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econ > macroeconomics > Flashcards

macroeconomics Flashcards

1
Q

why is GDP important? 

A

the #1 indicator of the economy 

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2
Q

what is GDP?

A

The market value of all final legal outputs produced by a country in one year 

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3
Q

GDP vs GNP

A

GDP is produced in America.
GNP is produced by America. 

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4
Q

how is GDP calculated?

A

C + I + G + [X - M]

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5
Q

what is the difference between GDP and real GDP? 

A

Real GDP takes inflation into account.

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6
Q

what is not counted towards GDP?

A

welfare

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7
Q

What is inflation?

A

A general rise in prices 

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8
Q

what is the purpose of a market basket? 

A

to track individual prices of consumer items 

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9
Q

What are the three main causes of inflation?

A

cost push, demand pull, wage price spiral 

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10
Q

what is creeping inflation

A

1-3%

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11
Q

Who is unaffected when inflation is high 

A

flexible income receivers, debtors, government 

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12
Q

Who loses when inflation is high 

A

fixed income receivers, savers, creditors 

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13
Q

what is a consequence of inflation? 

A

poverty increases 

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14
Q

how is unemployment defined? 

A

don’t have a job and actively seeking one

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15
Q

what is full employment? 

A

5% or below 

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16
Q

what are the five types of unemployment? (know what each type is)

A

fractional, cyclical, structural, technological, seasonal 

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17
Q

what are the two main phases of a business cycle? What are the high points and low points of a business cycle called? 

A

expansionary and contractionary. Peak and trough. 

18
Q

 what doesn’t affect a business cycle?

A

overdue credit cards 

19
Q

what is the relationship between inflation and unemployment? 

A

when one is high, the other is low 

20
Q

what unemployment is cause by a recession 

A

cyclical unemployment 

21
Q

what are the leading indicators the business cycle? 

A

inflation and unemployment 

22
Q

what is a characteristic of money? 

A

medium of exchange 

23
Q

what are the three criteria for affective taxes? 

A

Equity, simplicity, efficiency 

24
Q

what are the two principles of taxation? 

A

The benefits received principal and the ability to pay principal 

25
Q

what are the three types of taxes? 

A

progressive (income tax- affects rich people)
regressive (sales tax- affects low income people)
proportional (social security)

26
Q

what are the main sources of federal government revenues?

A

income tax 

27
Q

what are the main sources of federal government expenditures? 

A

social Security 

28
Q

what are the main sources of state government revenues? 

A

income tax 

29
Q

what are the main sources of state government expenditures?

A

public education 

30
Q

what is the difference between the debt and the deficit? 

A

A deficit is shortage over a year, and a debt is the accumulation of deficits 

31
Q

what is fiscal policy? 

A

taxation and spending policies by US government 

32
Q

what does the government do when there is high inflation 

A

raise taxes and decrease government spending 

33
Q

what should the government do when there is high unemployment 

A

decrease taxes and raise government spending 

34
Q

What is monetary policy

A

The money supply by the feds

35
Q

What is the three tools used in monetary policy?

A

discount rate, legal reserve requirements, federal open market operations 

36
Q

what should the feds do when there is high inflation 

A

raise discount rate, raise reserve requirements, net sell

37
Q

what should the feds do when there is high unemployment? 

A

lower discount rate, lower reserve requirements, net buy

38
Q

why do people trade with people from other countries? 

A

so they can consume more than they can produce 

39
Q

example of comparative trade advantage 

A

Norway produces skis and America produces tractors, so they trade with each other because they are the best at producing those specific goods

40
Q

Who are protectionists and what is their reason for wanting to protect domestic industries 

A

people who favor tariffs, quotas, another trade barrier. when the US places tariffs, both foreign and domestic prices will go up. 

41
Q

Who are free traders? 

A

people who don’t like tariffs, quotas, and trade barriers 

42
Q

what happens with the US dollar weakens?

A

exports will increase

econ (4 decks)

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