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Flashcards in economics 601-675 Deck (75):
1

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

2

How does the government generally aim to achieve monetary targets?

through manipulation of interest rates via the Federal Reserve

3

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.

4

when economists refer to "the money supply" to which category of money are they normally referring

m1

5

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

$25,000

6

about how much cash is there in circulation per citizen in the us economy

$1,500

7

what does inflation do to the value of money

inflation devalues money

8

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

9

according to the phillips curve, low inflation corresponds to _____ unemployment

high

10

if inflation is at 4%, what nominal interest rate must a lender charge to earn a real interest rate of 5%

9%

11

what is disinflation

a decrease in the inflation

12

high employment + high inflation =

stagflation

13

an unanticipated decrease in the rate of inflation benefits (credits/debtors/ neither)

creditors

14

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

15

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

16

what are some important characteristics of money if it is to fulfill its roles

portability, recognizability, durability, difficulty of duplication

17

if nomal gdp is $300 billion, and the gdp deflator is 200, what is real gdp

$150 billion

18

what is the prime rate

the interest rate that banks charge their most credit-worthy customers for short term loans

19

define stagflation

a period of high unemployment in a time of high inflation

20

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

21

define deflation

a decrease in general price levels

22

mortgage rates have general (increased/decreased) since the early 1980sw

decreased

23

how are the different categories of money, such as m1 and m2, divided

according to liquidity

24

according to the phillips curvre, high inflation corresponds to ____ unemployment

low

25

what is deflation

a general decrease in price levels

26

at higher interest rates, individuals borrow (less/more) money

less

27

l consists of what elements

m3 plus savings bonds, government securities, commercial paper and other obscure financial instruments

28

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

29

what curve graphically represents an inverse relationship of inflation and unemployment

the phillips curve

30

what are the two primary markets in the circular flow model of an economy?

product and resource markets

31

using the income approach how id GDP calculated?

GDP= Consumption + investment + government spending + net exports

32

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

33

why is an import leak from the money flow

money leaves our country in exchange for product from another country

34

which sector is on the demand side of the factor markets n the circular flow model

the business sector

35

in a nation of subsistence farmers is GDP per capita an accurate measure of quality of life?

probably not

36

explain how consumer sovereignty works

consumers have needs for resources, good, or services, and their demand gets the circular flow model going

37

the decision between guns and butter is a classic example of which basic economic question

what to produce

38

what do firms pay for the factors of production

wages, rents, salaries

39

hw much was the US nominal GDP in 1990

over $5.74 trillion

40

the business cycle is graphed as a measure of changes in _____ over time

GDP

41

how much was the median household income of white household in the IS in 1999

$42,504

42

name the three types of economic indicators

lading indicators, lagging indicators, and concurrent indicators

43

the choice between mass-production and small-scale production is an example of which basic economic question?

how to produce

44

the rate and magnitude of the circular flow can be equated to ____

GDP

45

aggregate demand measures the relationship of ______

rice level to quantity of output in an entire economy

46

the number of new housing permits issued is a (leading/concurrent/lagging) economic indicator

leading

47

if real flow runs counter-clockqise in the circular flow model, in which direction does money flow?

clockwise

48

on a graph of aggregate demand, what does the vertical axis represent?

gross domestic product

49

what is the most meaningful measure of economic growth?

per capita GDP

50

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 !!!!!!!!

51

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

52

between 1990 and 1998 by what percent did real gross domestic product grow in the US

23.10%

53

What provides the "grease" that helps the economy run smoother by making exchanges easier?

money

54

Most day-to-day transactions take place with what form of money?

demand deposits

55

Interest rates are the cost of (consumption or investment)

investment

56

Derived demands are demands for what

factors of production

57

The demand for labor is an example of a ______ demand

derived

58

A farmer buys farmland solely for the purpose of growing wheat. The demand for the (farmland or wheat) is a derived demand

farmland

59

What term refers to the demand for an input?

derived demand

60

The term derived demand refers to (consumer or producer) demand

producer

61

The economic term "rent" refers to the price of a factor of production whose supply is perfectly (elastic or inelastic)

inelastic

62

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

63

Rent is the price paid for which factor of production

land

64

What economic term refers to payments for labor?

wages

65

What does a producer pay for the use of labor?

wages

66

What does the producer pay for the use of a capital resource?

interest

67

What is the reward for entrepreneurship?

profit

68

What does the producer pay for the use of natural resource?

rent

69

The degree of income inequality in the United States has (increased or decreased) since the beginning of the 20th century

decreased

70

What is a productivity-adjusted wage?

a wage rate based on the number of units produced

71

What does the Lorenz curve measure?

inequality among income classes

72

What is the measurement of output per unit of input?

productivity

73

If a firm improves its productivity, are prices likely to fall?

yes

74

If input remains the same, but output increases, does productivity increase, decrease or stay the same?

it increases

75

What is human capital?

education, skills, and training of laborers