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
