Flashcards in economics 601-675 Deck (75):
what are the 6 powers granted to the fed reserve by congress?
conduct monetary policy, supervise financial institutions, lend money to financial institutions, serve as a bank for the government, issuer currency,provide services to financial institutions
How does the government generally aim to achieve monetary targets?
through manipulation of interest rates via the Federal Reserve
What does the Federal Reserve do to help achieve the economic goals stated in the Full Employment and Balanced Growth Act of 1978?
The Fred manipulates the money supply.
when economists refer to "the money supply" to which category of money are they normally referring
you take out a loan in the amount of $25,000 and end up paying $50,000 over the course of 30 years. what is the principal
about how much cash is there in circulation per citizen in the us economy
what does inflation do to the value of money
inflation devalues money
prices in kosovo are measured in kumquats. kumquats are being used as a (medium of exchange/ unit of account/ store of value)
unit of account
according to the phillips curve, low inflation corresponds to _____ unemployment
if inflation is at 4%, what nominal interest rate must a lender charge to earn a real interest rate of 5%
what is disinflation
a decrease in the inflation
high employment + high inflation =
an unanticipated decrease in the rate of inflation benefits (credits/debtors/ neither)
what is a time deposit
money that must be held in a deposit for a certain length of time, usually in exchange for additional interest
m3 consists of what elements
m2 plus eurodollars, time deposits of over $100,000 and certain money market funds which take a long time to return money to investors
what are some important characteristics of money if it is to fulfill its roles
portability, recognizability, durability, difficulty of duplication
if nomal gdp is $300 billion, and the gdp deflator is 200, what is real gdp
what is the prime rate
the interest rate that banks charge their most credit-worthy customers for short term loans
a period of high unemployment in a time of high inflation
define "Cost-push inflation"
cost-push inflation is the result of rising production costs, which force producers to raise the selling prices of their goods
a decrease in general price levels
mortgage rates have general (increased/decreased) since the early 1980sw
how are the different categories of money, such as m1 and m2, divided
according to liquidity
according to the phillips curvre, high inflation corresponds to ____ unemployment
what is deflation
a general decrease in price levels
at higher interest rates, individuals borrow (less/more) money
l consists of what elements
m3 plus savings bonds, government securities, commercial paper and other obscure financial instruments
what is the wealth effect as related to inflatoin
if the price level decreases, people have more money to spend on more things; its as though they are wealthier
what curve graphically represents an inverse relationship of inflation and unemployment
the phillips curve
what are the two primary markets in the circular flow model of an economy?
product and resource markets
using the income approach how id GDP calculated?
GDP= Consumption + investment + government spending + net exports
what is the index of leading economic indicators?
a weighted index of twelve economic measurements that can indicate the general direction in which economic growth is moving
why is an import leak from the money flow
money leaves our country in exchange for product from another country
which sector is on the demand side of the factor markets n the circular flow model
the business sector
in a nation of subsistence farmers is GDP per capita an accurate measure of quality of life?
explain how consumer sovereignty works
consumers have needs for resources, good, or services, and their demand gets the circular flow model going
the decision between guns and butter is a classic example of which basic economic question
what to produce
what do firms pay for the factors of production
wages, rents, salaries
hw much was the US nominal GDP in 1990
over $5.74 trillion
the business cycle is graphed as a measure of changes in _____ over time
how much was the median household income of white household in the IS in 1999
name the three types of economic indicators
lading indicators, lagging indicators, and concurrent indicators
the choice between mass-production and small-scale production is an example of which basic economic question?
how to produce
the rate and magnitude of the circular flow can be equated to ____
aggregate demand measures the relationship of ______
rice level to quantity of output in an entire economy
the number of new housing permits issued is a (leading/concurrent/lagging) economic indicator
if real flow runs counter-clockqise in the circular flow model, in which direction does money flow?
on a graph of aggregate demand, what does the vertical axis represent?
gross domestic product
what is the most meaningful measure of economic growth?
per capita GDP
True or false: if people think price levels are going to fall in the future, they spend less now, bringing down aggregate demand
true=in fact, this actually helps lower the price level !!!!!!!!
what does it mean for aggregate supply to be in the classical range?
it means that an increase in aggregate demand will result in an equilibruim of higher prices but no greater quantity of economic output
between 1990 and 1998 by what percent did real gross domestic product grow in the US
What provides the "grease" that helps the economy run smoother by making exchanges easier?
Most day-to-day transactions take place with what form of money?
Interest rates are the cost of (consumption or investment)
Derived demands are demands for what
factors of production
The demand for labor is an example of a ______ demand
A farmer buys farmland solely for the purpose of growing wheat. The demand for the (farmland or wheat) is a derived demand
What term refers to the demand for an input?
The term derived demand refers to (consumer or producer) demand
The economic term "rent" refers to the price of a factor of production whose supply is perfectly (elastic or inelastic)
Explain the difference between the terms "rent" or "rental"
"Rent" is the payment for a factor with a fixed supply, such as land. "Rental" is the price paid for any good or service over a period of time
Rent is the price paid for which factor of production
What economic term refers to payments for labor?
What does a producer pay for the use of labor?
What does the producer pay for the use of a capital resource?
What is the reward for entrepreneurship?
What does the producer pay for the use of natural resource?
The degree of income inequality in the United States has (increased or decreased) since the beginning of the 20th century
What is a productivity-adjusted wage?
a wage rate based on the number of units produced
What does the Lorenz curve measure?
inequality among income classes
What is the measurement of output per unit of input?
If a firm improves its productivity, are prices likely to fall?
If input remains the same, but output increases, does productivity increase, decrease or stay the same?