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Macroecon > Unit 4 > Flashcards

Unit 4 Flashcards

(51 cards)

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1
Q

What is fiscal policy

A

Changes in government purchases and/or taxes
Discretionary fiscal policy

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2
Q

What is purpose of fiscal policy

A

To achieve full employment and low inflation

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3
Q

Multiplier Effect

A

Creation of real GDP with each additional $1 of expenditures

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4
Q

recession

A

Decline in real output for 2 consecutive quarters or more

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5
Q

full employment real GDP

A

Real GDP when economy operates at natural rate of unemployment or when economy is in long-run equilibrium

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6
Q

Expansionary fiscal policy

A

Fiscal policy to increase AD by increasing G and/or dec T

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7
Q

Short run Equilibrium equation

A

AS=AD

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8
Q

Long run equilibrium

A

Y=Y full-employement

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9
Q

Contractionary fiscal policy

A

Decrease AD by decreasing G and/or increasing T

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10
Q

What fiscal policy in a recession

A

Expansionary fiscal policy to increase AD and bring economy to full employment

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11
Q

What fiscal policy in an expansion/rising price level

A

Contractionary fiscal policy to decrease AD to lower price level and move economy to full employment

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12
Q

Expenditures Multiplier

A

Change in real GDP by additional $1

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13
Q

Cost push inflation

A

Inflation due to decrease in AS

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14
Q

Demand pull inflation

A

Inflation due to increase in AD

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15
Q

Automatic Stabilizer

A

Part of government policy that automatically steadies spending

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16
Q

How does automatic stabilizer work if the economy grows

A

Decreases G and/or increases T

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17
Q

How does automatic stabilizer work if the economy contracts

A

Increases G and/or decreases T

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18
Q

Progressive Tax

A

Ave tax rate changes in relation to changes in income

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19
Q

Recognition lag

A

Time to recognize how an event affects an economy

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20
Q

Crowding out

A

inc in government borrowing results in less borrowing by non government.

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21
Q

Money

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A

Any item buyers and sellers accept for exchange of G-S

22
Q

Unit of Account

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A

Measurement unit used to compare value of G-S. One function of money

23
Q

Medium of exchange

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A

Any item used to facilitate trade between buyers/sellers

24
Q

What are the functions of money

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A

Unit of account
Medium of exchange
Store of value

25
Store of value
Certain assets that enable transfer of wealth from present to the future.
26
M1
Most liquid; Demand deposits, travelors checks, currency, other checkable deposits
27
M2
M1 + savings deposits; small denomination time deposits, money market mutual funds
28
Time deposits
money held in an account for a specified period of time, cannot be converted to currency without penalty
29
M1 or M2 Demand Deposits
M1/M2
30
M1 or M2 Traveler's Checks
M1/M2
31
M1 or M2 Money Market Mutual Funds
M1/M2
32
M1 or M2 Savings deposits
M2
33
M1 or M2 Time deposits
M2
34
M1 or M2 Money Market mutual funds
M2
35
Nominal variables
variables measured in monetary units or prices
36
real variables
Variables measure in numerical units
37
Classical dichotomy
Real variables (employment/output) are independent from nominal variables (money)
38
Velocity of Money
Number of times in a given period each dollar in a nation's money supply is used to make purchases
39
What makes up the Federal Reserve System
12 regional banks and the board of Governors
40
What is the purpose of the Federal reserve system
Conduct monetary policy, supervises and regulates banks, monitors stability of financial sector, Provides financial services to the US Government
41
Federal Reserve Board
"Board of Directors" 7 members appointed by presidents and confirmed by the senate for 14-year terms
42
Federal Open Market Committee (FOMC)
Committee of federal reserve system responsible for monetary policy decisions
43
Central Bank
Provides financial services to country's government and responsible for nations monary policy
44
Federal Reserve
Central bank of US
45
Open Market Operations
purchase or sale of government securities by central bank. Used ot influence money supply and interest rates
46
Discount Rate
Interest rate for banks to borrow from the Fed
47
Money Market
Market where interest rate is determined by demand for and supply of money or opportunity cost of holding money balances.
48
Surplus of money exists
initial interest rate exceeds equilibrium
49
Shortage of money exists
interest falls below equilibrium
50
Inc MD or Dec MS
Shortage of money in the market Puts upward pressure on interest rate
51
Dec MD or inc MS
initial surplus of money in the market surplus causes interest rates to fall

Macroecon (1 decks)

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