1/31 module 1 notes

Question 1

how do many macroeconomists view/think of economy

Answer 1

circular flow

Question 2

circular flow

Answer 2

capture interactions between a macroeconomics two most important agents: households and firms

Question 3

how do firms flow to households

Answer 3

goods, services and income

Question 4

how do HH flow to firms

Answer 4

capital labor and expenditures

Question 5

what does circular flow also feature

Answer 5

government and foreign countries

Question 6

what are the two types of institutions macroecon consists of

Answer 6

agents and markets

Question 7

what falls under agents

Answer 7

HH and firms

Question 8

what falls under markets

Answer 8

goods, factors

Question 9

what is an asset

Answer 9

good/what you own (we like this)

Question 10

liability

Answer 10

what we owe (isn’t always bad but still not as good as asset)

Question 11

assets vs

Answer 11

liabilities

Question 12

money vs

Answer 12

other assets

Question 13

debt vs

Answer 13

equity

Question 14

what is liability often equated to

Answer 14

debt

Question 15

what is equity (residual)

Answer 15

residual because can calculate as different between assets and debt

Question 16

Residual equity formula

Answer 16

E= A (assets) - D (debts)

Question 17

do you want a large difference between Asset and debt for residual equity

Answer 17

because large difference with more asset, so their is more equity

Question 18

demands under households

Answer 18

goods and services (in exchange for money)

Question 19

supplies under HH agent

Answer 19

labor (in exchange for wages) and capital (in exchange for interest and/or profits)

Question 20

what do you want to be small in terms of net-worth under liability

Answer 20

credit card debt, student loans, mortgage

Question 21

example of financial asset

Answer 21

stocks/bonds

Question 22

is labor same for everyone

Answer 22

yes, because people have same time to work but capital is different because people will work different jobs

Question 23

demands under firm agent

Answer 23

labor (in exchange for wages) and capital (in exchange for interest and/or profits)

Question 24

supply under firm agent

Answer 24

goods and services (in exchange for money)

Question 25

market is

Answer 25

place of interaction sellers and buyers will meet for a particular good or service

Question 26

what are two canonical assumptions about econ

Answer 26

law of supply and law of demand

Question 27

law of supply

Answer 27

we typically assume that a markets supply is increasing in the price

Question 28

law of demand

Answer 28

we typically assume that a markets demand is decreasing in the price

Question 29

under macro econ what is supply and demand

Answer 29

agreggate supply and demand

Question 30

aggregate supply represents

Answer 30

firm

Question 31

aggregate demand represents

Answer 31

household

Question 32

what happens to HH when interest rates are high

Answer 32

HH save more money because they are less inclines to take out loans and therefore spend less money

Question 33

N stands for

Answer 33

labor

Question 34

do firms want to employ a lot of ppl

Answer 34

no because they want to spend less on labor so they don't hire as many workers

Question 35

what happens when Q2 is larger than Q1 on a graph

Answer 35

excess supply (surplus) so price will decrease

Question 36

equilibrium

Answer 36

a state of balance between opposing forces or actions

Question 37

what are the two well known types of equilibrium

Answer 37

walrasian/market/clearing and nash

Question 38

walrasian/market-clearing

Answer 38

supply is equal to demand

Question 39

Nash is

Answer 39

a strategic state in which no agent has an incentive to deviate from their current action

Question 40

equation aggregate demand and aggregate supply are given by

Answer 40

AS = P AD = 10-P (set them equal to each other)

Question 41

what are secondary agents

Answer 41

Fed, treasury, and banks

Question 42

who is responsible for setting interest rate

Answer 42

Fed

Question 43

does Fed make money

Answer 43

yes, they make money they do not spend it (so cash is placed on right side of balance sheet)

Question 44

what is the federal reserve

Answer 44

central bank responsible for managing the currency and monetary policy in the US

Question 45

dual mandate

Answer 45

promote effectively the goals of max employment, stable prices, and moderate long term interest rates

Question 46

what is reserves

Answer 46

money is system for banks

Question 47

what is gov. deposits

Answer 47

Fed is bank for government

Question 48

what do most macroeconomists want to avoid

Answer 48

deflation, last time it happened we faced recessions

Question 49

What is the US treasury

Answer 49

US finance department

Question 50

US treasury is liability because?

Answer 50

US gov debt it owes people

Question 51

what is GSE

Answer 51

gov sponsored enterprises

Question 52

what is net position

Answer 52

equity position of US gov

Question 53

banks

Answer 53

financial institutions with the access to the fed

Question 54

when banks make a loan it also initates

Answer 54

a deposit

Question 55

why are deposits a liability for banks

Answer 55

bank deposits are a liability for banks, for HH it is an asset (it is what banks owe ppl)