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Flashcards in Final Deck (90):
1

Absolute advantage

the ability to producea a good using fewer inputs than another producer

2

monopoly

only seller in the market, sets the price

3

scarcity

the limited nature of societys resources

4

efficiencey

the property of society getting the most it can from its scarce resources

5

microeconomics

the study of how households and firms make decisions and how they interact in the markets

6

macroeconomics

the study of economy wide phenomena including inflation, unemployment, and economic growht

7

equity

distributing economic prosperity uniformly among the members of soiceyt, how the economic pie is divided

8

normative statements

claims that attempt to prescribe how the world should be

9

property rights

the ability of an individual to own and exercise control over scarce resources

10

positive statements

descriptive
attempt to describe the world as it is
CAN BE PROVEN OR DISPROVEN

11

opportunity cost

whatever must be given up to obtain some item
measure of trade offs between the two goods that each producer faces

12

market

a group of buyers and sellers of a particular good or service

13

inferior good

a good for which other things being equal an increase in income leads to a decrease in demand

14

substitutes

two good for which an increase in the price of one leads to an increase in the demand for the other

15

surplus

a situation in which the quantity supplied is greater than the quantity demanded

16

incentive

something that causes a person to act is

17

price floor

legal minimum on the price at which a good can be sold
only binding above equilibrium i think

18

tax incidence

the manner in which the burden of tax is shared among participants in a market

19

willingness to pay

the max amount that a buyer will pay for a good

20

total revenue

the amount a firm receives for the sale of its output
so Q*Price

21

explicit costs

input costs that require an outlay of money by the firm

22

accounting profit

equal to total revenue minus total explicit costs

23

production function

shows the relationship between quantity of inputs used to make a good and the quantity of output of that good

24

efficient scale

quantity of output that minimized ATC

25

fixed costs

costs that do not vary with the quantity of output produced

26

mardinal revenue

the change in total revenue from an additional unit sold

27

shutdown

a short run decision by a firm to not produce anything is known as a shutdown

28

competitve markete

a market with many buyers and sellers trading identitcal products so that each buyer and seller is a price taker

29

Gross Domestic Product

the market value of all final goods and services produced within a country in a given period of time

30

exports

goods produced domestically and sold abroad

31

imports

goods produced abroad and sold domestically

32

investment

spending on capital equipment, inventoris, structures including household purchases of new housing

33

GDP delfator

a measure of the price level calculated as the ration of nominal GDP to real GDP times 100

34

labor force

teh total number of workers, including both the employed and unemployed

35

Natural rate of unemployment

the normal rate of unemployment around which the unemployment rate fluctuates

36

frictional unemployment

unemployment that results because it takes time for workers to search for the job that best suit their tastes and skills

37

collective bargaining

the process by which unions and firms agree on the terms of employment

38

money

Set of assets in an economy that people regularly use to buy goods and services from other people

39

medium of exchange

item that buyers give to sellers when they want to purchase goods and services

40

unit of account

yardstick people use to post prices and record debts

41

store of value

item that people can use to transfer purchasing power from the present to the future

42

liquidity

Ease with which an asset can be converted into the economy's medium of exchange

43

commodity money

Money that takes the form of a commodity with intrinsic value like gold or cigarettes in prison

44

fiat money

Money without instrinsic value used as money because of government decree so like US cash

45

money stock

quantity of money circulating in the economy

46

currency

paper bills and coins in the hands of the public

47

demand deposits

balances in bank accounts; depositors can access on demand by writing checks

48

federal reserve

the centtral bank of the US created in 1913 after a series of bank failures in 1907 to ensure the health of the nations banking system

49

central bank

institution designed to oversee the banking system and regulate the quanitty of money in the economy

50

money supply

quantity of money available in economy

51

monetary policy

setting of the money supply

52

reserves

Deposits that banks have received but have not loaned out

53

fractional-reserve banking

banks hold only a fraction of deposits as reserves

54

reserve ratio

fraction of deposits that banks hold as reserves

55

money multiplier

amount of money the banking system generates with each dollar of reserves
1/R
higher reserve ration - > smaller money multiplier

56

open market operations

purchase and sale of US bonds by fed
buy to increase MS
sell to decrease MS
common approach

57

discount rate

interese rate on loans that the Fed makes to the banks
higher DR = lower MS
lower DR = higher MS

58

reserve requirements

minimum amount of reserves that banks must hold against deposits
increase in RR= decrease in MS
lower RR = increase in MS
less common and less effective

59

federal funds rate

interest rate at which banks make overnight loans to one another
lender - has excess reserves
borrower- needs reserves
a change in FFR changes other interest rates

60

inflation

increase in overall level of prices

61

deflation

decrease in overall level of prices

62

hyperinflation

extraordinarily high rate of inflation

63

consumer price index

an index of the variation in prices paid by typical consumers for retail goods and other items.
when they get the 'shopping cart'

64

quantity theory of money

the quantity of money available in the economy determines the price level
growth rate in Q of money available determines the inflation rate

65

nominal variables

variable measured in monetary units so like dollar prices

66

real variables

variable measured in physical units
like relative prices, real wages, real interest rate

67

classical dichotomy

Theoretical separation of nominal and real variables

68

monetary neutrality

changes in money supply dont affect real variables
not realistic in short run but correct in long run

69

velocity of money

rate at which money changes hands
V=(P*Y)/M

70

quantity equation

M*V=P*Y
M=quantity of money
V=velocity of money
P*Y = nominal? GDP
Y=real GDP
P=GDP deflator
shows relationship and effects when M changes

71

fisher effect

one for one adjustment of nominal interest rate to inflation rate
When the fed increases the rate of money growth
long run result is higher inflation rate and higher nominal interest rate

72

what is money and what are its functions

money is a quantity set by commodity or fiat that is used to facilitate trade

73

whats liquidity and what is more/less liquid

liquidity is like how easily an asset can be used as money
so like cash is money is very liquid but a house isnt becuase youd have to sell it first

74

example of commodidty money

gold standard or cigarrettes (in prison) can be traded as a currency

75

how is FED organized and whats it do

7 members on 14 year terms
regulates banks
controls money supply

76

how are banks involved in creating money, how is money multiplier involved

banks make loans of less than or equal to what has been deposited and that is 'new' money and the money multiplier can be used to show how much more could be made if they lend the maximum

77

Fed buy or sell bonds to increase MS

buy bonds because thats like giving out cash

78

Fed raise or lower discount rate to increase MS

lower discount rates means greater money supply because people will take more loans from fed

79

Fed raise or lower Reserve Requirement to increase money supply

decrease in reserve requirement because that makes a bigger money multiplier

80

problems with Fed's control of MS

imprecise
does not control amount that households choose to hold as deposits or that bankers choose to lend, just sets max could lend less

81

factors that make up money demand

downward sloping and depneds on credit cards, ATM availablity, interest rate and average price level

82

Quantity theory of money and what happens when money supply changes

so m*v=p*Y so if M goes up V goes down or p goes up or y goes up to keep it all even always

83

classical dichotomy?

this is just the difference between real and nominal variables
so like prices vs relative prices

84

how is velocity of money related to real GDP, price level, and quantity of money

quantity theory of money answer so just know the equation is always balanced so thats how influence each each

85

what is the significance of the Fisher Effect

this is like the example we did where the nominal interest rate-inflation=real interest rate and you have to look at numbers see if its a good deal for lender borrower or no one

86

China tariff on fruit and pork

25% on pork
15% on tariffs

87

nonfarm payrolls in march

up by 103,000

88

unemployment rate march

still 4.1%

89

labor force participation rate in march

62.9%

90

China central banks change in reserve requirement

reduced by 1%