Macro economics

Question 1

macroeconomics

Answer 1

concerns the government and the economy as a whole

Question 2

Gross domestic product (GDP)

Answer 2

total value of goods produced and services provided in a country during one year

Question 3

nominal GDP

Answer 3

nominal GDP measures output using current market prices

Question 4

real GDP

Answer 4

Changes as a result of inflation. Measures output using constant market prices

Question 5

GDP deflator

Answer 5

measures the change in the annual GDP due to changes in price rates in the economy (actual dollars of nominal GDP divided by price index for that year)

Question 6

purchasing power

Answer 6

the amount of things any given nominal money can buy at a given time (changes due to inflation and changes in real GDP)

Question 7

2 balloon model of economy

Answer 7

bigger balloon is nominal economy smaller baloon is real GDP

Question 8

GDP (Y)= C + I + G + NX

Answer 8

income = consumer spending + investments by consumers + government spending + net exports

Question 9

goals of macroeconomics

Answer 9

stables prices, low unemployment, growth in real GDP

Question 10

CPI (consumer price index)

Answer 10

measures the overall cost of goods and services purchased by a consumer (only measures the c)

Question 11

indexation

Answer 11

adjustments by law or contract of a dollar amount to account for the effects of inflation

Question 12

nominal interest rate

Answer 12

interest rate without correction for inflation

Question 13

real interest rate

Answer 13

interest rate corrected for inflation

Question 14

formula for income (y)

Answer 14

y= c (consumer spending) + s (savings) + t (taxes)

Question 15

formula for disposable income (net of taxes)

Answer 15

y- t = c + s

Question 16

organized financial system

Answer 16

banks are confidential (do not advertise if you are a saver or a borrower)

Question 17

financial markets

Answer 17

institutions through which individuals who want to save can directly supply funds to a person who wants to borrow money (bond markets and stock markets)

Question 18

bond

Answer 18

A certificate of IOU; bonds are investments in debt

Question 19

stocks

Answer 19

a way to purchase part of a company

Question 20

3 types of unemployment

Answer 20

cyclical (due to business cycle)
structural (labor supply exceeding labor demand)
natural (quit or let go)

Question 21

frictional unemployment

Answer 21

natural and structural

Question 22

how does the government adopt policies to reduce unemployment

Answer 22

structural- is reduced by job training and school
cyclical- reduced by fiscal and monetary policy
natural- accepted cost no reduction attempt

Question 23

money supply

Answer 23

consists of currency and demand deposits

Question 24

money functions

Answer 24

medium of exchange
store of value
unit of account

Question 25

evolution of use of money

Answer 25

commodities (bartering scare materials for goods)
Receipts (proof of purchase)
Fiat (promise to pay)

Question 26

money creation principles

Answer 26

banks lend amounts equal to excess reserves
reserves have to stay within the federal reserve
eventually make their way back as deposits

Question 27

federal reserve

Answer 27

central bank of the united states

Question 28

money multiplier

Answer 28

banks loan or invest excess reserves to earn more interest- increase in money supply

Question 29

long run aggregate supply (LRAS)

Answer 29

curve that shows the relationship between price level and real GDP

Question 30

short run aggregate supply (SRAS)

Answer 30

relationship between planned national output (GDP) and the general price level

Question 31

fiscal policy

Answer 31

tax and spending policies of the federal government
AD=Y=GDP

Question 32

Monetary Policy

Answer 32

Actions of central banks to achieve macroeconomics goals such as price stability, employment, and economic growth
m x v = p x Q = nominal GDP

Question 33

example of fiscal policy

Answer 33

government can lower taxes and raise government spending during a recession