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macroeconomics Flashcards

(66 cards)

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1
Q

equity

A

normative concept of fairness
- equal opportunity of achieving economic success

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2
Q

equality

A

minimizing disparites of income and wealth
- same or similar economic outcomes for all groups/individuals

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3
Q

quintile / decile

A

what % of income from each 20% / 10% block of population makes up total national income

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4
Q

indirect vs. direct tax

A

indirect - tax on goods (paid through an intermediary)
-> passed on to consumers

direct - tax on income/wealth directly paid to gov

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5
Q

excise tax

A

tax that targets a specific good (eg. fuel, alcohol); type of indirect tax

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6
Q

pigouvian / sin tax

A

tax on goods that cause negative externalities (demerit goods)

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7
Q

payroll tax

A

tax on salary of employees + employers (% of salaray they pay)

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8
Q

transfer payments (+ at least 3 examples)

A

money paid with no good/service exchanged

eg. unemployment benefits, social security, nutritional subsideis, higher education grants, welfare/social service benefits

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9
Q

inflation

A

-a sustained increase (over time) in the general price level

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10
Q

free market

A

–an economy wherein markets alone are in control
–the interaction between buyers and sellers determine prices and outcomes

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11
Q

free goods

A

–goods that do not have an opportunity cost
eg. sea water, air

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12
Q

commodities

A

–primary resources from agricultural and non-agricultural (mining, energy)
–used as inputs in the manufacturing process
–traded in international markets (i.e. coffee, copper, cotton, oil)

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13
Q

GDP & real GDP

A

–the final value of all goods and services
–produced in an economy (within national boundary); in a given timeframe (generally one year)
–Real GDP: same def’n but add “adjusted for inflation”

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14
Q

gross national income/product (GNI/GNP)

A

–GNP is equal to the GDP of an economy PLUS income from abroad and MINUS income paid to firms/individuals abroad

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15
Q

production
possibilities
curve (frontier or boundary)

A

–shows the maximum quantity of a good (X) that an economy can produce in terms of another good(Y)
–the boundary between attainable and unattainable levels of production
–scarcity of resources determines the position of the curve (w/ land, labour, capital, entrepreneurship)
–curve is contingent on existing technology (a ‘shifter’ on all PPC points)

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16
Q

price

A

–the impersonal and, at a minimum cost, automatic signal in a free market
–conveys all necessary information to market participants (under certain assumptions)
–allocates society’s scarce resources to their ‘best’ use

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17
Q

property rights

A

–legal ownership of an asset

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18
Q

wages

A

–the price paid for the factor input labour (re- compensation for labour = wages/salaries)
– real wages: the value after labour compensation has been adjusted for inflation (re—“purchasing power”)

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19
Q

short run

A

–time period when adjustments in all factor inputs are not possible
–at least one factor input (LLCE) cannot be changed & remains fixed

–macro s-run: money wages remain fixed (re- so price level changes affect real wage levels)
–mkt. structures: time period when firms can/will entry to a mkt. is not fixed (i.e. —will enter if supernormal profits are being earned etc.)

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20
Q

long run

A

–time period when adjustments in all factor inputs are variable (possible)
–no fixed factor inputs (LLCE) exist
–firms can change the scale of operations

–macro l-run: money wages can fully adjust to changes in average price levels; real wages are at equilibrium level (c. p.)
–mkt. structures: time period when firms are profit maximizing BUT there is no entry or exit for firms (i.e. profits are normal OR barriers exist)

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21
Q

deflation

A

–sustained downward movement in price level
–deflation suggests ‘negative inflation’ rates

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22
Q

central bank

A

–an institution responsible for monetary and exchange rate policy in an economy
–may be independent or gov’t controlled
–provides banking services to the government and commercial banks
–the ‘lender of last resort’

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23
Q

labour market
reforms

A

–reforms to the way labour markets operate
–aimed at increasing participation rates, lowering unemployment and making L-markets more flexible
–often centered around unions (i.e. right-to-work legislation), minimum wage laws (i.e. lowering), employment protection laws (i.e. reducing), and also changing the size (and duration) of unemployment insurance benefits etc.

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24
Q

leakages

A

–within the (macro) circular-flow model, income not spent on domestic output
–money/income being withdrawn from the circular flow
–i.e. savings, taxes, spending on imported goods/services

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25
labour
--the human efforts in the production of goods and services -- the benefit firms receive for wages/salaries
26
wages
--the reward of the labour factor input in the production process
27
disinflation
--when the rate of inflation is decreasing --measured over a given timeframe --prices are continuing to rise, but at a slower rate
28
core inflation
--a measure of inflation with the more volatile goods reduced --energy and food prices excluded
29
inflationary gap & recessionary gap
Macroeconomic situation where: * the economy is (in equilibrium) at a level of output that is -greater than the full employment level of output or (aka) - above potential output OR * an increase in aggregate demand (when the economy is at full employment) results in an increase in the average price level with no increase in real GDP ---- recessionary gap: - opposite! - when current real GDP less than GDP at full employment
30
direct taxation [ & indirect]
--Taxation on income/wealth --Taxes that cannot be passed on to others (2nd or 3rd parties) Indirect taxation: taxes implemented on a ‘per unit’ basis OR as a percentage of the price; collected by an intermediary—i.e. a retail store. (typically indirect taxes are easily passed on to consumers by producers—eg. value added taxes, goods/service taxes)
31
hidden unemployment
--unemployment not reflected in the official statistics --includes (eg.) discouraged workers; involuntary part-time employees; workers forced into early retirement --causes the official unemployment figures to understate true figures
32
interest
--the compensation/reward for the factor of production ‘capital’ --the payment made for using borrowed money over a period of time
33
recession
--an economy is in a recession if there is zero or negative GDP growth for two consecutive quarters
34
regulation
--direct government intervention in the operations of markets --aimed at influencing the behavior of firms --influence c/b on price, market entry, competition, product standards/safety, etc.
35
stagflation
--zero or negative growth in real GDP --corresponds with rising or stagnant unemployment in the same timeframe
36
under- employment
--when individuals are employed but working less than they would have wanted to --could also be employment in positions below their skill level
37
wage ‘stickiness’
--a key feature of most labour markets where money wages do not easily respond to market forces --i.e. wages do not easily decrease because of labour unions and employment contracts
38
aggregate demand
total demand/spending for all goods in an economy at a given price level - PLANNED consumption, investment, gov spending, net exports
39
short run aggregate supply
total output of goods & services produced in an economy at a given price level in the short run
40
wealth
the value of all assets owned net of all liabilities owed at a point in time.
41
business confidence
the degree to which firms feel confident about their financial position and the overall state of the economy - influences how they will spend/produce
42
unemployment rate
workers in labour force, willing and able to work, actively searching but unable to find a job - # unemployed people / labour force (percentage)
43
labour force
sum of all employed & unemployed persons of working age (around 15-64)
44
labour force participation rate
ratio of labour force to entire working age
45
monetary policy
tool used by central bank to manage economy - primarily interest rates & money supply contractionary: slow down growth & reduce inflation expansionary: during recession (usually), stimulate growth
46
fiscal policy
use of government spending & taxation to manage economy contractionary: slow down growth & reduce inflation expansionary: during recession (usually), stimulate growth
47
counter-cyclical policies
economic measures which counteract the the fluctuations of the business cycle to maintain stability - stimulate economy during recessions, cool it during booms
48
actual & potential growth
actual: real increase of output over a period of time - usually measured in real GDP over a year - shift in SRAS, move thru business cycle potential: maximum possible output an economy can achieve when all resources are fully employed and operating efficiently - shift in LRAS, trendline of biz cycle shift upward
49
deregulation
--policies by governments or other central authorities (i.e. pricing authority) --designed to lower or eliminate government rules/regs. on the way an industry operates --typically have a positive effect on the ‘supply-side’ of the economy
50
automatic stabilizers
gov policies that automatically counteract economic fluctuation - eg. progressive tax & employment insurance
51
crowding out
increased government spending or borrowing leads to a decrease in private sector spending/investment - gov increases demand for loans, drives up borrowing costs & interest rates - competing for scarce amt of loands available
52
austerity
a set of economic policies used by governments to reduce budget deficits - tax increases, spending cuts
53
price bubbles
when price of an asset rises rapidly without fundamentals to justify price spike - eg. 2008 bubble bust of real estate, 2002 dot-com bust
54
interest rates
rates at which borrowers are charged or lenders paid for their loan
55
real interest rates
nominal interest rate minus rate of inflation
56
key interest rate
the interest rate set by the central bank to commercial banks
57
commanding heights
industries that largely control/support other sectors - eg. steel, oil, railroads
58
rent seeking
when an entity tries to gain wealth without contribution to productivity - eg. instead of investment, firsm spend money bribing gov to lower prices
59
purchasing power parity
the exchange rate that would make the purchasing power (value consumers can get from spending their domestic currency) in one country equal to that of another country with a different currency
60
liberalization
the reduction or removal of government regulations and restrictions on economic activity - to make it more like a free market - promote econ growth by increasing efficiency eg. deregulation, privatization
61
industrial policy
broader based policy to encourage allocation of resources to certian industries (eg. AI)
62
types of unemployment (frictional, seasonal, structural, natural, cyclical/demand deficient/keynesian)
frictional - unavoidable, ppl between jobs seasonal - certain jobs are seasonally varied in demand (eg. fisherman, tourism) structural - persistent, mismatch b/w skills of workforce & demands of employers - often caused by changing structure of economy (eg. tech advancdments) natural - (structural + frictional + seasonal), unemployment that exists when labour market is at equilibrium cyclical/demand deficient/keynesian - caused by fluctuations in business cycle
63
consumer price index (CPI) & producer price index (PPI)
CPI - measures the change in the price of a 'basket' of goods and services which are typically purchased by households PPI - same as CPI but for producers; for price of factors of production
64
types of taxes ``` 1. progressive 2. proportional / flat 3. regressive ```
1. progressive - higher income = higher tax rate - eg. progressive income tax 2. proportional / flat - same tax rate for all regardless of income 3. regressive - higher income = proportionally lower tax rate - eg. sales tax
65
sustainable development
growth/development that meets the needs of present generation without comprimisng ability of future generations to meet their needs
66
sustainability
preserving resources/environment so they can be used in the futre

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