| Term | Definition |
|---|
| What is real GDP | Gross Domestic Product with inflation adjustments |
| California represents the __ largest economy in the world? | 5th |
| What is the Keynesian Equation? | C+I+G (x-m) = AD |
| Who created the Keynesian Equation? | John Maynard Keynes |
| What is the significance of 1936 when the Keynesian Equation was first introduced? | The Great Depression |
| What else did John Maynard Keynes introduce in the book: "The General Theory"? | The involvement of Government |
| Consumption represents ___ of all economic activity? | 67% |
| I represents what in the Keynesian equation? | Investment or Firm |
| Who runs our economy from a firm's perspective? | Small Business |
| G represents what in the Keynesian equation? | Government |
| (x-m) represents what in the Keynesian Equation | The Foreign Sector |
| What does x represent in the Keynesian Equation | Exports |
| What does m represent in the Keynesian Equation? | Imports |
| What is the current state of imports and exports? | Negative |
| We import more than we export is a reflection of? | A free market/capitalistic economy |
| Is the U.S. currently a service oriented or a manufacturing oriented economy? | service oriented |
| Define crowding-out effect. | An economic theory explaining an increase in interest rates due to rising government borrowing in the money market. |
| What is the impact to the Global economy if the U.S. economy plummets? | The Global Economy will plummet as well. |
| What economic/business data is available today to forecast trends in the economy. | MPC; GDP; CPI |
| In order to have an economy in "recovery" we must see? | 2 consecutive Quarter growths of real GDP |
| Real GDP is considered good when it is above? | 3% historically |
| FOMC stands for? | Federal Open Market Committee |
| How often does the FOMC meet? | Every 6 months |
| Are the FOMC meetings open to the public | No |
| Will the position on the economic barometer scale change because of key economic data? | Yes |
| Who knows where the economy will be in 6 weeks; 6 months or 6 years from now? | Only god and the angels |
| The Federal Reserve was founded in? | 1913 |
| Does the chairman of the Federal Reserve report to the President? | No |
| Who does the Federal Reserve Report to? | No one. Readouts are provided to congress every 6 months. |
| Why does the Federal Reserve report to no one especially the president? | Separation of Power |
| What is capacity utilization? | A metric used to measure the rate at which potential output levels are met or used. Displayed as a percentage and usually used in factories. |
| M2 stands for? | Liquidity or money available |
| Give and example of liquidity or M2? | If you go to McDonalds, how do you pay? Credit Card or Cash |
| MPC stands for? | Marginal Propensity to Consume |
| What does Marginal Propensity to Consume Mean? | 99% of the population will spend what they have and only 1% will save it. |
| Give an example of MPC? | If the government provides you a check for $600. Do you spend it or save it? 99% of people will spend it. |
| What is Consumption Function? | C= f(?) |
| What are some examples of Consumption Functions? | Credit, Income, Wealth, |
| List the 5 barometer cycle indicators of an economy? | Boom; Palatable Growth; Subdued Growth; Recession; Depression |
| Name 3 Key Indicators of the Economy? | Leading, Coincident, and Lagging |
| Provide 2 examples of Lagging Indicators. | Unemployment and Capital outlays or capital spending/investments |
| What is the President required to do in regards to the economy? | Maintain Full employment withouth inflation |
| What is the significance of the Humphrey Hawkins bill in 1968? | The president is mandated to provide a full employment economy without inflation |
| What is the efficacy of data? | Believability |
| What is the Gross Domestic Product? | Entire output of the U.S. economy in 1 year. It is the Super Bowl of Economics |
| Provide an example of GDP | You own a apple orchard and in 2008, you sold two bushels of apples @ $5 each. Your GDP is $10. In 2009, you sold 1 bushel of apples @$20, then your GDP is $20. |
| Why did your apple orchard GDP double in one year? | Inflation |
| What does AD stand for? | Aggregate Demand |
| If the president gives a check for $100 to every citizen. What are the 3 options a citizen has to use this check? | 1. Consume 2. Save and 2. Pay off Debt |
| In the Keynesian Equation, how does consume relate? | C or Consumption |
| In the Keynesian Equation, how does save relate? | I or Investment |
| How does paying off debt relate to the Keynesian Equation? | It does not relate |
| AD > AS equals | Boom with high inflation |
| AD = AS equals | Full employment without inflation |
| AD < AS equals | Recession with high unemployment |
| Price is | The great equilibrator |
| Inflation is a ___ to markets and consumers. | cancer |
| Inflation impacts which socioeconomic sector? | Poor |
| If ther is an annual inflation rate of 14% then in 7 years a dollar will be worth? | 50 cents |
| Investment is a function of: | 1. Cost of $ or interest rates 2. Profit potential and 3. Profit expectations |
| What is in the Fed's Toolbox? | 1. Money Supply 2. Required Reserves 3. Discount Rate 4. Federal Funds Rate 5. Open Market Operations |
| List 3 Pro's of the Monetary Policy of the Federal Reserve. | 1. Relatively Quick 2. Nondiscriminatory 3. Taken Seriously |
| List 3 Con's of the monetary policy of the Federal Reserve. | 1. Not a fine tuning instrument 2. Difficult to Gauge the result 3. Filter through the Economy |
| Name 3 critical components in a modern economy. | 1. Money 2. Prices 3. Interest |
| Name the 3 purposes of the dollar. | 1. Means of exchange 2. Limit of Value 3. Store of Value |
| What is the government's approach during AD > AS? | 1. Decrease government spending and 2. Increase taxes |
| What is the government's approach during AD < AS? | 1. Increase government spending and 2. Decrease taxes |
| Why would the government increase spending in a recession and lower taxes? | To maximize votes. |
| Is it effective to increase spending and lower taxes during a recession? | No |
| The fed is responsible for? | 1. The Monetary Stability with inflation 2. Regulation of banking industry and 3. Global Financial Balance |
| What is the state of the U.S. economy if AD > AS | Boom with high inflation |
| What is the state of the U.S. Economy if AD = AS | Full Employment without inflation |
| What is the state of the U.S. Economy if AD < AS | Recession with high unemployment |
| Gross Domestic Product equals | Aggregate Demand |
| What is the big question regarding the government and the economy? | Their size and their role in maintaining national defense, public goods and the nations infrastructure |
| What is the US fiscal policy? | Increase or Decrease Government Spending and Increase or Decrease Taxes |
| Money's usefulness and efficacy is reflected by its degree of | Liquidity |
| The money system is a reflection of | Liquidity |
| Required Reserves in banking is | A law that requires a bank to maintain approximately 10% in reserves at the bank |
| Discount Rate is | Charged interest among banks |
| Federal Funds Rates is | Lending Rate Between banks |
| Open Market Operations is | Buying and Selling treasure securities |
| What is the Fed's monetary policy during AD > AS | Decerase Money System; Increase Required Reserves and Discount Rate |
| What is the Federal Reserves monetary policy during AD < AS | Decrease money system, interest rates, discount rates and federal fund rates |
| Why is the Fed ineffective during a bust? | Interest Rates may be lowered but consumers are less likely to buy |
| What is nominal GDP? | Gross Domestic Product with noninflation adjustments |
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