Macro Quiz 3 Flashcards Preview

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Flashcards in Macro Quiz 3 Deck (32):
1

Stopler Samuelson Theorem

Free trade results in higher return of abundant resources for goods and lower return on its scarce resources for goods

2

How do banks create money?

By loaning out money

3

What is an example of a Trade Adjustment program?

Training unemployed unskilled workers for jobs that require greater skill like coding

4

Speculative Demand

Holding money instead of buying bonds that can lose value

5

What is an example of an automatic stabilizer?

When the economy is in recession, unemployment increases.
This results in an increase in government spending because they pay for unemployment benefits

6

Structural Deficit

Deficit exists even if economy is at potential output

7

Government Budget Deficit

Spent more than we budgeted for

8

Fiscal Austerity

Taxes ⬆️ Government spending ⬇️. Therefore, the deficit ⬇️

9

Discount rate

Interest rate that the Fed charges loans to other banks

10

Transactional Demand

Having money to pay for normal expenses

11

Store of Value

Can save money and use it at a different time

12

Heckscher-Ohlin Theorem

We export goods we have many resources for and import goods when we have scarce resources

13

What are the 2 methods of Fiscal Policy?

Taxes
Government Spending

14

Federal Reserve

Central bank of U.S. controls monetary policies such as interest rates and reserve requirements

15

What are the 3 functions of money?

Medium of Exchange
Unit of Account
Store of Value

16

What are the 3 components of demand for money?

Transactional Demand
Precautionary Demand
Speculative Demand

17

What are 3 things the U.S. Exports?

Oil
High Skilled Labor
Technology

18

What is the relationship between government budget deficit and national debt?

Government Budget Deficit- debt of a current year
National debt- Accumulation of budget deficits

19

Why do tariffs hurt trade?

Act as a barrier from trade occurring which decreases efficiency

20

Medium of exchange

Used to pay for goods and services

21

Precautionary Demand

Saving money to have for emergencies

22

Why is trade beneficial for countries?

It increases efficiency by allowing both countries to benefit

23

Automatic Stabilzers

Any government program or policy that will counteract the business cycle without any new government action

24

Federal Funds Rate

Interest rates charged by banks for another bank to borrow money

25

Unit of Account

Used to value goods and services

26

Crowding Out

Reduction in consumption due to interest rates, when the government increases spending

27

Trade Adjustment Program

Helping out workers who are unemployed due to trade

28

What happens to the value of bonds if interest rates increase?

i ⬆️
Bond value ⬇️

29

What are the 3 tools for Monetary Policy?

Reserve Requirements
Discount Rate
Open Market Operations

30

Why is the Federal Reserve politically independent?

The goal is to help the economy in the best way which is not making decisions based on politics.
- it is what decision is best for the economy

31

In order to decrease the government budget deficit using fiscal policy what 2 things can we do?

Raise taxes to increase revenue
Cut spending to control deficit

32

What are 2 things the U.S. import?

Machinery
Vehicles

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