Upgrade to remove ads
Only $35.99/year

Econ 1015 final

Terms in this set (33)

Four Macroeconomic goals
1. Economic Growth
2. Stable Prices
3. Full Employment
4. Sustainable balance of trade
During a recession we want to use ______ policy.
Expansionary
A depression is a long recession with low ______ and _____.
employment, economic growth
We want to sue _____ policy when we hit a peak.
Contractionary
Natural employment only includes ______ and _____ unemployment.
Frictional, structural
Price level measures _____.
Inflation
Full employment is when?...
Potential GDP = Real GDP
Foreign Direct Investment
An investment is made by one country or person into another country or person.
Commodity
a good used as money. ex: Gold
Fiat Money
Money, such as paper currency, that is authorized by a central bank or Govt. body.
M1 consists of?
Currency, Traveler's checks, Checking account
M2 consists of?
everything else.
Liquidity?
ability to convert something into cash.
Primary function of the Fed (2)
1. Lender of last resort
2. Moral Hazard: not held accountable
Structure of the Fed (3)
1. The Board of Directors
2. 12 federal district reserve Banks
3. The FOMC
The NY Fed President always does what at the FOMC?
votes and is responsible for carrying out open market operations.
Three Monetary Policy rules:
1. Open Market Operations: Contractionary and expansionary
2. Discount Policy: Lower interest rates means more borrowing
3. Reserve requirements: Higher reserve requirement means that banks will be able to lend out less money.
Excess Reserves equation
Reserves-required reserves
Liquidity crisis
People cannot get cash
Bank Run
Everyone goes to the bank and takes their money out
Bank Panic
Many banks experience runs
Quantitative easing
Increasing the money supply by purchasing government securities
Expansionary Monetary policy:
1. ___ the money supply and ___ the federal funds rate
2. Open Market ___
3. ____ the RRR or the discount rate
1. Increase, decrease
2. Purchases
3. Lower
Contractionary (tighter) Monetary Policy:
1. ___ the money supply and the Federal Funds rate
2. Open Market ___
3. ___ the RRR or the discount rate
1. Decrease
2. Sales
3. Increase
MV=PY
M= Money supply
V= Velocity of Money
P= Price level
Y= Real GDP
Expansionary fiscal policy
1. ___ the tax rate or ___ spending on transfer payments, which eventually leads to a budget deficit.
Decrease, increase
Contractionary fiscal policy
1. ___ the tax rate or ___ spending on transfer payments, which could eventually lead to a budget surplus.
Increase, decrease
Main sources of tax revenue (3)
1. Income tax
2. Social security (payroll) tax
3. Corporate income Taxes
Three Categories of expenditures
1. Transfer Payments
2. Government Purchases
3. Debt interest
Crowding out
When the govt. runs a budget deficit, which causes the supply curve in the market for loanable funnds to decrease, which increases the interest rate and decreases loanable funds.
Flat tax
Same tax rate to everyone
Great Depression possible causes (5)
1. Decrease in the money supply
2. Decrease in consumption
3. Decrease in investment
4. Unexpected deflation
5. Increasing tariffs
automatic stabilizers
...
Recommended textbook explanations

Principles of Economics

8th EditionN. Gregory Mankiw
820 explanations

Principles of Economics

8th EditionN. Gregory Mankiw
819 explanations

Macroeconomics

10th EditionN. Gregory Mankiw
269 explanations

Macroeconomics

21st EditionCampbell R. McConnell, Sean M. Flynn, Stanley L. Brue
545 explanations