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Final Exam Set
Terms in this set (68)
Which of the following is not a characteristic of a perfectly competitive market?
A.) Different sellers sell identical products
B.) Sellers must accept the price of the market determines
C.) there are many sellers
D.) ALL OF THE ABOVE ARE CHARACTERISTICS
Legal minimum on the price a good can be sold at.
Benefit given by the government to groups or individuals, usually in the form of a cash payment or a tax reduction
When the price charged is more than or less than the equilibrium price determined by market forces of demand and supply
Resources are limited
At the equilibrium price, the quantity of the good that buyers are willing and able to buy
Exactly equals t he quantity that sellers are willing and able to sell
A macroeconomist, opposed to a microeconomist, would study
The effects of borrowing by the federal government
Nonbonding Price Ceiling
Equilibrium price is below Price Ceiling
Binding Price Ceiling
Equilibrium Price Above Price Ceiling
Demand increases when income increases, Falls income Decreases
Decrease in price of good X results in fewer Good Y being demanded.
X & Y are......?
a good's demand is increased when the price of another good is decreased.
good whose quantity demanded decreases when consumer income rises (or quantity demanded rises when consumer income decreases)
Opportunity Cost of going to college
Vale of the best opportunity a student gives up to attend college
Luxury Good/ Superior Good
demand increases more than proportionally as income rises, and is a contrast to a "necessity good", for which demand increases proportionally less than income
Go to a movie
If the marginal benefit of the movie exceeds its marginal cost.
Number of People Employed + Number of people Unemployed
GDP not a perfect measure of well-being; for example,
GDP fails to account for the quality of the environment
Because every transaction has a buyer and seller
Every transaction contributes equally to an economy's income and to its expenditure.
Unemployment Rate Equation
(Number of Unemployed)/ divided by the labor force, all X 100
Short-Run Fluctuations around the natural rate of unemployment.
When a country has a comparative advantage in producing a good
A.) the country should produce just enough of that good for its own consumption.
B.) the country's opportunity cost of that good is high relative to other countries' opportunity costs of that same good.
C.) the country should import that good
D.) None of the above
Not included in Labor Force, Frictional Unemployment, or the number of unemployed.
GDP equal to
A.) market value of all final goods and services produced within a country in a given period of time.
C.) C + I + G + NX
D.) All of the Above
NOT included in GDP because they are not payments for currently produced goods or services
Initally, both markets perfectly competitive. If a union organizes workers in one of the markets, then the wage rates will tend to
Rise for the Union Jobs and fall for the Nonunion Jobs
Kyle is a stay at home father who is not looking for a job.... He is categorized as....
Neither in the Labor Force or Unemployed.
Suppose a gardener produces both tomatoes and squash. If the opportunity cost of one bushel of squash is 2/5, then the opportunity cost of 1 bushel of tomato is.....
5/2 bushels of squash (Reciprocal)
If 2010 base year, inflation rate in 2015 is...
Interest rate at which the Federal Reserve Banks lend to commercial banks is called the
Federal Funds Rate
The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution overnight
Interest rate that commercial banks charge their most credit-worthy customers.
Short-Term Interest Rate
Less than A Year
The Fed has communicated changes in its monetary policy by announcing changes in its policy targets for the:
U.S. dollar- foreign currency exchange rate.
To avoid recession, government implements a tax rebate program, effectively cutting taxes for households. We would expect this to...
Increase Aggregate Demand
Total demand for final goods and services in an economy at a given time. It specifies the amounts of goods and services that will be purchased at all possible price levels.
Gov Spend - Tax Rev
Which of the following actions by the Fed would cause the money supply to increase?
Purchases of government bonds from banks.
Cash to purchase Honda, using money as...
Medium of Exchange
Unit of account
Nominal monetary unit of measure or currency used to value/cost goods, services, assets, liabilities, income, expenses; i.e., any economic item. It is one of three well-known functions of money. It lends meaning to profits, losses, liability, or assets.
Store of Value
function of an asset that can be saved, retrieved and exchanged at a later time, and be predictably useful when retrieved. The most common store of value in modern times has been money, currency, or a commodity like gold, or financial capital.
Purchase of goods that are not consumed today but are used in the future to create wealth.
Investment Demand Curve Suggests:
An inverse relationship between the real rate of interest and the level of investment spending.
Amount of money federal government owes to holds of U.S. Securities (bonds)
If the MPC in an economy is .9, government could shift the aggregate demand curve rightward by $40 billion by
Increasing government spending by $4 billion.
In an aggregate demand- aggregate supply diagram, equal decreases in government spending and taxes will
Shift the AD curve to the left
Which one of the following is true about the U.S. federal reserve system?
There are 12 regional Federal Reserve Banks
Amount a commercial bank can lend is determined by...
Cash reserve Ratio
Is a central bank regulation employed by most, but not all, of the world's central banks, that sets the minimum amount of reserves that must be held by a commercial bank.
Outstanding Checkable Deposits
Funds held at a bank or any other financial institution as a means for people to quickly access their accounts by writing checks or drafts. ... Checking, savings and money market accounts are examples of a checkable deposit account.
Budget Surplus When...
Tax Rev > Gov Spend
Which of the following best describes the built-in- stabilizers as they function in the United States?
Personal and corporate income tax collections automatically rise and transfers and subsidies automatically decline as GDP rises.
AS tax ^^, G Decreases
Which of the following best describes the cause- effect chain of a restrictive monetary policy?
A decrease in the money supply will raise the interest rate, decrease investment spending, and decrease aggregate demand and GDP.
The multiplier effect means that...
An increase in investment can cause GDP to change by a larger amount.
total supply of goods and services that firms in a national economy plan on selling during a specific time period. It is the total amount of goods and services that firms are willing and able to sell at a given price level in an economy.
The money demand curve is down sloping because
The opportunity cost of holding money increases as the interest rate rises.
Stabilizing Fiscal Policy calls for...
Deficits during recessions and surpluses during periods of demand- pull inflation.
During a recession the economy experiences
Falling Income & Unemployment
Sticky Wage Theory of the short run aggregate supply curve says that the quantity of output firms supply will increase if
The price level is higher than expected making production more profitable
Long-Run Aggregate Supply shift right if...
The capital stock increases
The wealth effect, the interest-rate effect, and the exchange rate effect are all explanations for the...
Slope of the Aggregate-Demand curve Shift
(GDP * GDP Deflator)/ (100)
GDP Deflator =
(Nominal GDP/Real GDP) *100
(Original Nom GDP)/(Real GDP)
THIS SET IS OFTEN IN FOLDERS WITH...
Ch.16 The Monetary System
Chapter 20 Aggregate Demand and Aggregate Supply
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