exam 4

Question 1

define employment

Answer 1

commonly relied upon measure of economic welfare

Question 2

why is employment used instead of GDP

Answer 2

it is calculated more quickly

Question 3

employment rate=

Answer 3

working / working+looking

Question 4

labor force precipitation rate=

Answer 4

working + looking / population>16

Question 5

unemployment rate=

Answer 5

looking/ working+looking

Question 6

define natural rate of unemployment

Answer 6

includes the production parameters and GDP

Question 7

what does the natural rate of unemployment do?

Answer 7

determines how many people can be employed without inflation rising

Question 8

what type of correlation does unemployment rate and RGDP have

Answer 8

negative correlation

Question 9

what can cause the demand of micro markets to shift down

Answer 9

diminishing marginal utility
income effects
substitution effects

Question 10

what are aggregated demand represented by

Answer 10

CPI and RGDP

Question 11

define income effect

Answer 11

decomposing GDP

Question 12

define intrest rate effect

Answer 12

price of borrowing money

Question 13

define negative correlation

Answer 13

as one good/supply increases, another decreases, or vice versa

Question 14

describe and define short run

Answer 14

factors of production are fixed
set 1-2 years

Question 15

define and describe long run

Answer 15

factors of production are variable
decisions are made 5+ years out

Question 16

define shortage run aggregated supply

Answer 16

GPD deflator or CPI shows relationship;

Question 17

describe long run aggregated supply

Answer 17

wages reflect work being put in
perfectly inelastic

Question 18

Y1=

Answer 18

production possibility frontier

Question 19

define production

Answer 19

productivity causes a shift

Question 20

what are examples of key inputs

Answer 20

fuel, tech, transportation

Question 21

what correlation is between unemployment and vacancy rates

Answer 21

negative

Question 22

define disposable income

Answer 22

percent of income that isn’t used for rent, food, etc

Question 23

define intrest rates

Answer 23

ability to borrow and invest

Question 24

AD will be __________ if AS is __________

Answer 24

higher; lower

Question 25

what can an increase in any front cause

Answer 25

an increase in LRAS

Question 26

what are institutional changes

Answer 26

legal, transport, energy, and infrastructure

Question 27

define fiscal

Answer 27

explicit taxing and spending on behalf of the government

Question 28

define fiscal policy

Answer 28

how much money is taxed and how much is spent

Question 29

what is the fiscal policy determined by

Answer 29

the executive and legislative branches

Question 30

monetary policy is _____________

Answer 30

continuous

Question 31

who plays a major role in fiscal theory/policy

Answer 31

John Maynard keynes

Question 32

what did Keynes want

Answer 32

the gov to step in and lend aid in macroeconomic issues

Question 33

what was Keynes book called

Answer 33

a general theory of employment interest in money

Question 34

what type of system did Keynes what

Answer 34

a system of equations for employment fluctuation, interest rates, and money supplements

Question 35

what combats classical economics

Answer 35

rationality

Question 36

what is unemployment rate

Answer 36

a function of supply and demand

Question 37

Smith:invisible hand as Keynes:_______ ________

Answer 37

animal spirits

Question 38

what makes economics unstable

Answer 38

human nature

Question 39

define classical theory

Answer 39

investment goes to firms with the greatest profit potential

Question 40

what will people most likely invest in

Answer 40

what others think are the most profitable

Question 41

what causes recessions

Answer 41

consumer pessimism

Question 42

what does pessimism lead to

Answer 42

decreased spending

Question 43

what would the control on interest rates do

Answer 43

discourage people from saving and instead invest

Question 44

define monetary policy

Answer 44

actions that affect money supply that is determined by the federal reserve

Question 45

describe the federal reserve

Answer 45

independent, central band of US independent of taxpayer dollars and politics

Question 46

what is the dual mandate

Answer 46

low unemployment price stability

Question 47

as interest rate goes down, what does aggregate demand do

Answer 47

go up

Question 48

what does more income cause

Answer 48

more spending but also more inflation

Question 49

wealth is not money itself, but...

Answer 49

what can be bought with money

Question 50

how do banks get covered by FDIC

Answer 50

by doing what the Fed tells them

Question 51

do banks hold all their money? why or why not

Answer 51

no, because they are lenders and lend out a portion of that bone y

Question 52

what are the 3 tools of monetary policy

Answer 52

reserve requirements open market operations federal fund rates

Question 53

define RRR

Answer 53

reserve requirement ratio

Question 54

define RR

Answer 54

required reserve

Question 55

define ER

Answer 55

excess reserve

Question 56

Σloans=

Answer 56

1/RRR x loan1

Question 57

describe government bonds

Answer 57

a low risk, low reward IOU system

Question 58

define quantitative easing

Answer 58

the federal reserve buys bonds from the government which allows the government to pay back the fed

Question 59

define federal fund rate

Answer 59

inters rate that banks charge each other to borrow or lend excess reserves

Question 60

how does the fed effect the economy

Answer 60

by controlling interest rates

Question 61

what is the fed constrained by

Answer 61

inflation and intrest rates

Question 62

describe expansionary

Answer 62

decreased aggregate demand expands RRR buys bonds lower federal fund rate

Question 63

describe contractionary

Answer 63

increased aggregate demand increases RRR sells bonds raises federal fund rate