Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

MacroEconomics > Deck > Flashcards

Deck Flashcards

(59 cards)

Start Studying
1
Q

3 approaches to measuring GDP

A 
GDP = value added of final goods and services
GDP = sum of value added in economy
GDP = sum of incomes
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Nominal GDP

A

Q x P

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Real GDP

A

Q x constant P

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

GDP Growth

A

(Yt-Yt-1)/Yt-1

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Unemployment rate

A

u = U/L

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Labour force

A

L = N + U

Labour force = employment + unemployment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Participation rate

A

Labour force/population of working age

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

GDP Deflator

A 
Pt = €Yt/Yt
Pt = nominal GDPt/real GDPt
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Rate of change in the GDP deflator

A

Rate of change in the GDP deflator = inflation rate

Inflt = (Pt-Pt-1)/Pt-1

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

CPI

GDP

A 
CPI = goods and services consumed (includes import)
GDP = goods and services produced (includes exports)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Demand for goods

A

Z= C + I + G + X - M

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Disposable income

A

Yd = Y - T

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Consumption function

A

C = Co + C1(Yd)

Co = intercept (autonomous spending)
C1 = marginal propensity to consume
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Output (including multiplier and autonomous spending)

A

Y = 1/1-c1 [co - c1T + Ī + G]

1/1-c1 = multiplier

[co - c1T + Ī + G]

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Private saving

A

S = Y - T - C

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Government Spending Multipler

A

🔺Y/🔺G = 1/1-c1

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Investment multiplier

A

🔺Y/🔺Ī = 1/1-c1

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Tax multiplier

A

-c/1-c1

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Investment

A

I = I(Y, i)

Investment depends on income and the interest rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Flows and stocks

A

Flows: income, saving
Stock: wealth

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Demand for money

A

Md = $Y L(i)

$Y = nominal income - increases in proportion to nominal income
L(i) = interest rate - depends negatively on the interest rate
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Base money (high powered money)

A

Notes and coins and reserves

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

When central bank buys bonds…

A

…it engages in an expansionary open market operation because the central bank increases (expands) the supply of money

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

How does an increase on the supply of money affect the interest rate?

Study These Flashcards
A

An increase in the supply of money leads to a decrease in the interest rate

25
Assets and liabilities of the central bank
Assets: bonds it holds Liabilities: stock of money in the economy
26
Changing the supply of money means central banks can also change what?
The interest rate
27
How does the central bank change the supply of money?
Purchase or sale of bonds
28
How does an increase in the money supply by central banks buying bonds affect the price of bonds and the interest rate?
An increase in the money supply by buying bonds leads to an increase in the price of bonds and a decrease in the interest rate
29
How does an decrease in the money supply by central banks selling bonds affect the price of bonds and the interest rate?
A decrease in the money supply caused by selling bonds leads to a decrease in the price of bonds and an increase in the interest rate
30
3 reasons why bankers hope reserves
1) depositors withdraw cash 2) people write checks to people with assets in another banks 3) banks are subject to reserve requirements
31
Demand for money
€Y L(i)
32
Demand for deposit accounts
Dd = (-c)Md
33
Demand for currency
CUd = cMd
34
Demand for reserves by banks
Rd = Ø(1-c)Md
35
Demand for central bank money
Hd = CUd + Rd = [c + Ø(1-c)]Md =[c + Ø(1-c)]€YL(i)
36
The overall supply of money
Central bank money (H) x the money multiplier | M = H x MM
37
Money multiplier
1/[c+Ø(1-c)] c = proportion as cash Ø = reserve ratio (1-c) = proportion as deposits
38
What is the central bank wants to increase the stock of high powered money by £100? ``` Ø = 0.01 c = 0 ```
CB wants to increase H by £100 M = H x MM MM = 1/c+Ø(1-c) MM = 1/Ø = 1/0.1 = 10 £100 x 10 = £1000
39
How does an increase in money supply affect the LM curve
An increase in the money supply shifts the LM curve down
40
How does a decrease in the money supply affect the LM curve?
A decrease in the money supply shifts the LM curve up
41
What 3 factors does the aggregate nominal wage depend on?
1) Pe - the expected price level 2) u - the unemployment rate 3) z - the cat hall variable that stand for all other variables that may affect the outcome of wage setting
42
What affect does increased unemployment have in bargaining power and wages?
Increases unemployment decreases workers’ bargaining power, forcing them to accept lower wages
43
Natural rate of employment
The unemployment rate such that the real wage chosen in wage setting is equal to the real wage implied by price setting. It is to be expected if the economy is working at full capacity.
44
How do higher unemployment benefits affect the real wage?
At a given unemployment rate, higher unemployment benefits lead to a higher real wage
45
Preferential trade agreement
Preferential access to certain products | E.g. EU & Mercosur
46
Fair Trade Agreement
Elimination of tariffs between member states | E.g. EU & Turkey
47
Single market
Customs unions + free movement | E.g. EU
48
Exchange rate (3)
3 = EP/p* ``` E = nominal exchange rate P = price of UK goods in £ p* = price of EU goods in € ```
49
GNP
GNP = GDP + NI
50
Interest parity condition
(1+i) = (1+i*)(Et/Eet+1)
51
The relation between the domestic nominal interest rate, the foreign nominal interest rate and the expected rate of depreciation of the domestic currency
(1+it) = (1+it*)/[1+(Eet+1-Et)/Et]
52
Approximation
it = i*t - Eet+1-Et/Et
53
Current exchange rate
E = 1+i/1+i* Ēe
54
How does a higher domestic interest rate affect the exchange rate?
A higher domestic interest rate leads to a higher exchange rate - an appreciation
55
How does a higher propensity to import affect a country’s fiscal multiplier
Countries with higher propensities to consume have lower fiscal multipliers
56
Marshall Lerner condition
Real depreciation leads to an increase in net exports
57
Leverage ratio
Assets/capital
58
Securitisation
Creation of securities based on a bundle of assets such as mortgage based securities
59
Seigniorage
Money creation

MacroEconomics (1 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions