Test3 Flashcards Preview

ECON 201 > Test3 > Flashcards

Flashcards in Test3 Deck (30)
Loading flashcards...
1
Q

Factors to shift planned investment function

A

Change in technology, change in expectations about future

2
Q

Fiscal Policy

A

The federal government policies regarding government purchases (G) and taxes(T)

3
Q

Two types of fiscal policy

A

Discretionary and Automatic

4
Q

Discretionary Fiscal Policy

A

When government purposely changes G or T…Congress passes law

5
Q

Automatic Fiscal Policy

A

Does not require any government action. Built in

6
Q

Ricardian Equivalence

A

When G goes up by borrowing money, the people understand that means it substitutes future races for this year taxes

7
Q

Supply side view of fiscal policy

A

Changes in tax rates will change supply of goods and services not demand

8
Q

Suggestions for reducing federal deficit

A

Raise taxes, tax the rich, reduce expenditures

9
Q

Laffer Curve

A

At first revenue goes up for the government, but at a point it goes down

10
Q

Deficit

A

Amount by which government spending exceeds tax revenue collected for that year

11
Q

National Debt

A

The total amount of money the federal government owes. All deficits added up

12
Q

Gross Public Debt

A

All federal government debt regardless of who owns it

13
Q

Net Public Debt

A

Gross public debt minus the debt owned by federal government agencies

14
Q

Budget Philospohies

A

Annually Balanced budget, cyclically balanced budget, functional finance

15
Q

Annually Balanced Budget

A

Fed. Gov. budget balanced every year

16
Q

Cyclically Balanced Budget

A

Budget should be balanced every 5 or 10 years

17
Q

Functional Finance

A

Doesn’t matter if budget is balanced. What is important is that congress pursue any policy to maintain full employment

18
Q

Functions of Money

A

Medium of Exchange, Store of Value, Unit of Account

19
Q

Medium of Exchange

A

You can use money to buy things

20
Q

Store of Value

A

Can store ones wealth in money

21
Q

Unit of Account

A

You can use money to compare the values of different things

22
Q

M1 Measure

A

Currency of circulation, travelers checks, “demand deposits”

23
Q

m2 measure of money

A

Savings at banks, time deposits at banks, money market mutual funds

24
Q

Liquid asset

A

Easy to convert to money

25
Q

Illiquid asset

A

Hard to convert to money

26
Q

Double Coincidence of wants

A

Money fixes this

27
Q

Fiduciary money

A

There nothing physical backing up our currency. We can’t get anything for dollar bills

28
Q

People accept money because

A

Fed. gov. says they are legal tender and people think money will hold value

29
Q

Multiplier Formula

A

1/1-MPC

30
Q

Important

A

As you slide across the AE line, the price is fixed