resources. D. decrease in the price level.
B. increase in business taxes and costly government regulation.
25. In the above table, an increase in net exports of $10 would: A. increase real GDP by $10. B. increase real GDP by $30. C. decrease real GDP by $10. D. decrease real GDP by $30.
B. increase real GDP by $30.
6. Refer to the above diagram, in which Qf is the full-employment output. If aggregate demand curve AD3 describes the current situation, appropriate fiscal policy would be to: A. do nothing since the economy appears to be achieving full-employment real output. B. increase taxes and reduce government spending to shift the aggregate demand curve leftward from AD3 to AD2, assuming downward price flexibility. C. increase taxes on businesses to shift the aggregate supply curve rightward to reduce the price level. D. increase taxes and reduce government spending to shift the aggregate demand curve from AD3 to AD1.
B. increase taxes and reduce government spending to shift the aggregate demand curve leftward from AD3 to AD2, assuming downward price flexibility.
19. The crowding-out effect of expansionary fiscal policy suggests that: A. tax increases are paid primarily out of saving and therefore are not an effective fiscal device. B. increases in government spending financed through borrowing will increase the interest rate and thereby reduce investment. C. it is very difficult to have excessive aggregate spending in the U.S. economy. D. consumer and investment spending always vary inversely.
B. increases in government spending financed through borrowing will increase the interest rate and thereby reduce investment.
47. An expansionary monetary policy may be frustrated if the: A. demand-for-money curve shifts to the left. B. investment-demand curve shifts to the left. C. saving schedule shifts downward. D. investment-demand curve shifts to the right.
B. investment-demand curve shifts to the left.
20. Assume that the listed amounts constitute this bank's complete set of accounts. Moolah's: A. assets are $1,000. B. liabilities are $1,000. C. net worth is zero. D. profit is $1,000.
B. liabilities are $1,000.
15. Appreciation of the Canadian dollar will: A. intensify an existing disequilibrium in Canada's balance of payments. B. make Canada's exports less expensive and its imports more expensive. C. make Canada's exports more expensive and its imports less expensive. D. make Canada's exports and imports both more expensive.
B. make Canada's exports less expensive and its imports more expensive.
38. Dumping of goods abroad: A. constitutes a general case for permanent tariffs. B. may be part of a firm's price discrimination strategy. C. may be part of a nation's strategy to rectify its trade deficit. D. drives up prices of the dumped goods.
B. may be part of a firm's price discrimination strategy.
11. If a nation has a comparative advantage in the production of X, this means the nation: A. cannot benefit by producing and trading this product. B. must give up less of other goods than other nations in producing a unit of X. C. has a production possibilities curve identical to those of other nations. D. is not subject to increasing opportunity costs.
B. must give up less of other goods than other nations in producing a unit of X.
21. The discount rate is the interest: A. rate at which the central banks lend to the U.S. Treasury. B. rate at which the Federal Reserve Banks lend to commercial banks. C. yield on long-term government bonds. D. rate at which commercial banks lend to the public.
B. rate at which the Federal Reserve Banks lend to commercial banks.
23. When aggregate demand declines, many firms may reduce employment rather than wages because wage reductions may: A. reduce per unit production costs. B. reduce worker morale and work effort, and thus lower productivity. C. increase the firms' cost of raising financial capital. D. reduce the demands for their products.
B. reduce worker morale and work effort, and thus lower productivity.
40. The "Euro Zone": A. is another name for the European Union. B. refers to the common currency used by all European Union members. C. is a geographic region in Europe with no national sovereignty, where free trade between European nations is allowed to occur. D. is the subset of the EU that uses a common currency.
B. refers to the common currency used by all European Union members.
23. Assume that Brazil and Mexico have floating exchange rates. Other things unchanged, if the price level is stable in Mexico but Brazil experiences rapid inflation: A. gold bullion will flow into Brazil. B. the Brazilian real will depreciate. C. the Mexican peso will depreciate. D. the Brazilian real will appreciate.
B. the Brazilian real will depreciate.
7. The difference between M1 and M2 is that: A. the former includes time deposits. B. the latter includes small-denominated time deposits, non-checkable savings accounts, money market deposit accounts, and money market mutual fund balances. C. the latter includes negotiable government bonds. D. the latter includes cash held by commercial banks and the U.S. Treasury.
B. the latter includes small-denominated time deposits, non-checkable savings accounts, money market deposit accounts, and money market mutual fund balances.
5. Refer to the above diagram of the market for money. The vertical money supply curve Sm reflects the fact that: A. bond prices and interest rates are inversely related. B. the stock of money is determined by the Federal Reserve System and does not change when the interest rate changes. C. the rate at which money is spent is zero. D. lower interest rates result in lower opportunity costs of supplying money.
B. the stock of money is determined by the Federal Reserve System and does not change when the interest rate changes.
16. The U.S. supply of Japanese yen is: A. downsloping because a lower dollar price of yen means U.S. goods are cheaper to the Japanese. B. upsloping because a higher dollar price of yen means U.S. goods are cheaper to the Japanese. C. upsloping because a lower dollar price of yen means U.S. goods are cheaper to the Japanese. D. downsloping because a higher dollar price of yen means U.S. goods are cheaper to the Japanese.
B. upsloping because a higher dollar price of yen means U.S. goods are cheaper to the Japanese.
2. The asset demand for money: A. is unrelated to both the interest rate and the level of GDP. B. varies inversely with the rate of interest. C. varies inversely with the level of real GDP. D. varies directly with the level of nominal GDP.
B. varies inversely with the rate of interest.
1. To say money is socially defined means that: A. money has been defined in a Constitutional amendment. B. whatever performs the functions of money extremely well is considered to be money. C. the money supply includes all public and private securities purchased by society. D. society, acting through Congress, specifies what shall be included in the money supply.
B. whatever performs the functions of money extremely well is considered to be money.
11. Built-in stability means that: A. an annually balanced budget will offset the procyclical tendencies created by state and local finance and thereby stabilize the economy. B. with given tax rates and expenditures policies, a rise in domestic income will reduce a budget deficit or produce a budget surplus while a decline in income will result in a deficit or a lower budget surplus. C. Congress will automatically change the tax structure and expenditure programs to correct upswings and downswings in business activity. D. government expenditures and tax receipts automatically balance over the business cycle, though they may be out of balance in any single year.
B. with given tax rates and expenditures policies, a rise in domestic income will reduce a budget deficit or produce a budget surplus while a decline in income will result in a deficit or a lower budget surplus.
21. Between 1985 and 2003 the: A. dollar appreciated in value relative to the yen. B. yen appreciated in value relative to the dollar. C. dollar price of yen fell. D. yen price of dollars rose.
B. yen appreciated in value relative to the dollar.
Dutch Auction
Begins with price greater than what bidder will pay and price is reduced until bidder will pay it. Units must be specified
Means Tested Benefits
Benefits which are only paid to households who can prove they are poor
Vickrey Auction
Bidder submitting highest bid wins but pays price of second highest bidder
Municipal bonds
Bonds issued by state and local governments
bill consolidation
Borrowing a larger sum of money to pay off many smaller debts.
Austrian school
Business cycles are caused by government intervention into an economy.
Fundamental balance among savings, investment, the fiscal balance and the trade balance
C + I + G + (X-M) = C + S + T Consumption spending Household and business Savings Net Taxes
GDP Expendeturesc approch
C(consumption) + I (business investment- capital equipment+changes in inventories)+ government purchases + (X-M)- exports-imports
27. Refer to the above diagram for the Federal funds market. If the Fed supplies $300 billion in reserves, the equilibrium Federal funds rate is: A. 6.0 percent. B. 5.5 percent. C. 5.0 percent. D. undeterminable with the information given.
C. 5.0 percent.
20. At a world price of $5: A. Alpha will want to import 50 units of steel. B. Beta will want to import 60 units of steel. C. Alpha will want to export 50 units of steel. D. neither country will want to export steel.
C. Alpha will want to export 50 units of steel.
12. Which of the following would reduce the money supply? A. Commercial banks use excess reserves to buy government bonds from the public. B. Commercial banks loan out excess reserves. C. Commercial banks sell government bonds to the public. D. A check clears from Bank A to Bank B.
C. Commercial banks sell government bonds to the public.
24. Which of the following actions by the Fed will increase commercial bank lending potential? A. Raising the reserve ratio. B. Increasing the Federal funds rate target. C. Expanding the amount of reserves available through the term auction facility. D. Selling bonds to commercial banks and the public.
C. Expanding the amount of reserves available through the term auction facility.
22. Which of the following statements is true as a result of Federal Reserve efforts to rescue the financial industry from the financial crisis of 2007 and 2008? A. From February 2008, to May 2009, the Fed oversaw the consolidation of 20 major financial institutions into fewer than a dozen. B. From March 2008, to February 2009, the Fed experienced a 50 percent decline in the value of assets held. C. From February 2008, to March 2009, Fed assets more than doubled to nearly $2 trillion. D. From February 2008, to March 2009, Fed lending caused the U.S. public debt to rise by over $1 trillion.
C. From February 2008, to March 2009, Fed assets more than doubled to nearly $2 trillion.
5. On the basis of the above information: A. Gamma should export both tea and pots to Sigma. B. Sigma should export tea to Gamma and Gamma should export pots to Sigma. C. Gamma should export tea to Sigma and Sigma should export pots to Gamma. D. Gamma should export tea to Sigma, but it will not be profitable for the two nations to exchange pots.
C. Gamma should export tea to Sigma and Sigma should export pots to Gamma.
29. In The General Theory of Employment, Interest, and Money: A. Adam Smith stated his idea of the invisible hand. B. Thorstein Veblen poked fun at the leisure class. C. John Maynard Keynes attacked the classical economist's contention that recession or depression will automatically cure itself. D. J. B. Say developed "Say's law."
C. John Maynard Keynes attacked the classical economist's contention that recession or depression will automatically cure itself.
28. With a per unit tariff of PcPt, the total amount of tariff revenue collected on this product will be: A. PaPt times wy. B. PcPa times x. C. PcPt times wy. D. PcPt times z.
C. PcPt times wy.
18. Which of the following best describes the idea of a political business cycle? A. Politicians are more willing to cut taxes and increase government spending than they are to do the reverse. B. Fiscal policy will result in alternating budget deficits and surpluses. C. Politicians will use fiscal policy to cause output, real incomes, and employment to be rising prior to elections. D. Despite good intentions, various timing lags will cause fiscal policy to reinforce the business cycle.
C. Politicians will use fiscal policy to cause output, real incomes, and employment to be rising prior to elections.
25. Which of the following statements is true? A. The Federal Reserve sets the Federal funds rate. B. The Federal Reserve sets the target for the Federal funds rate, and then uses the reserve ratio to push banks toward that target. C. The Federal Reserve does not set the Federal funds rate, but it influences it through the use of open market operations. D. The Federal Reserve will set a higher target for the Federal funds rate if pursuing an expansionary monetary policy.
C. The Federal Reserve does not set the Federal funds rate, but it influences it through the use of open market operations.
18. Which of the following statements best describes the twelve Federal Reserve Banks? A. They are privately owned and privately controlled central banks whose basic goal is to provide an ample and orderly market for U.S. Treasury securities. B. They are privately owned and publicly controlled central banks whose basic function is to minimize the risks in commercial banking in order to make it a reasonably profitable industry. C. They are privately owned and publicly controlled central banks whose basic goal is to control the money supply and interest rates in promoting the general economic welfare. D. They are privately owned and publicly controlled central banks whose basic goal is to earn profits for their owners.
C. They are privately owned and publicly controlled central banks whose basic goal is to control the money supply and interest rates in promoting the general economic welfare.
2. Which of the following is incorrect? A. As the U.S. price level rises, U.S. goods become relatively more expensive so that U.S. exports fall and U.S. imports rise. B. As the price level falls, the demand for money declines, the interest rate declines, and interest-rate sensitive spending increases. C. When the price level increases, real balances increase, businesses and households find themselves wealthier and therefore increase their spending. D. Given aggregate demand, an increase in aggregate supply increases real output and, assuming downward flexible prices, reduces the price level.
C. When the price level increases, real balances increase, businesses and households find themselves wealthier and therefore increase their spending.
3. When economists say that money serves as a unit of account, they mean that it is: A. a way to keep wealth in a readily spendable form for future use. B. a means of payment. C. a monetary unit for measuring and comparing the relative values of goods. D. declared as legal tender by the government.
C. a monetary unit for measuring and comparing the relative values of goods.
8. It may be misleading to label a trade deficit as unfavorable or adverse because: A. the multiplier does not apply to a trade deficit. B. a trade deficit increases a nation's aggregate output and employment. C. a nation's consumers benefit from a trade deficit during the period it occurs. D. a trade deficit precludes inflation.
C. a nation's consumers benefit from a trade deficit during the period it occurs.
28. The recessionary expenditure gap associated with the recession of 2007-2009 resulted from: A. the government's attempt to control hyperinflation. B. a major increase in personal and corporate taxes. C. a rapid decline in investment spending. D. a rapid increase in imports resulting from large tariff reductions.
C. a rapid decline in investment spending.
12. If the price level is 250 and producers supply $450 of real output: A. a shortage of real output of $150 will occur. B. a shortage of real output of $100 will occur. C. a surplus of real output of $150 will occur. D. neither a shortage nor a surplus of real output will occur.
C. a surplus of real output of $150 will occur.
22. In which of the following sets of circumstances can we confidently expect inflation? A. aggregate supply and aggregate demand both increase B. aggregate supply and aggregate demand both decrease C. aggregate supply decreases and aggregate demand increases D. aggregate supply increases and aggregate demand decreases
C. aggregate supply decreases and aggregate demand increases
13. Refer to the above diagram in which T is tax revenues and G is government expenditures. All figures are in billions. The budget will entail a deficit: A. at all levels of GDP. B. at any level of GDP above $400. C. at any level of GDP below $400. D. only when GDP is stable.
C. at any level of GDP below $400.
13. The Federal funds market is the market in which: A. banks borrow from the Federal Reserve Banks. B. U.S. securities are bought and sold. C. banks borrow reserves from one another on an overnight basis. D. Federal Reserve Banks borrow from one another.
C. banks borrow reserves from one another on an overnight basis.
25. Which is an example of a nontariff barrier (NTB)? A. an export subsidy B. an excise tax on the physical volume of imported goods C. box-by-box inspection requirements for imported fruit D. an excise tax on the dollar value of imported goods
C. box-by-box inspection requirements for imported fruit
10. Banks create money when they: A. allow loans to mature. B. accept deposits of cash. C. buy government bonds from households. D. sell government bonds to households.
C. buy government bonds from households.
15. The impact of increasing, as opposed to constant, costs is to: A. intensify and prolong the comparative advantages that any nation may have initially. B. expand the limits of the terms of trade. C. cause the bases for further specialization to disappear as nations specialize according to comparative advantage. D. cause nations to realize economies of scale in those products in which they specialize.
C. cause the bases for further specialization to disappear as nations specialize according to comparative advantage.
27. Which of the following is the best example of public investment? A. salaries of Senators and Representatives B. government expenditures on food stamps C. construction of highways D. funding of regulatory agencies
C. construction of highways
8. Commercial banks create money when they: A. accept cash deposits from the public. B. purchase government securities from the central banks. C. create checkable deposits in exchange for IOUs. D. raise their interest rates.
C. create checkable deposits in exchange for IOUs.
15. Other things equal, serious recession in the economies of U.S. trading partners will: A. have no perceptible impact on the U.S. economy. B. cause inflation in the U.S. economy. C. depress real output and employment in the U.S. economy. D. stimulate real output and employment in the U.S. economy.
C. depress real output and employment in the U.S. economy.
1. The aggregate demand curve is: A. vertical under conditions of full employment. B. horizontal when there is considerable unemployment in the economy. C. downsloping because of the interest-rate, real-balances, and foreign purchases effects. D. downsloping because production costs decrease as real output rises.
C. downsloping because of the interest-rate, real-balances, and foreign purchases effects.
29. Suppose the United States eliminates high tariffs on German bicycles. As a result, we would expect: A. the price of German bicycles to increase in the United States. B. employment to decrease in the German bicycle industry. C. employment to decrease in the U.S. bicycle industry. D. profits to rise in the U.S. bicycle industry.
C. employment to decrease in the U.S. bicycle industry.
3. Which of the following is an example of a capital-intensive commodity? A. clothing B. wool C. sunflower seeds D. chemicals
D. chemicals
14. If the equilibrium exchange rate changes so that fewer dollars are needed to buy a South Korean won, then: A. Americans will buy fewer Korean goods and services. B. the won has appreciated in value. C. fewer U.S. goods and services will be demanded by the South Koreans. D. the dollar has depreciated in value.
C. fewer U.S. goods and services will be demanded by the South Koreans.
33. According to the Taylor rule: A. for every 1 percentage point that unemployment exceeds the natural rate of unemployment, there is a 2 percentage point gap between potential and actual GDP. B. growth in the money supply should be limited to the long-run average growth rate of real GDP. C. if inflation rises by 1 percentage point above its target, then the Fed should raise the real Federal funds rate by one-half a percentage point. D. the rate of money growth should be set at 4 percent per year.
C. if inflation rises by 1 percentage point above its target, then the Fed should raise the real Federal funds rate by one-half a percentage point.
17. The American Recovery and Reinvestment Act of 2009: A. created a $700 billion rescue package for financial institutions. B. cut taxes by $152 billion, distributed primarily as rebate checks to taxpayers. C. implemented a $787 billion package of tax cuts and government expenditure increases. D. substantially lowered interest rates in an attempt to stimulate investment spending.
C. implemented a $787 billion package of tax cuts and government expenditure increases.
24. Country A limits other nation's exports to Country A to 1,000 tons of coal annually. This is an example of a (n): A. protective tariff. B. export subsidy. C. import quota. D. voluntary export restriction.
C. import quota.
4. A nation's capital and financial account: A. contains inpayment items, but not outpayment items. B. includes service exports and service imports. C. includes both inpayments and outpayments. D. includes net investment income and net transfers.
C. includes both inpayments and outpayments.
22. Suppose that, for every 1-percentage point decline in the discount rate, commercial banks collectively borrow an additional $2 billion from Federal Reserve banks. Also assume that the reserve ratio is 10 percent. If the Fed lowers the discount rate from 4.0 percent to 3.5 percent, bank reserves will: A. increase by $1 billion and the money supply will increase by $5 billion. B. decline by $1 billion and the money supply will decline by $10 billion. C. increase by $1 billion and the money supply will increase by $10 billion. D. increase by $10 billion and the money supply will increase by $100 billion.
C. increase by $1 billion and the money supply will increase by $10 billion.
19. In the above diagram, a shift of the aggregate demand curve from AD1 to AD0 might be caused by a(n): A. decrease in aggregate supply. B. decrease in the amount of output supplied. C. increase in investment spending. D. decrease in net export spending.
C. increase in investment spending.
49. (Consider This) During and immediately following the severe recession of 2007-2009, commercial bank reserves held on deposit in Federal Reserve banks: A. rose to a high of 50 percent of total checkable deposits held by banks. B. fell significantly as commercial banks withdrew reserves to pay off heavy debt obligations. C. increased significantly because of Fed purchases of securities from commercial banks, and the paying of interest on bank reserves. D. increased significantly because the Fed increased the required reserve ratio.
C. increased significantly because of Fed purchases of securities from commercial banks, and the paying of interest on bank reserves.
23. The various lender-of-last-resort programs implemented by the Fed in response to the financial crisis of 2007 and 2008: A. severely depleted the assets of the Federal Reserve. B. have been little used, and therefore ineffective. C. increased the moral hazard problem by limiting losses from bad financial decisions. D. were designed to offset the moral hazard created by the TARP and other bailout programs.
C. increased the moral hazard problem by limiting losses from bad financial decisions.
10. The short-run aggregate supply curve represents circumstances where: A. both input and output prices are fixed. B. both input and output prices are flexible. C. input prices are fixed, but output prices are flexible. D. input prices are flexible, but output prices are fixed.
C. input prices are fixed, but output prices are flexible.
7. In the above diagram for a private closed economy, investment: A. decreases as GDP increases. B. increases as GDP increases. C. is $40 billion at all levels of GDP. D. is $60 billion at all levels of GDP.
C. is $40 billion at all levels of GDP.
33. In the above diagram Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product. Sd + Q is the product supply curve after an import quota is imposed. The size of the import quota: A. is vz. B. is vy. C. is wy. D. cannot be determined.
C. is wy.
26. The Fed directly sets: A. the prime interest rate but not the Federal funds rate. B. both the Federal funds rate and the prime interest rate. C. neither the Federal funds rate nor the prime interest rate. D. the discount rate and the prime interest rate.
C. neither the Federal funds rate nor the prime interest rate.
22. Assume that the listed amounts constitute this bank's complete set of accounts. Moolah's: A. assets are $1000. B. liabilities are $300. C. net worth is $100. D. annual profit is $200.
C. net worth is $100.
7. Refer to the above diagram of the market for money. Other things equal, the money demand curve in the diagram would shift leftward if: A. the asset demand for money increased. B. the transactions demand for money increased. C. nominal GDP decreased. D. the overall price level rose.
C. nominal GDP decreased.
3. In which of the following situations is it certain that the quantity of money demanded by the public will decrease? A. nominal GDP decreases and the interest rate decreases B. nominal GDP increases and the interest rate decreases C. nominal GDP decreases and the interest rate increases D. nominal GDP increases and the interest rate increases
C. nominal GDP decreases and the interest rate increases
23. Which of the following tools of monetary policy is flexible, and able to affect bank reserves quickly and by relatively specific amounts? A. the discount rate B. the reserve ratio C. open market operations D. the Federal funds rate
C. open market operations
5. The aggregate supply curve (short-run) is upsloping because: A. wages and other resource prices match changes in the price level. B. the price level is flexible upward but inflexible downward. C. per-unit production costs rise as the economy moves toward and beyond its full-employment real output. D. wages and other resource prices are flexible upward but inflexible downward.
C. per-unit production costs rise as the economy moves toward and beyond its full-employment real output.
2. In international financial transactions, what are the only two things that individuals and firms can exchange? A. currency and real assets. B. services and manufactured goods. C. preexisting assets and currently produced goods and services. D. currency and currently produced goods and services.
C. preexisting assets and currently produced goods and services.
42. Between March 2001 and November 2002, the Fed reduced the Federal funds rate from 5 percent to just above 1 percent. The Fed's purpose was to: A. prevent rising inflation. B. reduce the public debt. C. promote recovery from recession. D. strengthen the international value of the dollar.
C. promote recovery from recession.
20. If government desired to raise the equilibrium GDP to $650, it could: A. raise G by $45 and reduce T by $10. B. raise G by $40 and reduce T by $30. C. raise G by $30 or reduce T by $40. D. raise both G and T by $40.
C. raise G by $30 or reduce T by $40.
5. Refer to the above diagram, in which Qf is the full-employment output. If aggregate demand curve AD1 describes the current situation, appropriate fiscal policy would be to: A. increase taxes and reduce government spending to shift the aggregate demand curve rightward to AD2. B. reduce taxes on businesses to shift the aggregate supply curve leftward. C. reduce taxes and increase government spending to shift the aggregate demand curve from AD1 to AD2. D. do nothing since the economy appears to be achieving full-employment real GDP.
C. reduce taxes and increase government spending to shift the aggregate demand curve from AD1 to AD2.
3. If investment increases by $10 billion and the economy's MPC is .8, the aggregate demand curve will shift: A. leftward by $50 billion at each price level. B. rightward by $10 billion at each price level. C. rightward by $50 billion at each price level. D. leftward by $40 billion at each price level.
C. rightward by $50 billion at each price level.
9. Other things equal, an improvement in productivity will: A. increase the equilibrium price level. B. shift the aggregate supply curve to the left. C. shift the aggregate supply curve to the right. D. shift the aggregate demand curve to the left.
C. shift the aggregate supply curve to the right.
17. If the world price for this product is $1.60, this nation will experience a domestic: A. shortage of 160 units, which it will meet with 160 units of imports. B. shortage of 160 units, which will increase the domestic price to $1.60. C. surplus of 160 units, which it will export. D. surplus of 160 units, which will reduce the world price to $1.00.
C. surplus of 160 units, which it will export.
28. Which of the following represents a change in today's banking policies that should prevent a recurrence of the bank panics of 1930-1933? A. banks are more cautious lenders B. banks keep large amounts of excess reserves on hand C. the FDIC insures bank deposits and therefore depositors do not panic and rush to withdraw money when individual banks have financial problems D. the President now has the authority to close banks whenever panics occur
C. the FDIC insures bank deposits and therefore depositors do not panic and rush to withdraw money when individual banks have financial problems
11. In prosperous times commercial banks are likely to hold very small amounts of excess reserves because: A. the Fed wants commercial banks to increase the money supply during economic expansions. B. it is very costly to transfer funds between commercial banks and the central banks. C. the Federal Reserve Banks pay lower rates of interest on bank reserves than could be earned by the commercial banks loaning out the reserves. D. the Federal Reserve Banks want to minimize their interest payments on such deposits.
C. the Federal Reserve Banks pay lower rates of interest on bank reserves than could be earned by the commercial banks loaning out the reserves.
25. To say that "the U.S. public debt is mostly held internally" is to say that: A. only interest payments on the public debt are an economic burden. B. official figures understate the size of the public debt. C. the bulk of the public debt is owned by U.S. citizens and institutions. D. the public debt is equal to the land and buildings assets owned by the Federal government.
C. the bulk of the public debt is owned by U.S. citizens and institutions.
16. The four main tools of monetary policy are: A. tax rate changes, the discount rate, open-market operations, and the Federal funds rate. B. tax rate changes, changes in government expenditures, open-market operations, and the term auction facility. C. the discount rate, the reserve ratio, the term auction facility, and open-market operations. D. changes in government expenditures, the reserve ratio, the Federal funds rate, and the discount rate.
C. the discount rate, the reserve ratio, the term auction facility, and open-market operations.
36. Which of the following arguments for trade protection is based on the premise that a nation should have a wide enough range of domestic industries to be self-sufficient if necessary? A. the increase-domestic-employment argument B. the cheap-foreign-labor argument C. the diversification-for-stability argument D. the infant-industry argument
C. the diversification-for-stability argument
1. When the receipts given by goldsmiths to depositors were used to make purchases: A. the gold standard was created. B. existing banking laws were violated. C. the receipts became in effect paper money. D. a fractional reserve banking system was created.
C. the receipts became in effect paper money.
16. The immediate primary cause of the swing from Federal budget surpluses in 2000 and 2001 to a budget deficit in 2002 was: A. the tax cuts of 2001. B. spending increases relating to the wars in Afghanistan and Iraq. C. the recession of 2001. D. the acceleration of inflation in 2001 and 2002.
C. the recession of 2001.
10. In the aggregate expenditures model, technological progress will shift the investment schedule: A. downward and increase aggregate expenditures. B. downward and decrease aggregate expenditures. C. upward and increase aggregate expenditures. D. upward and decrease aggregate expenditures.
C. upward and increase aggregate expenditures.
37. A major difficulty with the argument that trade barriers are necessary because foreign workers are paid low wages is that: A. labor costs and product prices are not related. B. there is no discernible relationship between wage rates and labor productivity. C. wage rates and labor productivity are directly related. D. wage rates and labor productivity are inversely related.
C. wage rates and labor productivity are directly related.
Janet Yellen
Chairman of Federal Reserve
13. If the price index rises from 100 to 120, the purchasing power value of the dollar: A. may either rise or fall. B. will rise by one-sixth. C. will fall by one-sixth. D. will rise by 20 percent.
C. will fall by one-sixth.
41. Assume that the price level is flexible both upward and downward and that the Fed's policy is to keep the price level from either rising or falling. If aggregate supply increases in the economy, the Fed: A. will have to increase interest rates to keep the price level from falling. B. will have to reduce the money supply to keep the price level from rising. C. will have to increase the money supply to keep the price level from falling. D. can keep the price level stable without altering the money supply or interest rate.
C. will have to increase the money supply to keep the price level from falling.
The most efficent combination of resources in producing any output is the combination that:
Can be obstained for the smallest money outlay
Why is free trade good?
Can make money by selling in a different place
Monetary policy
Central bank and/or government decisions on the rate of interest, the money supply and the exchange rate
Bond
Certificate from company-they borrow your money and then pay back with interest
Cost Comparison
Comparing the cost of two or more goods or services in an effort to find the best value.
non-price competition
Competition based on factors that are not related to price, such as product quality, service and financing, business location, and reputation.
Laspeyres index
Constant basket of goods and services. Biased upward as a measure of cost of living. 1. New goods 2. Quality changes 3. substitution
GDP=
Consumptions + Investment + Government spending + net exports
Parts of the Business Cycle
Contraction, expansion, trough, and peak
Opportunity cost
Cost of an item is what you give up to get that item.
Expense
Cost paid to secure a good or service.
Shoeleather costs
Costs in terms of the extra time and effort involved in reducing money holdings
30. With a $1 per unit tariff, price and total quantity sold will be: A. $3 and 7 units. B. $5 and 2 units. C. $3 and 7 units. D. $2 and 11 units.
D. $2 and 11 units.
7. If the original balance sheet was for the commercial banking system, rather than a single bank, loans and checkable deposits could have been expanded by a maximum of: A. $8,000. B. $15,000. C. $48,000. D. $25,000.
D. $25,000.
13. For the open economy shown above the equilibrium GDP and the multiplier are: A. $300 and 2.5. B. $450 and 5. C. $400 and 4. D. $400 and 5.
D. $400 and 5.
4. This commercial bank has excess reserves of: A. $0. B. $3,000. C. $12,000. D. $5,000.
D. $5,000.
5. This bank can safely expand its loans by a maximum of: A. $7,000. B. $25,000. C. $12,000. D. $5,000.
D. $5,000.
17. After the deposit of $10 billion of new currency, the maximum amount by which this commercial banking system can expand the supply of money by lending is: A. $9 billion. B. $45 billion. C. $36 billion. D. $90 billion.
D. $90 billion.
13. The following are hypothetical exchange rates: $1 = 140 yen; 1 Swiss franc = $.10. We can conclude that: A. 1 yen = 280 Swiss francs. B. 1 yen = 14 Swiss francs. C. 1 Swiss franc = 28 yen. D. 1 Swiss franc = 14 yen.
D. 1 Swiss franc = 14 yen.
9. In equilibrium the level of consumption spending will be: A. 170. B. 270. C. 160. D. 195.
D. 195.
24. Approximately what percentage of the U.S. public debt is held by foreign individuals and institutions? A. 56 percent B. 71 percent C. 43 percent D. 29 percent
D. 29 percent
22. If year 1 is the first year of this nation's existence and year 4 is the present year, the public debt as a percentage of GDP in year 4 is: A. 7.5 percent. B. 1.39 percent. C. 2.5 percent. D. 3.9 percent.
D. 3.9 percent.
6. Refer to the above data. Assume that before specialization and trade Gamma and Sigma both chose production possibility "C." Now if each specializes according to comparative advantage, the gains from specialization and trade will be: A. 40 tons of pots. B. 20 tons of tea and 20 tons of pots. C. 20 tons of tea. D. 40 tons of tea.
D. 40 tons of tea.
10. The equilibrium interest rate is: A. 2 percent. B. 4 percent. C. 6 percent. D. 8 percent.
D. 8 percent.
12. In the above diagram for a private closed economy, the multiplier is: A. GF/DE. B. GF/GB. C. FE/GF. D. AB/GF.
D. AB/GF.
12. Suppose that the Federal government suddenly declared that wheat was to be used as money. What is a possible outcome of that decision? A. The value of the "wheat dollar" would be unstable depending on crop yields from year to year. B. Farmers would replace corn and soy crops with wheat. C. Wheat would function as money so long as people accept it in exchange for goods and services. D. All of these are possible outcomes.
D. All of these are possible outcomes.
12. Which of the following statements is true regarding why the balance on the current account and the balance on the capital and financial account must always sum to zero? A. Any deficit or surplus in the current account automatically creates an offsetting entry in the capital and financial account. B. People can only trade one of two things with each other; currently produced goods and services or preexisting assets. C. If trading partners have an imbalance in their trade of currently produced goods and services, the only way to correct that imbalance is with a net transfer of assets from one party to the other. D. All of these are true statements.
D. All of these are true statements.
29. Which of the following has contributed to large U.S. trade deficits in recent years? A. China fixing its exchange rate. B. Rapid increases in the price of oil. C. A declining U.S. saving rate. D. All of these have contributed.
D. All of these have contributed.
34. Which of the following best describes the cause-effect chain of an expansionary monetary policy? A. A decrease in the money supply will lower the interest rate, increase investment spending, and increase aggregate demand and GDP. B. A decrease in the money supply will raise the interest rate, decrease investment spending, and decrease aggregate demand and GDP. C. An increase in the money supply will raise the interest rate, decrease investment spending, and decrease aggregate demand and GDP. D. An increase in the money supply will lower the interest rate, increase investment spending, and increase aggregate demand and GDP.
D. An increase in the money supply will lower the interest rate, increase investment spending, and increase aggregate demand and GDP.
2. Which of the following statements is false? A. In recent years the United States has had large annual trade deficits in goods and services. B. The United States imports some of the same categories of goods as it exports. C. China has the largest share of world exports. D. As a percentage of GDP, U.S. exports are the highest among the industrially advanced nations.
D. As a percentage of GDP, U.S. exports are the highest among the industrially advanced nations.
12. The above data show that: A. Beta has a comparative advantage in producing chips. B. Alpha has a comparative advantage in catching fish. C. Alpha is subject to constant costs and Beta is subject to increasing costs. D. Beta is more efficient than Alpha both in catching fish and in producing chips.
D. Beta is more efficient than Alpha both in catching fish and in producing chips.
18. In the above diagram, if aggregate supply is AS1 and aggregate demand is AD0, then: A. at any price level above G a shortage of real output would occur. B. F represents a price level that would result in a surplus of real output of AC. C. a surplus of real output of GH would occur. D. F represents a price level that would result in a shortage of real output of AC.
D. F represents a price level that would result in a shortage of real output of AC.
27. Which of the following resulted from the financial crisis of 2007-2008? A. A national bank holiday was declared that shut down banks for one week. B. The Fed raised reserve requirements to keep cash from flowing out of banks. C. The Fed raised interest rates to entice depositors to keep their money in banks. D. FDIC insurance was increased from $100,000 to $250,000 per account.
D. FDIC insurance was increased from $100,000 to $250,000 per account.
9. Which of the following is correct? A. Both the granting and repaying of bank loans expand the aggregate money supply. B. Granting and repaying bank loans do not affect the money supply. C. Granting a bank loan destroys money; repaying a bank loan creates money. D. Granting a bank loan creates money; repaying a bank loan destroys money.
D. Granting a bank loan creates money; repaying a bank loan destroys money.
26. If the economy is opened to free trade, the price and quantity sold of this product would be: A. Pc and v. B. Pa and z. C. Pt and y. D. Pc and z.
D. Pc and z.
12. Which of the following best describes the built-in stabilizers as they function in the United States? A. The size of the multiplier varies inversely with the level of GDP. B. Personal and corporate income tax collections automatically fall and transfers and subsidies automatically rise as GDP rises. C. Personal and corporate income tax collections and transfers and subsidies all automatically vary inversely with the level of GDP. D. Personal and corporate income tax collections automatically rise and transfers and subsidies automatically decline as GDP rises.
D. Personal and corporate income tax collections automatically rise and transfers and subsidies automatically decline as GDP rises.
4. Suppose that the economy is in the midst of a recession. Which of the following policies would most likely end the recession and stimulate output growth? A. A Congressional proposal to incur a Federal surplus to be used for the retirement of public debt. B. Reductions in agricultural subsidies and veterans' benefits. C. Postponement of a highway construction program. D. Reductions in Federal tax rates on personal and corporate income.
D. Reductions in Federal tax rates on personal and corporate income.
32. Other things equal, which of the following would increase the Federal funds rate? A. a decrease in loan demand in the Federal funds market B. a decrease in the reserve ratio C. Fed purchases of government securities from banks D. a decline in excess reserves in the banking system
D. a decline in excess reserves in the banking system
24. Refer to the above diagram where D and S are the United States' demand for and supply of Swiss francs. At the equilibrium exchange rate, E, the United States' balance of payments is in equilibrium. A shift of the demand curve to D' might be the result of: A. a relative decline in interest rates in Switzerland. B. a reduction in the United States' relative price level. C. a recession in the United States which slows its rate of growth. D. a relative decline in interest rates in the United States.
D. a relative decline in interest rates in the United States.
31. The prime interest rate: A. affects investment spending while the Federal funds rate affects consumption spending. B. affects consumption spending while the Federal funds rate affects investment spending. C. has no affect on exchange rates and net exports. D. affects investment spending while the Federal funds rate affects overnight borrowing of bank reserves.
D. affects investment spending while the Federal funds rate affects overnight borrowing of bank reserves.
30. Present consumption supported by large trade deficits may come at the expense of: A. permanent debt to foreign interests. B. permanent foreign ownership of formerly U.S. owned assets. C. large sacrifices of future consumption. D. all of these.
D. all of these.
4. Differences in production efficiencies among nations in producing a particular good result from: A. different endowments of fertile soil. B. different amounts of skilled labor. C. different levels of technological knowledge. D. all of these.
D. all of these.
20. Under a system of freely flexible (floating) exchange rates a U.S. trade deficit with Mexico will tend to cause: A. the United States government to ration pesos to U.S. importers. B. a flow of gold from the United States to Mexico. C. an increase in the peso price of dollars. D. an increase in the dollar price of pesos.
D. an increase in the dollar price of pesos.
14. During periods of rapid inflation, money may cease to work as a medium of exchange: A. unless it has been designated legal tender. B. unless it is backed by gold. C. because it is too scarce for everyone to have enough for transactions. D. because people and businesses will not want to accept it in transactions.
D. because people and businesses will not want to accept it in transactions.D. because people and businesses will not want to accept it in transactions.
19. Suppose the Fed wants to increase the money supply by $400 billion to drive down interest rates and stimulate the economy. Assuming that the money multiplier is operating to full effect, to accomplish the desired increase the Fed could: A. sell $20 billion of U.S. securities to the banks. B. buy $20 billion of U.S. securities from the banks. C. sell $40 billion of U.S. securities to the banks. D. buy $40 billion of U.S. securities from the banks.
D. buy $40 billion of U.S. securities from the banks.
1. Refer to the above diagrams. Other things equal, curve B will shift upward when: A. the level of GDP increases. B. the interest rate increases. C. curve A shifts to the left. D. curve A shifts to the right.
D. curve A shifts to the right.
6. Refer to the above diagram of the market for money. Given Dm and Sm, an interest rate of i3 is not sustainable because the: A. supply of bonds in the bond market will decline and the interest rate will rise. B. supply of bonds in the bond market will increase and the interest rate will decline. C. demand for bonds in the bond market will decline and the interest rate will rise. D. demand for bonds in the bond market will rise and the interest rate will fall.
D. demand for bonds in the bond market will rise and the interest rate will fall.
17. Assume the reserve ratio is 25 percent and Federal Reserve Banks buy $4 million of U.S. securities from the public, which deposits this amount into checking accounts. As a result of these transactions, the supply of money is: A. not directly affected, but the money-creating potential of the commercial banking system is increased by $12 million. B. directly increased by $4 million and the money-creating potential of the commercial banking system is increased by an additional $16 million. C. directly reduced by $4 million and the money-creating potential of the commercial banking system is decreased by an additional $12 million. D. directly increased by $4 million and the money-creating potential of the commercial banking system is increased by an additional $12 million.
D. directly increased by $4 million and the money-creating potential of the commercial banking system is increased by an additional $12 million.
25. Under a system of fixed exchange rates, a nation that has chronic balance of payments deficits may: A. initiate protectionist trade policies. B. run short of international monetary reserves. C. be forced to invoke contractionary monetary and fiscal policies. D. do all of these.
D. do all of these.
8. The determinants of aggregate supply: A. are consumption, investment, government, and net export spending. B. explain why real domestic output and the price level are directly related. C. explain the three distinct ranges of the aggregate supply curve. D. include resource prices and resource productivity.
D. include resource prices and resource productivity.
9. Refer to the above diagram. If the full-employment level of GDP is D, then it would be appropriate fiscal policy for government to: A. decrease spending and increase taxes. B. decrease spending and decrease taxes. C. increase spending and increase taxes. D. increase spending and decrease taxes.
D. increase spending and decrease taxes.
28. Relatively rapid U.S. growth between 1999 and 2000, and from 2003 to 2007, contributed to large U.S. trade deficits by: A. increasing U.S. national income, which decreased U.S. exports. B. reducing real interest rates in the United States. C. increasing U.S. tax revenues and reducing the Federal budget deficit. D. increasing U.S. national income, which increased U.S. imports.
D. increasing U.S. national income, which increased U.S. imports.
3. If the MPC in an economy is .75, government could shift the aggregate demand curve leftward by $60 billion by: A. reducing government expenditures by $12 billion. B. reducing government expenditures by $60 billion. C. increasing taxes by $15 billion. D. increasing taxes by $20 billion.
D. increasing taxes by $20 billion.
26. If the United States has full employment and the dollar dramatically depreciates in value, we can expect (other things equal): A. both U.S. imports and U.S. exports to rise. B. both U.S. imports and U.S. exports to fall. C. U.S. exports to fall and U.S. imports to increase. D. inflation to occur.
D. inflation to occur.
26. In the above diagram, if the full-employment level of GDP is B and aggregate expenditures are at AE1, the: A. inflationary expenditure gap is BC. B. recessionary expenditure gap is BC. C. inflationary expenditure gap is zero. D. inflationary expenditure gap is ei.
D. inflationary expenditure gap is ei.
2. Refer to the above diagrams. Other things equal, an interest rate decrease will: A. shift curve A to the right and shift curve B upward. B. shift curve A to the left and shift curve B downward. C. leave curve A in place but shift curve B downward. D. leave curve A in place but shift curve B upward.
D. leave curve A in place but shift curve B upward.
25. Firms whose central business is providing individual account shares of collections of stocks, bonds, or both are known as: A. insurance companies. B. thrifts. C. commercial banks. D. mutual funds companies.
D. mutual funds companies.
19. If the world price of this product is $1, this nation will: A. export all of the product. B. import all of the product. C. import some of the product and produce some of the product domestically. D. neither export nor import the product.
D. neither export nor import the product.
26. Credit card balances are: A. a component of M1. B. a component of M2 but not of M1. C. a component of M1 but not of M2. D. not a component of M1 or M2.
D. not a component of M1 or M2.
21. Banks lost money during the mortgage default crisis because: A. of defaulted loans to investors in mortgage-backed securities. B. they held mortgage-backed securities they had purchased from investment firms. C. homebuyers defaulted on mortgages held by the banks. D. of all of these reasons.
D. of all of these reasons.
24. TIAA-CREF, Teamsters' Union, and CalPERS, are all primarily: A. commercial banks. B. thrifts. C. insurance companies. D. pension funds.
D. pension funds.
6. In the above diagram, a shift from AS3 to AS2 might be caused by an increase in: A. business taxes and government regulation. B. the prices of imported resources. C. the prices of domestic resources. D. productivity.
D. productivity.
24. In the above table, if the full-employment real GDP is $100 the: A. inflationary expenditure gap is $30. B. inflationary expenditure gap is $10. C. recessionary expenditure gap is $30. D. recessionary expenditure gap is $10.
D. recessionary expenditure gap is $10.
18. Refer to the above data. Suppose the Fed sold $10 billion of U.S. securities to the banks. This would: A. increase bank reserves to $70 billion, reduce bank-held securities to $130 billion, and ultimately increase the money supply (checkable deposits) by $100 billion. B. increase bank reserves to $70 billion, reduce bank-held securities to $130 billion, and ultimately decrease the money supply (checkable deposits) by $100 billion. C. reduce bank reserves to $50 billion, increase bank-held securities to $150 billion, and ultimately increase the money supply (checkable deposits) by $100 billion. D. reduce bank reserves to $50 billion, increase bank-held securities to $150 billion, and ultimately decrease the money supply (checkable deposits) by $100 billion.
D. reduce bank reserves to $50 billion, increase bank-held securities to $150 billion, and ultimately decrease the money supply (checkable deposits) by $100 billion.
8. Suppose the price level is fixed, the MPC is .5, and the GDP gap is a negative $80 billion. To achieve full-employment output (exactly), government should: A. increase government expenditures by $80 billion. B. reduce government expenditures by $40 billion. C. reduce taxes by $40 billion. D. reduce taxes by $80 billion.
D. reduce taxes by $80 billion.
20. When the required reserve ratio is increased, the excess reserves of member banks are: A. reduced, but the multiple by which the commercial banking system can lend is unaffected. B. reduced and the multiple by which the commercial banking system can lend is increased. C. increased and the multiple by which the commercial banking system can lend is increased. D. reduced and the multiple by which the commercial banking system can lend is reduced.
D. reduced and the multiple by which the commercial banking system can lend is reduced.
27. In saying that the present system of floating exchange rates is managed we mean that: A. countries that allow their exchange rate to move freely will lose their borrowing privileges with the IMF. B. the value of any IMF member's currency can only vary 2 percent from its par value. C. IMF officials determine exchange rates on a day-to-day basis. D. the central banks of various countries sometimes buy and sell foreign exchange to alter undesirable trends in exchange rates.
D. the central banks of various countries sometimes buy and sell foreign exchange to alter undesirable trends in exchange rates.
48. In the 1990s and early 2000s, Japan's central bank reduced real interest rates to zero percent, but investment spending did not respond enough to bring the economy out of recession. Japan's experience is an illustration of: A. the crowding-out effect. B. "pulling on a string." C. the Taylor rule. D. the liquidity trap.
D. the liquidity trap.
16. The Federal Open Market Committee (FOMC) is comprised of: A. the chair of the Board of Governors along with the 12 presidents of the Federal Reserve Banks. B. the seven members of the Board of Governors along with the president of the New York Federal Reserve Bank. C. the seven members of the Board of Governors of the Federal Reserve System along with the three members of the Council of Economic Advisers. D. the seven member of the Board of Governors of the Federal Reserve System along with the president of the New York Federal Reserve Bank and four other Federal Reserve Banks presidents on a rotating basis.
D. the seven member of the Board of Governors of the Federal Reserve System along with the president of the New York Federal Reserve Bank and four other Federal Reserve Banks presidents on a rotating basis.
28. Refer to the above diagram for the Federal funds market. If the Fed supplies $200 billion in reserves, the equilibrium prime interest rate is: A. 6.0 percent. B. 5.5 percent. C. 5.0 percent. D. undeterminable with the information given.
D. undeterminable with the information given.
Kara was out jogging and dispite being tired, decided to run one more mile. Based on her actions economists would conclude that Kara:
Decided that the marginal benefit of running one more mile outweighed the cost of the additional mile
Entrepreneurship
Decisions, risks and work that are needed to run a business.
Cost push inflation
Decrease in aggregate supply
Risk
Degree of uncertainty of return on an asset; in business, the likelihood of loss or reduced profit.
Discretionary fiscal policy
Deliberate changes in government spending and taxation designed to infuence aggregate demand
Kinked Demand Curve
Demand curve facing an oligopolist which is relatively price elastic if price is raised but relatively price inelastic if price is reduced
Marginal change
Description of small incremental adjustment to an existing plan of action. Adjustments around the edges
Inflationary gap
Difference between GDP1 and full employment GDP because the increase in aggregate demand from its previous level causes upward pressure on the price level.
Consumer surplus
Difference between total value to consumers of the units of a good that buy and the total amount they must pay for those units
Occupational immobility of labour
Difficulty in moving from one type of job to another
Monopoly
Downward facing demand curve for to duct. Possible pricing strategies are single price and price discrimination. Profit max (P-ATC) * Q
Imperfect competition
Downward facing demand curves. Creates price searchers.
Profit
Earnings after all expenses have been paid
Profit
Earnings after all expenses have been paid.
Human capital
Education, training and experience that a worker, or group of workers, possesses
Traditional Economy
Econimic desisions based on customs and habits
Informal economy
Economic activity that is not recorded or registered with the authorities in order to avoid paying tax or complying with regulations, or because the activity is illegal
Development
Economic growth increases standard of living
Sustainable economic growth
Economic growth that can continue over time and does not endanger future generations' ability to expand productive capacity
Law of Demand
Economic law that states that consumers buy more of a good when the price decreases and less when its price increases.
Which of the following is not an economic cost?
Economic profits
If a competitive industry is neither expanding nor contraction, we would expect:
Economic profits to be zero
Adam Smith
Economist who wrote Wealth of Nations; Laissez-Faire economics
The competitive market system:
Ecourages innovation because successful innovators are rewarded with economic profits
Federal Trade Commission
Established to preserve competition by preventing unfair business practices and investigates complaints against companies
Voluntary Exchange
Everyone is dependent on many other people to voluntarily produce and exchange products
coincident Indicators
Ex. Paycheck. Moves w/ the GDP.
Lagging Indicators
Ex. unemployment
Marginal cost
Example: Making cookies than making one more which might affect and cost more.
patent
Exclusive rights over an invention (monopoly) - used as an incentive to let inventors profit from their own research and work
Federal open market committee
FOMC- the fed's chief body that decides monetary policy
Resources
Factors used in the production of goods and service
Resources
Factors used in the production of goods and services
FDIC
Federal Deposit Insurance Corp. gov't agency that insures customer deposits up to 250K if a bank fails.
Oligopoly
Few firms, greater pricing power, high entry barriers, products may be differentiated
Finances
Finance is the science of funds management, or the allocation of assets and liabilities over time under conditions of certainty and uncertainty.
Consumer Price Index
Shows changes in the average prices of goods and services purchased by consumers over a period of time
Suppose industry A is realizing substantial ecnomic profit. Which of the following best describes what will happen in this competitive market?
Firms will ener the industry and output will rise
Proportional Tax
Flat tax, income paid for taxes remains the same for all income levels.
Keynesian school
Fluctuations are primarily due to swings in the level of optimism of those who run businesses- over investment or over production in boom. Opposite in bust. Wages are downward sticky. Increase aggregate demand through monetary policy or stimulus.
Law of diminishing return
For a given production process as more and more resources are added, holding quantities of other resources fixed, output increases at a decreasing rate. At some point more workers results in inefficiencies
The coincidence-of-wants problem associated with barter refers to the fact that:
For exhange to occur each seller must have a product that some buyer wants
Automatic stabilisers
Forms of government spending and taxation that change automatically to offset fluctuations in economic activity
What should be produce? How will it be made? How many of this item should be produces? Who is the item for?
Four questions?
Mutual Funds
Funds that pools the savings of many individuals and invests this money in a variety of stocks,bonds, and other financial assets.
Fiscal Balance
G-T
Net domestic product
GDP - Depreciation
Gross Domestic Product
GDP total value of all financial goods and services produced in a particular economy. $ value of all final goods and services produced in country in a given year.
Command economy
Givernment makes all decisions
Short-term, medium-term, and long-term goals
Goals to achieve over specific periods of time.
Regulator
Government agent responsible for setting maximum price and ensuring against abuse of monopoly power by those companies who face limited competition in product markets
Competition Policy
Government efforts to ensure firms do not exploit monopoly power
Government Spending
Government spending or expenditure includes all government consumption,investment, and transfer payments.
Fiscal policy
Government spending policies that influence macroeconomic conditions. Through fiscal policy, regulators attempt to improve unemployment rates, control inflation, stabilize business cycles and influence interest rates in an effort to control the economy
Lorenz Curve
Graphical representation to inequality: cumulative shares of income are plotted against cumulative shares of the population
Real GDP
Gross Domestic Product expressed in constant or unchanging prices.
GDP Per Capita
Gross domestic product divided by the number of people in the population.
Supply and demand
Heart and sole of economics
How do taxes affect spending
High Taxes= Less Spending (meaning people buy less stuff)
How do interest rates affect spending
High interest= Less Spending
Veblen good
High price makes the good more desirable. Gucci Gucci Louie Louie fends fendi fendi Prada
Vickrey Auction
Highest bid wins, Pays amount of second highest bidder
English Auction
Highest bid wins, bids known, pays bid amount
Sealed Auction
Highest bid wins, bids sealed, pays bid amount
Horizontal/Vertical Merger
Horizontal- 2 or more firms competing in the same marker w/ the same good or service. Vertical-2 or more firms involved in diff. stages of producing the same good.
Distribution of income
How income is shared out between households in a country
Demand
How many consumers want a certain product.
Demand
How much consumers are willing and able to buy at possible prices at given times
Demand
How much in the way of goods and services people want and are able and willing to buy at a given price.
Consumer confidence
How optimistic consumers are about future economic prospects
capital goods
Human made materials needed to produce goods and services.
quietly give me a thumbs up when you get into class...
I just want to see who is studying! I'm proud of you!
Calculating Future Expenses
Identifying the cost of meeting future needs and goals.
Paradox of thrift
In the long run, saving leads to investment and growth In the short run, saving may lead to a decrease in spending, output, and employment
Economic growth
In the short run, an increase in real GDP, and in the long run, an increase in productive capacity, that is, in the maximum output that the economy can produce
Scarcity
Inability to satisfy all wants at the same time
Resources
Includes time, land, space, and the knowledge to combine them and become successful.
Gross Income
Income before taxes are taken out.
Regressive Tax
Income paid in taxes decreases as income increases.
Disposable Income
Income remaining for a person to spend or save after all taxes have been paid
IS Curve
Income savings curve. Negative relationship between real interest rates and real income. Points on IS curve are combo of real interest rate a and income consistent with equilibrium in the goods market
Marginal Revenue
Increase in TR from selling one more unit. In perfect competition AR=MR=price
Demand Pull inflation
Increase in monetary supply, gov spending or other change that increases aggregate demand
Compliments
Increase in price of a good. Increase in price of left shoes decreases demand for a right shoe
Fraud
Intentional deception made for personal gain or to damage another individual
Economic Flow
Interaction of consumers, businesses, and markets
Economic flow
Interaction of consumers, businesses, and markets
Economics flow
Interaction of consumers, businesses, and markets
Economic Flow
Interaction of consumers,buisnesses, and markets
Economic flow
Interaction of consumers,businesses, and markets
World bank
International organisation whose aims include: reducing poverty levels or providing aid and advice to developing.
Sustability if econmic growth
Potential GDP=growth in labor force + growth in productivity
Fiscal multiplier
Inversely related to tax rate and directly related to marginal propensity to consume
extreme poverty (world bank)
Is earning less than $1.25 in purchasing power parity - adjusted terms, per day. Moderate poverty is earning 2.00 per day, adjusted for purchasing power
Demand
Is the amount of a good or service that consumers are willing and able to buy at a certain price
Demand
Is the amount of a good or service that consumers are willing and able to buy at a certain price.
Supply
Is the amount of a good or service that producers are willing and able to sell at a certain price
Supply
Is the amount of a good or service that producers are willing and able to sell at a certain price.
Demand
Is the amount of a good orservice that consumers are willing and able to buy at a certain price
Supply
Is the amount of good and service that producerrs are willing and able to sell at a certain price.
Demand
Is the amount of good or service that consumers are willing and able to buy certain price.
Production
Is the combining of resources to make goods or provide services
Merger
Joining of two previously separate firms into one
Leading Indicators
Key economic variables that economists use to predict a new phase of the business cycle.
Left - Democrats
Keynesian perspective
Human Resources
Labor
Factors of production
Land Labor Capital Materials
LM curve
Liquidity money curve. Positive relationship between real interest rates and income consistent with equilibrium in the money market
Perfect Competition
Many firms, No pricing power, no barriers, homogeneous product
Monopolistic Competition
Many firms, some pricing power, low barriers to entry, differentiated products, large advertising expense
Free markets
Markets that are allowed to operate without undue interference from the government
Free Markets
Markets that are allowed to operate without undue interference from the government.
Free markets
Markets that are allowed to operate without undue interference from the government.
Goods
Materials that are produced for people to buy or things that be see and touched.
Derived Demand for Labour
Means labour is only demanded because of the output it can produce and not because firms want workers in their own right
Efficiency
Means that society is getting the maximum benefits from us scarce resources.
Equality
Means that those benefits are distributed uniformly among societies members
Retail prices index
Measure of inflation that is used for adjusting pensions and other benefits to take account of changes in inflation and frequently used in wage negotiations. Differs from CPI in methodology and coverage.
Producer Surplus
Measure of producer welfare: the surplus of market price received over the minimum price the producer would be prepared to accept
Consumers Surplus
Measures of consumer welfare: the maximum price a consumer is willing to pay for a good minus the market price
Incentives
Money
Income
Money earned over a period of time
Profit
Money someone makes off their product when they sell it for more than they made it for.
Quantity theory of money
Money supply X velocity = price X real output (mv=py)
Transfer payments
Money transferred from one person or group to another not in return for any good or service
Taxes
Money you pay to the government
Housing sector activity
Mortgage rates- low rates increase activity Housing cost relative to income Speculative activity Demographic factors
Economics involves marginal analysis because:
Most decisions involve changes from present situation
the NASDAQ
National Association of Securities Dealers Automated Quotations (a computer system in the US that supplies the current price of shares to the people who sell them)
NASDQ
National Association of Securities Dealers, world's first electronic stock exchange, many technology companies are traded on it (Google, Apple, Microsoft, Oracle, Amazon, Intel)
Land
Natural resources, such as trees, cows, and oil.
Deadweight Loss
Net welfare loss from not producing at social optimal production
New Deal
New Labour's policy to combat long term unemployment: after a period of assisted job search, an unemployed person is guaranteed some form of paid work or training
NYSE
New York Stock Exchange, aka the "Big Board", stock exchange in New York City, approximately 1,900 companies listed on it
Recession
No econimic growh for 6 months
Structural unempkoyment
No skills needed
Free trade
No trade barriers
Dynamic Efficiency
Occurs when resources are allocated efficiently over time
Reflationary
Of policy measures designed to increase aggregate demand
Deflationary
Of policy measures designed to reduce aggregate demand
Kinked Demand Curve
Oligopoly price model. The assumption that an increase in a firm's product price will not be followed by compete it's but a decrease in price will
Value of final output GDP
Only goods valued in market. Final goods and services. Retail value for owner occupied housing and government services at cost. Household earning +business+ government
Suppose that a university decides to spend $1 million to upgrade personal computers and scientific equipment for faculty rather than spend $1 million to expand parking for students. This expample illustrates:
Opportunity costs
OEDC
Organization for Economic Cooperation and Development (an organization of industrial countries that encourages trade and economic growth)
Market
Organized way for producers and consumers to trade goods and services
The term "ceteris paribus" means:
Other things equal
MR equals MC
Output at which ,in all market structures, profit is maximized
Nominal GDP
Output measured in current prices and so not adjusted for inflation
Productivity
Output per factor input
Labour productivity
Output per worker hour
Socially Optimal Production
Output where Allocative efficiency is maximised
Productivity
Output, or production, of a good or service per worker per unit of a factor of production in a given time period
deficit
Owe more than you have money coming in.
Total revenue
P * Q
Price taker firm, no barrier to entry
P=MC=ATC=MR
Income
Payment received for goods or services, including employment.
Entrepreneur
People who start a business
Consumers
People whose wants are satisfied by using goods and services
Labor
People working.
Fiscal drag
People's income being dragged into higher tax bands as a result of tax brackets not being adjusted in line with inflation
Recessionary gap
Period of declining GDP and increasing unemployment. Classic Econ would say wages will drive down and workers compete for jobs. This increases SRAS and returns economy to full employment. Kynesains say give government a chance to act through expansionary (increase gov spending or decrease tax) and expansionary monetary supply (lower rates and increasing money supply)
Long Run
Period of time when all factors of production are variable
Short Run
Period of time when at least one factor of production is fixed
Entrepreneur
Person who takes a risk to produce goods and services in search of a profit
Entrepeneur
Person who takes a risk to produce goods and services in search of a profit.
Entrepreneur
Person who takes a risk to produce goods and services in services of a profit
Entreprenuer
Person who takes risk to produce goods and services in search of a profit
Budget
Plan which shows income and expenses over a period of time
Contractionary Monetary Policy
Policy rate > Neutral interest rate (real trend rate of economic growth + inflation target)
Sales Maximisation
Price and output are chosen to maximise sales volume
Revenue Maximisation
Price and output are chosen to maximise total revenue
Modified Dutch Auction
Price declines until all units can be sold, all bidders pay last bid price
Inflation rate
Price of borrowing money
Dutch Auction
Price starts high then declines until all units can be sold, pays bid amount
New Keynesian school
Prices of productive inputs other than labor are also downward sticky presenting additional barriers to full employment equilibrium.
Retained profits
Profit kept by firms' to finance investment
Participation Rate
Proportion of those of working age who are in paid jobs or seeking them
Economists contend that most economic decisions are:
Purposeful
Consumers spend their incomes to get the maximum benefit or satisfaction from the good and services they purchase. This is a refection of:
Purposeful behavior
Surplus
Quantity supplied is greater than the quantity demanded. (also known as excess supply)
Regulation
Rules from government requiring firms to modify their production techniques, output or price
Alex sees that his neighbors' lawns all need mowing. He offers to provide the service in exchange for a wage of $20 per hour. Some neighbors accept Alex's offer and other refuse. Economists would describe Alexs behavior as:
Rational self-interest, becasue he's attempting to increase his own income by identifying and satisfying someone else's wants
Deregulation
Removal of government regulations to allow the entry of private sector firms to compete in a market
Natural Resources
Resources that haven't been "tampered" with yet. They were naturally that way and haven't been made into material. (Cotton instead of yarn.)
Elastic
Responsive to a change in market conditions
Competition
Rivalry between producer/ sellers of a good service
Competition
Rivalry between producers/sellers of a good or service
Competition
Rivalry between producers/sellers of a good or services
White Collar Worker
Salaried employees (ex. teachers lawyers)
Savings ratio
Savings as a proportion of disposable income
If you studied this...
Say "GDP fo' life!" when you walk in.
Indeciding whether to study for an economics quiz or go to a movie, one is confronted by the idea(s) of:
Scarcity and opportunity costs
Choice
Selecting an item or action from a set of alternative
Internal Growth
Self-financed growth of a company
Stock
Share of ownership
Neoclassical school
Shifts in aggregate demand and aggregate supply are driven by tech change over time. Strong tendency towards full employment as recession puts downward pressure on the money wage rate or as full employment puts upward pressure on the money wage rate. Business cycles result from temporary deviation from long range equilibrium
Frictional unemployment
Short term unemployment occurring when workers are in-between jobs
Monopoly
Single firm, significant pricing power, high barriers, advertising used to compete with substitutes
Consumer
Somebody that gets products and services for themselves.
Producer
Someone that makes products and services for consumers.
Consumer
Someone who uses goods or services.
Blue Collar Workers
Someone who works in an industrial job and receives wages. (ex. production workers)
Dissave
Spending more than disposable income
Investment
Spending on capital goods
Diversification
Spreading out investments to reduce risk.
Stagflation
Stagnant economy with inflation. Declining output and higher prices.
Economic Indicators
Statistics that provide information about the performance of the economy and its position in the business cycle.
Elastic Demand
Steeper demand curve. In the case of tax consumer bears higher burden. Perfect elastic would be a straight horizontal line.
Elastic Supply
Steeper supply curve. In the case of tax the supplier bears burden. Buyers have more leverage in this market.
portfolio diversification
Strategy of holding different investments to protect against risk
Developed country
Strong economy and high standard of living
Adam smith
Studied economics before there was economics
Economics
Study of hiw people meet their wants and needs
Economics
Study of how people use resources to produce and distribute goods and services
economics
Study of how people use resources to produce and distribute goods and services
Economics
Study of how societies decide what to produce, how to produce it, and how to distribute what they produce
Real vs nominal GDP
Sum of goods and services at current year prices is nominal Sum of current year goods and services at base price is nominal.
Producers
Supply products for money
Law of supply
Tendency of suppliers to offer more of a good at a higher price
rule of 72 states:
The # of years to double income = 72/growth rate
Capital
The amount of capital that a firm, usually in financial services, needs to ensure that the company stays solvent. Economic capital is calculated internally and is the amount of capital the firm should have to support any risks it takes on. The measurement process involves converting a given risk to the amount of capital that is required to support it. The calculations are based on the institution's financial strength (e.g., credit rating) and expected losses.
Interest Rate
The amount of extra money a bank charges to take out a loan
Supply
The amount of goods available.
market power
The ability of a company to change prices and output
Human Capital
The ability of workers to add value to production
Innovation
The ability to turn an invention into a marketable product or production process
Marginal Cost
The addition to total cost from producing an extra unit of output
Marginal Private Cost
The addition to total cost to the firm from an extra unit of production
Marginal Revenue Product
The addition to total revenue from employing an extra worker
Marginal Revenue
The addition to total revenue from producing an extra unit of output
Marginal External Benefit
The additional (external) benefit to third parties from an extra unit of production
Marginal Social Benefit
The additional benefit to society from an extra unit of production
Marginal Private Benefit
The additional benefit to the consumers from an extra unit of production
Marginal External Cost
The additional cost suffered by the third part from an extra unit of production
Marginal Social Cost
The additional cost to society (i.e. firm + third party) from an extra unit of production
Economy of scale
The advantage of producing on large scale, in the form of lower long-run average cost
Deficit
The amount by which expenses exceed income or costs outstrip revenues. Deficit essentially refers to the difference between cash inflows and outflows. It is generally prefixed by another term to refer to a specific situation - trade deficit or budget deficit, for example. Deficit is the opposite of "surplus" and is synonymous with shortfall or loss.
supply
The amount of a product that is available for people to purchase.
supply
The amount of an item produced for sale
Supply
The amount of items to be sold
price
The amount of money a consumer is prepared to pay for a good or service
Dow Jones Industrial Average
The average cost of 30 selected stocks, used to give an indication of the direction (up or down) of the stock market over time.
Price level
The average of each of the prices of all the products produced in an economy
Risk
The chance that an investment's actual return will be different than expected. Risk includes the possibility of losing some or all of the original investment. Different versions of risk are usually measured by calculating the standard deviation of the historical returns or average returns of a specific investment. A high standard deviation indicates a high degree of risk.
Rate of interest
The charge for borrowing money and the amount paid for lending money
Market for Corporate Control
The competition for control of companies through takeovers
Specialization
The concentration of the productive efforts of individuals and firms on a limited number of activities.
Voluntary Exchange
The concept that ppl may decide what and when they want to buy and sell.
Surplus
The condition in which a quantity is larger than what is needed
Free Enterprise
The condition that allows people to freely make choices in their economics roles
price stability
The condition that exists when overall price levels remain relatively constant over a period of time.
Menu costs
The costs of changing prices due to inflation
Fiscal Policy
The federal government efforts to keep the economy stable by increasing or decreasing taxes or government spending
Marginal cost exits because:
The decision to engage in one activity means forgoing some other activity
Federal Reserve
The department of the US government that regulates the supply of money in America
Demand
The desire to own something and the ability to pay for it.
Output gap
The difference between an economy's actual and potential real GDP
Macroexonomics approaches the study of economics from the viewpoint of:
The entire economy
Horizontal Equity
The equal treatment of people in the same circumstances
Producer surplus
The excess of the market price above the opportunity cost of production. Total revenue - Total Variable Cost
Trend growth
The expected increase in potential output over time
Capacity utilisation
The extent to which firms are using their capital goods
Substitution Effect
The fall in demand for leisure by an individual worker as wage rates rise because leisure becomes more expensive in terms of opportunity cost
Law of Diminishing Returns
The fall in marginal product that eventually results as additional units of the variable factor of production are added to the fixed factors
macroeconomics
The field of economics that studies the behavior of the aggregate economy. Macroeconomics examines economy-wide phenomena such as changes in unemployment, national income, rate of growth, gross domestic product, inflation and price levels.
The Great Recession
The financial crisis that intensified in September 2008 marked the end of an era for U.S. investment banking. By 2009, output was around 4% below potential and unemployment was up around 10%.
Diversification
The increase in the variety of goods and services pro ducted in other to avoid over-specialisation.
Income Effect
The increased demand for leisure by an individual worker as wage rates rise because workers regard leisure as a normal good to be enjoyed more as they earn more
Privatisation (Broad Definition)
The increased use of market forces in markets previously dominated by state planning
Normal Profit
The minimum (accounting) profit which the entrepreneur needs to stay in long term production
Minimum Efficient Scale
The lowest output at which a firm can produce at the lowest unit costs possible for the given technology
Concentration Ratio
The market share of the 5 largest firms in an industry
The Great Depression
The most severe downturn in the nation's history. GDP fell by almost one third, and unemployment rose to about 25%
Circular flow of income
The movement of spending and income throughout the economy
Economic Cycles
The natural fluctuation of the economy between periods of expansion (growth) and contraction (recession). Factors such as gross domestic product (GDP), interest rates, levels of employment and consumer spending can help to determine the current stage of the economic cycle.
Vertical Equity
The notion which can be used to justify taxing richer people more to bring about greater 'fairness'
consumer
The one who buys or uses the good or service
Which one of the following is an economic explanation for why most college-ages movies stars do not attend college.
The opportunity cost in terms of reduced income is too great
Labour force
The people who are employed and unemployed, that is, those who are economically active
Inflation rate
The percentage increase in the price level over a period of time
Unemployment rate
The percentage of the labour force who are out of work
Consumer Sovereignty
The power of the consumer to decide what to produce.
Total Purchase Price
The price at which something is actually purchased.
Exchange rate
The price of one currency in terms of another currency
Cost
The price paid for a good or service.
Multiplier effect
The process by which any change in a component of aggregate demand results in a greater final change in real GDP
Innovation
The process of translating an idea or invention into a good or service that creates value or for which customers will pay.
Average propensity to save (APS)
The proportion of disposable income saved. It is saving divided by disposable income
Average propensity to consumer (APC)
The proportion of disposable income spent. It is consumer expenditure divided by disposable income.
Protectionism
The protection of domestic industries from foreign competition
In a market economy the distribution of output will be determined primarily by:
The quantities and prices of the resources that households supply
Equilibrium Price
The quantity demanded is equal to the quantity supplied.
Privatisation (Narrow Definition)
The sale of state owned industries to the private sector
Population of Working Wage
The school leaving age to retirement age
The process by which economists test hypotheses against facts to develop therories, principles, and models is called:
The scientific method
Factor services
The services provided by the factors of production
Solepropiership
The sole proprietor is an unincorporated business with one owner who pays personal income tax on profits from the business. With little government regulation, they are the simplest business to set up or take apart, making them popular among individual self contractors or business owners.
Economics
The study of how people use money and how they choose to use their resources.
Economics
The study of the manufacture distribution, sale , and use of goods and services.
Economic development
The sustainable increase in living standard for a country, typically characterised by increases in life span, education levels, and income
Great Depression
The worst economic recession in US History
Demand Pull Theory
Theory that states that inflation occurs when demand for goods and services exceeds supply.
Fiscal policy
The taxation and spending decisions of a government
Economic cycle
The tendency for economic activity to fluctuate outside its trend growth rate, moving from a high level of economic activity (boom) to negative economic growth (recession)
Law of Supply
The tendency of suppliers to offer more of a good at a higher rice. As price increases, supply increases.
Opportunity cost
The things you give up when making a choice between two things.
Wealth
The value of an individual's assets at a point in time
Trade surplus
The value of exports exceeding the value of imports
Net exports
The value of exports minus the value of imports
Trade deficit
The value of imports exceeding the value of exports
Exchange rate
The value of one currency expressed in terms of another currency
Opportunity Cost
The value of the alternative given up as a result of a decision.
Cost
The value of the next better thing. What you are giving up.
Which of the following charateristics is least unique to a market system?
The widespread use of money
The presence of market faliures implies that:
There is an acive role for government, even in a market system
Natural Resources
Things in nature which man has found use.
Needs
Things that people must have in order to survive, such as food.
Which of the following is a correct statement?
Though not quantitatively exact, economic laws are useful because they allow us to predict and therefore control or adjust to events
1.people will accept it 2.stable value 3. Pay our taxes
Three reasons why our dollar is worth so much
Consumer sovereignty
Through their purchases, consumers determine what good and services will be produced.
Consumer Sovereignty
Through their purchases, consumers determine what goods and services will be produced
Consumer sovereignty
Through their purchases, consumers determine what goods and services will be produced
Consumer Sovereignty
Through their purchases, consumers determine what goods and services will be produces
quotes
To state (a price) for securities, goods, or services
Accounting profit
Total revenue -total accounting (explicit) costs
Gross domestic product
Total value of all goods and services produced in a country in one year
Structural Unemployment
Unemployment that occurs when workers' skills do not match the jobs that are available.
Cyclical Unemployment
Unemployment that rises during economic downturns and falls when the economy improves.
Which of the following most closely relates to the idea of opportunity costs?
Tradeoffs
Privitisation
Transfer of assets from the public to the private sector
Economic Business cycle trends
Trough, expansion, peak, contraction recession
True
True or False: The four main factors of production are scarce, even in the most prosperous regions.
True
True or False: The labor of free men and women is usually more productive than the labor of slaves, serfs, and other people who are not free.
Structural unemployment
Unemployment caused by the decline of certain industries and occupations due to changes in demand and supply
Hysteresis
Unemployment causing unemployment
Long-term unemployment
Unemployment lasting for more than a year
Seasonal Unemployment
Unemployment that occurs as a result of harvest schedules or vacation, f or when industries slow or shut down for a season.
Frictional Unemployment
Unemployment that occurs when ppl take time to find a job.
Kelly works at an ice cream shop and observes that the number of people buying ice cream varies greatly from day to day. For a couple of weeks she has recorded the number of people at the shop each day, as well as the daily temperature. If Kelly is using the secientific method to better understand ice cream buying habits, her next step is to:
Use the observed datat to form a hypothesis about ice cream buying behavior
The scidentific method is:
Used by economists and other social scientists, as well as by physical scientists and life scientists
Consumer Price Index
Used to calculate inflation. Price index is determined by measuring the price of standard group of goods meant to represent the typical "market basket" of a typical consumer.
Comsumption
Using goods and services
Consumption
Using goods and services
Investing
Using money to make a Profit
Capitol
Using the money or materials made from the natural resources to start a business.
Monetarist school
Variations in aggregate demand that cause business cycles are due to variations in the growth of monetary supply. Central banks should follow steady predictable increases in monetary supply.
Inelastic Demand
Verticals line. No or few good substitutes.
Import
We get goods and services to us
Which of the following is one of the Five Fundamental Questions?
What goods and services will be produced?
Current account deficit
When more money is leaving the country than entering it, as a result of sales of its exports, income and current transfers from abroad being less than imports and income and current transfers going aboard
scarcity
When needs and wants are unlimited but the resources used to satisfy them are limited
Specilization
When people produce a smaller amount of goods and services; a focus on certain goods and services
a buyer will typically not be willing to spend time and energy researching the market ___
When savings to be made are small
Competition
When two companies "battle" to see who will make the most profit if they have the same product.
Market
Whenever buyers and sellers exchange goods and services prices are established for similar products
Price Discrimination
Where a firm sells identical products at different prices to different buyers
marketplace
Where buyers and sellers come together and exchange goods and services for money
Limit Pricing
Where existing firms attempt to prevent new entry by pricing low so that new entrants will not make normal profits
Non Price Competition
Where firms attempt to make more profit without cutting price
Cost Plus Pricing
Where firms set price at average cost plus a profit margin, without explicit reference to estimated demand curve
Productive Efficiency
Where goods are produced at the minimum possible average cost
Allocative Efficiency
Where resources are used to produce what consumers actually want to buy i.e. where resources are allocated such that no consumer could be made better off without another consumer becoming worse off
National Collective Bargaining
Where trade unions negotiate for wages and working conditions which must apply to its workers throughout the country
Satutotry incidence
Who is legally responsible for paying the tax
Leakages
Withdrawals of possible spending from the circular flow of income
Competition
a company or firm that sells similar goods and might share customers
recession
[countable, uncountable] a difficult time for the economy of a country, when there is less trade and industrial activity than usual and more people are unemployed
reserve
[countable, usually plural] a supply of something that is available to be used in the future or when it is needed large oil and gas ____s He discovered unexpected ___s of strength. The company has substantial ____s of capital. ____ funds
crunch
[countable, usually singular] a situation in which there is suddenly not enough of something, especially money the budget/energy/housing ___ Higher grain prices are putting a ____on cattle feeders.
utility
[countable] a service provided for the public, for example an electricity, water or gas supply the administration of public ___es Rescue teams worked desperately to restore ___es in the area shattered by the hurricane.
aggregate
[countable] a total number or amount made up of smaller amounts that are collected together a record ___of 285 points The three smaller parties gained an ___of 25 per cent of the vote. in the ___ gộp chung, toàn thể
loss
[countable] money that has been lost by a business or an organization The company has announced net ___es of $1.5 million. We made a ___on (= lost money on) the deal. We are now operating at a ___.
option
[countable] the right to buy or sell something at some time in the future ____(on something) We have an option on the house. He has promised me first ___on his car (= the opportunity to buy it before anyone else). _____(to do something) The property is for rent with an ____to buy at any time. share ____s (= the right to buy shares in a company)
budget
[intransitive, transitive] to be careful about the amount of money you spend; to plan to spend an amount of money for a particular purpose If we ___carefully we'll be able to afford the trip. ___for something I've ___ed for two new members of staff. ___something (for something) Ten million francs has been ___ed for the project. ___something (at something) The project has been ____ed at ten million francs.
overheat
[intransitive] (of a country's economy) to be too active, with rising prices tăng trưởng nóng ___ed(adj)
spiral
[intransitive] to increase rapidly the ____ling cost of health care + adv./prep. Prices are ____ling out of control. tăng liên tục
consolidate
[transitive, intransitive] ___(something) (specialist) to join things together into one; to be joined into one All the debts have been ___d. ____d accounts The two companies ____d for greater efficiency. hợp nhất
reflate
[transitive, intransitive] ____(something) (economics) to increase the amount of money that is used in a country, usually in order to increase the demand for goods phục hồi hệ thống tiền tệ
float
[transitive] ____something (business) to sell shares in a company or business to the public for the first time The company was ____ed on the stock market in 2014. Shares were ___ed at 585p. IPO
fiddle
[transitive] ___something (informal) to change the details or figures of something in order to try to get money dishonestly, or gain an advantage to ___the accounts She ___d the books (= changed a company's financial records) while working as an accountant
fraud
[uncountable, countable] the crime of cheating somebody in order to get money or goods illegally She was charged with credit card ___. property that has been obtained by ___ a $100 million ____
poverty
[uncountable] the state of being poor conditions of abject/extreme ___ to alleviate/relieve _____ Many elderly people live in ___.
undercut
___ somebody/something to sell goods or services at a lower price than your competitors to ____somebody's prices We were able to ____our European rivals by 5%.
monopoly
____(in/of/on something) (business) the complete control of trade in particular goods or the supply of a particular service; a type of goods or a service that is controlled in this way In the past central government had a ____on television broadcasting. Electricity, gas and water were considered to be natural ___es. độc quyền exclusive right
future
____s[plural] (finance) goods or shares that are bought at agreed prices but that will be delivered and paid for at a later time oil ___s the ___s market
bankroll
___somebody/something (informal, especially North American English) to support somebody/something by giving money They claimed his campaign had been ___ed with drug money.
launder
___something to move money that has been obtained illegally into foreign bank accounts or legal businesses so that it is difficult for people to know where the money came from Most of the drugs money was ___ed through Swiss bank accounts.
privatize
___something to sell a business or an industry so that it is no longer owned by the government Air traffic control has been ____d.
ceteris paribus
a Latin phrase that means, "all other things held constant."
wealth accounts
a balance sheet of an economy's stock of assets and liabilities
savings account
a bank account in which you save money
national bank
a bank chartered by the national government
corporation
a business owned by its shareholders
Corporation
a business owned by stockholders who share in its profits but are not personally responsible for its debts
Stock
a certificate documenting the shareholder's ownership in the corporation
Bonds
a certificate issued by a government or private company which promises to pay back with interest the money borrowed from the buyer of the certificate: The city issued bonds to raise money for putting in new sewers.
substitution effect
a change in the amount that consumers will buy because they buy substitute goods instead
market supply schedule
a chart that lists how much a good all suppliers will offer at various prices
supply schedule
a chart that lists how much of a good a supplier will offer at various prices
base rate
a rate of interest, set by a central bank, that banks in Britain use when calculating the amount of interest that they charge on money they lend
rationing
a system of allocating scarce goods and services using criteria other than price
exchange rate
a system of changing from one type of currency (money) to another
double-entry bookkeeping
a system of keeping financial records in which each piece of business is recorded as a credit in one account and a debit in another
gold standard
a system that backs the basic monetary unit with a set amount of gold
National Income Accounting
a system that collects macroeconomic statistics on production, income, investment, and savings
deposit insurance
a system under which the federal government promises to reimburse an individual for any losses due to bank failure
Demand Schedule
a table that shows the relationship between the price of a good and the quantity demanded
Proportional Tax
a tax for which high-income and low-income taxpayers pay the same fraction of income
Regressive Tax
a tax for which the percentage of income paid in taxes decreases as income increases
Income Tax
a tax on the amount of money a person makes
excise tax
a tax on the production or sale of a good
Property Tax
a tax on the value of your home or business
excise tax
a tax that is levied on a specific good
tariff
a tax that is paid on goods coming into or going out of a country A general ___was imposed on foreign imports. thuế quan
classical growth model
a theory of growth that emphasizes the role of capital in the growth process
market power
ability of a company to change prices and output like a monopolist
entrepreneurship
ability of risk-taking individuals to develop new products and start new businesses in order to make profits.
role of the stockbroker
act as intermediaries between bulls and bears (buyers and sellers)
services
actions done for you by others to satisfy your needs and wants
services
actions that can satisfy people's wants
services
activities (things people do for others) that can satisfy people's wants
services
activities that can satisfy people´s wants
productive resources
all natural resources human resources and human made resources used in production of goods and services
supply
all of the available choices
Full employment
all people in the labor force are able to find work
productive resources
all resources used in the production of goods and services
efficient market hypothesis
all the financial decisions are made by rational people and are based on all relevant information that accurately reflects the value of assets today and in the future
command economy
an economy in which centralized planning groups decide what and how goods and services will be produced, distributed, and consumed
market economy
an economy in which changes in price guide what and how goods and services will be produced, distributed, and consumed
trust
an illegal grouping of companies that discourages competition, similar to a cartel
appreciation
an increase in the value of one currency in terms of another currency in a floating ER system
change in quantity demanded
an increase or decrease in the amount demanded because of change in price
mutual fund
an investment program funded by shareholders that trades in diversified holdings and is professionally managed.
market
an open place or a covered building where buyers and sellers convene for the sale of goods. All economic transactions.
business
an organisation that provides goods and/or services to consumers in order to make a profit
Labor Unions
an organization formed by workers to strive for better wages and working conditions
clearing house
an organization that collects and exchanges information on behalf of people or other organizations
Business Firm
an organization that uses resources to produce goods and services that are sold to consumers, other firms, or the government
expansion
an upturn that lasts at least two consecutive quarters of a year
Offensive actions
are designed to have expansionary or contractionary effects on the economy
Defensive actions
are designed to maintain the current monetary policy
Fed funds
are loans of excess reserves banks make to each other
Real interest rates
are nominal interest rates adjusted for expected inflation
Positive externalities
are positive effects on others not taken into account by the decision maker
Export promotion policies
are protectionist measures aimed at increasing the competitiveness of domestic producers in foreign markets. Subsidies for domestic producers of exportable goods and intentional devaluation of the nations currency to give domestic producers an advantage in international markets and promote export-orientated growth
Import substation polices
are protectionist policies, meant to reduce domestic consumers dependence on imported goods, for which they substitute domestic goods and services, thus promoting the development of domestic industries.
Human capital
are skills that workers gain from experience, education, and on-the-job training
Open market operations
are the Fed's buying and selling of Treasury bills and Treasury bonds
Nominal interest rates
are the rates you actually see and pay
Reserves
are vault cash or deposits at the Fed
Efficient Market Hypothesis
argument that stocks are always priced about right, and that bargains are hard to find because they are closely watched by so many investors
price system
arrangement that uses monetary prices as messages to facilitate exchanges between buyers and sellers
law of diminishing marginal productivity
as more and more of a variable input is added to an existing fixed input, eventually the additional output produced with that additional input falls
cartels
association of suppliers with the purpose of maintaining high prices and restricting competition - must agree on output
bank loans
banks give a line of credit or promissory note
economic security
basic needs are met
Smith
believed that people make exchanges to obtain what they want and that the purpose of production is to satisfy consumers
savings bonds
bonds issued by the federal government as a way of borrowing money; they are purchased at half the face value and increase every 6 months until full face value is reached
M2
broader measure of money supply, consisting of M1 plus various kinds of near money, including savings accounts, other small-denomination time deposits (CDs of less then $100,000), and money market mutual funds
Sole Proprietorship
business owned by one person
trade credit
business suppliers give customers a delay to pay off orders
buying long
buyers who hope the value of a stock will rise, called "Bulls"
primary market
buying financial assets directly from the issuer
margin
buying stock on credit (not really done since the Great Depression)
demand deposits
checking accounts
opportunity cost
choices; what you give up
opportunity cost
choices; what you give up to get something
financial assets
claims on the property and the income of the borrower; property that has value such as land, homes, cars, stocks, etc
precommitment policy
committing to continue a policy for a prolonged period of time
flat money
declared by the government and accepted by citizens to have worth
standard of value
determines the economic worth in the exchange process
sustainable development
development that meets the need of the present without compromising the ability of future generations to meet their own needs
GDP
dollar value of all economic activity in a country
profit
earnings after all expenses have been paid
Profit
earnings after all expenses have been paid.
circular flow of money, resources, and products
economic activity that happens and that you see every day (page 23) Look a it
Free Enterprise
economic system in which individuals and businesses are allowed to compete for profit with a minimum of government interference
traditional system
economic system in which people rely on tradtions and customs to make what, how and for whom choices
mixed systems
economic system that blends voluntary exchange, government command and traditional elements of economic choice making
free market
economic system where people can decide what they want to make or buy
command system
economic system which the government holds most property rights
innovation
either adding a new product to an existing product line, or significantly improving an existing product or process
free trade
environment where buyers and sellers can make transactions without government intervention
capital growth
expectation that one's stock with increase over time (long term investment)
extrapolative expectations
expectations that a trend will continue
start-up costs
expenses a firm must pay before it can begin to produce and sell goods
Capital Goods (Physical Capital)
factories, machines, technologies, buildings, and property needed for a business to operate
economics of scale
factors that cause a producer's average cost per unit to fall as output rises
economies of scale
factors that cause a producer's average cost per unit to fall as output rises
barriers to entry
factors that make it difficult and costly for an organization to enter a particular industry
resources
factors used in the production of goods and services
Resources
factors used in the production of goods and services.
resources
factors used in the production of goods and services.
economic equity
fairness and impartiality is open to all
depreciation
fall in the value of one currency in terms of another currency in a floating ER system.
making flow grow
flow of resources into businesses (page 23)
cartel
formal organization of producers that agree to coordinate prices and production
Benefits
forms of pay other than salary or wages
Karl Marx
founder of modern communism
Mutual Fund
fund that pools the savings of many individuals and invests this money in a variety of stocks, bonds, and other financial assets
S&P 500
index that shows the price changes of 500 different stocks
financial intermediaries
institution that helps channel funds from savers to borrowers
fraudulent
intended to cheat somebody, usually in order to make money illegally ____advertising ____ insurance claims
Economic Flow
interaction of consumers, business, and markets.
WTO
international body that hosts negotiations concerning the reduction of trade carries between its member nations
stagflation
inverse relation between inflation and unemployment
fair-trade
involving trade which supports producers in developing countries by paying fair prices and making sure that workers have good working conditions and fair pay We buy 10% of our bananas from ___ sources. a range of ____ foods
Human development index
is a composite indicator of development, created by the united nations, which ranks country development on the basis of average income, education levels and life span
open market sale
is a contractionary monetary policy that tends to raise interest rates and lower income
MNC
is a large company with trading manufacturing or service operations across several countries
monetary regime
is a predetermined statement of the policy that will be followed in various situations
Poverty trap
is a self-perpetuating mechanism that contributes to the persistence of poverty in a nation
New growth theory
is a theory that emphasizes the role of technology in the growth process
Certificate of Deposit
is a time deposit that requires you to leave your money in a financial institution for a set amount of time
Planned Economy
is an economic system in which the government makes all of the decisions. The government controls and regulates the production, prices, distribution, etc. for that civilization
Mixed Economy
is an economic system in which there are elements of both private and public enterprise. It is both Planned and Market combined.
Market Economy
is an economic system in which there is free competition. This means that prices are determined by the interaction of supply and demand.
Network externality
is an externality in which the use by one individual makes a technology more valuable to other people
open market purchase
is expansionary monetary policy that tends to reduce interest rates and increase income
anti-trust laws
laws that encourage competition in the marketplace
antitrust laws
laws that encourage competition in the marketplace
Antitrust Laws
laws that encourage competition in the marketplace.
Free Markets
markets that are allowed to operate without undue interference from the government.
trust
like a cartel, an illegal grouping of companies that discourage competition
Quota
limit the quantity of good that can be imported
assembly line
line of workers and machines working together to produce something
long term financing
loans and other financial strategies that are made for periods of a year or more, can be long term loans, bonds, or equity financing
long term loans
loans paid off over an extended period of time, usually secured by collateral
short term financing
loans that need to be repaid in less than a year
bonds
long term IOU; promise by a corporation or government to repay a specific sum at the end of a specific period
differentiation
making a product different from other similar products
differentiation
making a product different from other, similar products
manufacturing
making large amount of goods
monopoly
market dominated by single seller
Right - Republicans
market fundamentalists - less gov't intervention in the markets
oligopoly
market structure in which a few large firms dominate a market
free markets
markets that are allowed to operate without undue inference from the government.
free market
markets that are allowed to operate without undue interference from the government
full employment
means no unemployment caused by decreased economic activity
Entrepreneurship
motivation that drives busieness leaders to compete and react to changing conditions in the market
M1
narrowest measure of the money supply, consisting of currency, demand deposits, and other checkable deposits that can be converted to cash easily
land
natural resources and surface land and water
costs
negative results
scarcity
not being able to have all the goods and services you want
scarcity
not enough of something to meet your wants and needs
supply
number of items available
demand
number of items needed or wanted
goods
objects (things you can hold or touch ) that satisfy people's wants
economy of scale
occurs when increased efficiency lowers manufacturing costs as more of a product is made
change in demand
occurs when something prompts consumers to buy different amounts at every price.
floating exchange rate
price of a currency is deterred by the supply and demand of the free market
Private Property
property owned by individuals or companies, not by the government or the people as a whole
certificate of deposit
receipt showing that a person made an interest bearing loan to a bank
Business Cycle
recurring fluctuations in economic activity consisting of recession and recovery and growth and decline
consumption
spending by households on goods and services
investment
spending for the purpose of additional production
net exports
spending on domestically produced goods by foreigners (exports) minus spending on foreign goods by domestic residents (imports)
law of diminishing marginal utility
state that the marginal benefit of using each additional unit of a product during a given period will decline
speculators
stock buyers who hope to make a quick profit because prices change each day speculators can make money if they can predict price changes
equities
stocks that represent ownership shares in corporations
Economics
study of how people use resources to produce and distribute goods and services
goods
tangible objects that can satisfy people's wants
Quantity Supplied
the amount a supplier is willing and able to supply at a certain price
Quantity Demanded
the amount of a good or service that a consumer is willing and able to purchase at a given price
supply
the amount of a product producers will make for a certain price
Supply
the amount of goods available
supply
the amount of goods available
supply
the amount of items to be sold
productivity
the amount of output (goods and services) that results from a given level of inputs (land, labor, capital)
macroeconomics
the branch of economic theory dealing with the economy as a whole and decision making by large units such as governments.
microeconomics
the branch of economic theory that deals with behavior and decision making by small units such as individuals and firms.
price discrimination
the business practice of selling the same good at different prices to different customers (so a wider variety of customer groups are gained)
Open Market Operations
the buying and selling of government securities to alter the supply of money
insider trading
the crime of buying or selling shares in a company with the help of information known only by those connected with the business, before this information is available to everybody buôn bán nội gián
fiscal policy
the deliberate change in either government spending or taxes to stimulate or slow down the economy
price discrimination
the division of consumers into groups based on how much they will pay for a good
Gross Domestic Product
the dollar amount of all final goods and services produced within a country's borders in a year.
Gross Domestic Product (GDP)
the dollar value of all FINAL goods and services produced WITHIN a country's borders in a year.
*Robinson Crusoe*
the early English novel used to illustrate capitalism
private enterprise
the economic system in which industry or business is owned by independent companies or private people and is not controlled by the government
mercantilism
the economic theory that trade increases wealth chủ nghĩa trọng thương
potential output
the highest amount of output an economy can sustainably produce and sell using existing production processes and resources
herding
the human tendency to follow the crowd
net foreign factor income
the income from foreign domestic factor sources minus foreign factor income earned domestically (profit from imports - exports )
rents
the income from property received by households. Not included with firms because that is another source of income to the firm.
interest
the income private businesses pay to households that have lent the businesses money
value added
the increase in value that a firm contributes to a product or service (the profit)
compensation of employees
the largest component of national income, consists of wages and salaries paid to individuals, along with fringe benefits and government taxes for Social security and unemployment insurance
New York Stock Exchange
the largest stock exchange, located in New York City. Most of the companies on this exchange are larger companies with higher-priced stock.
Equilibrium output
the level of output toward which the economy gravitates in the short run because of the cumulative cycles of declining or increasing production
Bond maturity
the life of the bond
deregulation of industries
the lifting some of the restrictions on business & industries, for which government rules had been established.
depreciation
the loss of the value of capital equipment that results from normal wear and tear
target rate of unemployment
the lowest sustainable rate of unemployment that policy makers believe is achievable given existing demographics and the economy's institutional structure
producer
the maker of goods using productive resources
demand
the number of consumers who want and are able to buy an item
Currency
the metal or paper medium of exchange that is presently used
Required Reserves
the minimum amount of reserves a bank must hold against its deposits as mandated by the fed
income
the money someone earns from their job
game theory
the part of mathematics that deals with situations in which people compete with each other, for example war or business
private sector
the part of the economy of a country that is not under the direct control of the government to work in the ____ _____ pay rises
the public sector
the part of the economy of a country that is owned or controlled by the government ____ housing
Interest Rate
the percentage of a sum of money charged for its use
unemployment rate
the percentage of people in the economy who are both able to and looking for work but who cannot find jobs
unemployment rate
the percentage of the labor force that is jobless and looking for work
labour
the performance of laborious mental or physical tasks and/or the provision of time and effort in exchange for money
equilibrium
the point at which the demand for a product or service is equal to the supply of that product or service
laissez-faire
the policy of allowing private businesses to develop without government control chính sách tự do kinh doanh
monetarism
the policy of controlling the amount of money available in a country as a way of keeping the economy strong
Marxism
the political and economic theories of Karl Marx and Friedrich Engels, later developed by their followers to form the basis for the theory and practice of communism.
Entrepreneurship
the process of getting into and operating one's own business
economy
the production and distribution of goods and services in a society.
Real GDP
the production of goods and services valued at CONSTANT prices
Nominal GDP
the production of goods and services valued at CURRENT prices
Savings Rate
the proportion of disposable income that is saved
instability
the quality of a situation in which things are likely to change or fail suddenly political and economic ___
surplus
the quantity is greater than needed or nessary
inventory
the quantity of goods that a firm has on hand
Money Supply
the quantity of money available in the economy
deregulation
the removal of some government controls over a market
GDP (Gross Domestic Product)
the total value of all the final goods and services produced in a country in one year
natural resource
the resources supplied by nature. they include ores, trees, land and the other things nature provides
productive resource
the resources used to make goods and services
Natural Resources
the resources with the business or person is to deal with.
franchise
the right to sell a good or service within an exclusive market
Unemployment
the state of being unemployed or not having a job
Recession
the state of the economy declines, An economic slowdown of the economy which results in rising unemployment, increased business failures, declining economic growth and higher personal bankruptcies.
demographics
the statistical characteristics of populations and population segments, especially when used to identify consumer markets
real GDP
the total amount of goods and services produced, adjusted for price-level changes.
total revenue
the total amount of money a company receives by selling goods or services
average cost
the total cost divided by the quantity produced
profit
the total revenue received by a business firm minus its total cost of production.
Investment
the use of income today that allows for a future benefit
economy
the way that people make, buy, sell, and use things
Demand
the willingness to buy a good or service and the ability to pay for it
natural resources
things found in nature that are useful to people
capital resources
things made by people that help workers make goods and provide services
wants
things people would like but do not need
incentive
things that motivate or incite people to change a behavior.
specialization
those products a country makes best and that are in demand on the world market
consumer
those who buy the goods or use the services
producers
those who make goods or provide services
consumer sovereignty
through their purchases, consumers determine what goods and services will be produced.
Consumer Sovereignty
through their purchases, consumers determine what goods and services will be produces
specialize
to do a special job
specialize
to do one special kind of work
supply-side solution
to get rid of high inflation and high unemployment, gov't muxt cut high marginal tax rates
donate
to give money, items, or services to charitable organizations
invest
to put money to use in something offering potential profitable returns, as interest, income, or appreciation in value
private households and private businesses
two entities that make the majority of economic decisions in the free market
complements
two goods that are bought and used together
circular flow model
type of diagram that illustrates how resources and products move through the market
Traditional Economy
type of economy based on customs and traditions
market
type of economy where individuals trade and own things
command
type of economy where the government controls everything and tells you what job you should have
traditional
type of economy where wealth is passed down from generation to generation
financial property
type of property that includes cash, savings accounts, and other investments
real property
type of property that includes land, buildings, and other tangible things
intellectual property
type of property that includes right to a song, written work, a computer program, or a patent to an invention
cyclical unemployment
unemployment caused by a part of the bu
frictional unemployment
unemployment caused by people entering the job market and people quitting a job just long enough to look for and find another one
structural unemployment
unemployment caused by the institutional structure of an economy or by economic restructuring making some skills obsolete
seasonal employment
unemployment linked to seasonal workers
cyclical unemployment
unemployment resulting from fluctuations in economic activity
Structural Unemployment
unemployment that occurs when workers' skills do not match the jobs that are available
Cyclical Unemployment
unemployment that rises during economic downturns and falls when the economy improves
bubble
unsustainable rapidly rising prices of some type of asset (stocks or houses)
opportunity cost
value of the next best alternative given up for the alternative that was chosen.
nonprice competition
way to attract customers through style, service, or location, but not a lower price
trade barrier
ways of limiting trade by tariffs, quotas, or embargoes
tax avoidance
ways of paying only the smallest amount of tax that you legally have to
Capital
wealth, usually money, owned by a person and used for starting a company
opportunity cost
what is given up when a choice is made
Opportunity Cost
what is given up when a choice is made.
opportunity cost
what is given when a choice is made
demand
what people are willing and able to buy
unit elastic
when the percentage change in price and quantity demanded are the same
merger
when two or more companies join to form a single firm
interdependence
when we rely on each other
market
whenever buyers and sellers exchange goods and services
market
whenever buyers exchange goods and sellers set prices
Regulatory Capture
where a regulated firm achieves softer regulation
Human Capital
workers of a business or country including their education, training, skills, and health
proletariat
workers or working-class people, regarded collectively (often used with reference to Marxism).