ECON 1104 Final Cumulative

inflation rate between two years equation

(year 2 cpi- year 1 cpi/year 1 cpi)* 100

what is fiat money

-authorized by a central bank or gov body -serves as a medium of exchange -has little to no value except as money

how do lower households income taxes affect ad

-they increase disposable income -increase consumption -increase ad

ways a country can promote long run economic growth

-undergoing political reform to decrease corruption -enacting stronger laws to protect property rights -increase vaccinations against infectious diseases

3 functions of money

-unit of account -medium of exchange -store of value

produced in 2021 and sold in 2022, which year should it be counted in GDP

2021 as investment

countries with high rates of economic growth tend to have what

a labor force that is more productive

frictional unemployment example

a student who just graduated from college but has not found a job

fractional reserve baking systems is one in which banks hold less than 100% of ___

deposits

consequence of a weak rule of law

difficulty in attracting investments and low economic growth

labor force equals what

employed + unemployed

the federal open market committee consists of 7 members of the ___ and ___

federal board of governors, 5 presidents from the other 11 federal reserve banks

countries that are more globalized tend to have

higher growth rates in real GDP per capita

solve for investments

i= y-c-g

the percent increase in CPI from one year to the next is a measure of the

inflation rate

stagflation happens when

inflation rises and GDP falls

interest rate effects can be described as an increase in the price level that raises interest and chokes off what

investments and consumption spending

what describes the growth in real GDP per person in the US from 1900

it has increased by more than 8 times

what is potential GDP

level of real GDP in the long run

what two factors are the keys to determining labor productivity

level of technology and quantity of capital per hour

in a closed economy, what part of GDP is NOT included

net exports

if exports rise and imports fall what will happen to GDP

net exports will increase GDP

in 2020, all prices in the economy double and wages & salaries also double, in 2020 you are what

no better off or worse than previous years as purchasing power of your salary has remained the same

GDP deflator equation

nominal GDP/real GDP x 100

real interest paid equation

nominal interest rate-inflation rate

US currency includes what

paper money & coins in circulation

if labor force and working age population stay constant, but if more people who were unemployed become employed what will happen to the labor force participation

participation rate will remain constant

an increase in price level is represented by what

point B to A

3 ways the gov can increase the accumulation of knowledge capital

protecting intellectual property rights, subsidizing research and development, subsidizing education

what represents the purchase of a final good

purchase of a new snowblower

foreign direct investment

purchase or building by a corporation of a facility in a foreign country

the key standard if living is

real GDP per capita

stated interest rate on a loan is the

real interest rate

excess reserve are

remainder % that the bank does not keep

basic adas model explains whats

short term fluctuations in real GDP and price level

the most recessions in the US since WWII have begun with what

the stock market crash

if people go from unemployed to employed what is the result

the unemployment rate falls

structural unemployment

trouble finding a job because of a downturn (contraction phase) in the overall economy

full employment is

unemployment rate consists of only frictional and structural unemployment

to calculate (nominal) GDP the Bureau of Economic Analysis uses the sum of the market value of final goods and service produced. This means that the BEA

value final goods and final services at their market prices, multiplied them by the quantity produced and then add them up

real gdp in a given year is

valued in the prices of the base year

free ride definition

when a firm benefits from the result of research and development they didn't pay for

base year in calculating GDP is

when nominal and real GDP equal each other

discouraged workers are

workers who have consistently been looking for work for more than 4 weeks

in a closed economy which reflects investment

y-c-g

gdp equation

y=c+i+g+nx

short-run macroeconomic equilibrium occurs when

AD and short run AS intersect

increase is household expectations of future income would be represented by what

AD to AD1

foreign direct investment example

a Chinese corporation opens a new factory in France

on the long run AS curve

a decrease in price level has no effect on the aggregate quantity of GDP supplied

required reserve is

% of deposit that the bank keeps

what points show long run equilibrium

A and C

double support of university research, what movement is this

B to C

Starbucks in Mexico is in included in the US ___ and Mexico ____

GNP, GDP

a college loan to a customer is considered ____ and a customers checking account is considered _____

an asset, a liability

international trade effects does what

an increase in the price level will lower net exports

an increase in cyclical unemployment will result in

an increase in the unemployment rate

money is defined as what

any asset people generally accept in exchange for goods & services

the process when the economy adjusts back from a recession back to potential GDP in the long run without any gov intervention

automatic mechanism

in 1913, congress established the federal reserve system to put an end to what

bank runs

expansion ends with a _____ and recession ends with a ____

business cycle peak, business cycle trough

an economic growth model explains

changes in real GDP per capita in the long run

what comes closest to measuring the cost of living of the typical household

cpi (consumer price index)

when people ride bikes instead of driving due to increase in gas prices

substitution bias

an increase in the gov budget surplus will shift the ___ curve for loanable funds to the _____ and the equilibrium rate will _____

supply, right, rise

a negative supply sock in the short run causes what

the AS curve to shift left

human capital refers to what

the accumulated knowledge and skills workers acquire from education and training or from their life experiences

potential gdp refers to what

the extent to which real gdp is above or below nominal gdp

federal budget deficit is when

the government spends more than it collects in taxes

what would you expect to result in faster economic growth

the invention of new computers that increase labor productivity

if a developing country gets more machinery and capital as foreign entrepreneurs increase the amount of investments in the economy what will happen

the long run AS will shift to the right