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Final cumulative review
Terms in this set (32)
What are the factors of production (Ch.1)
Land, labor, capital, entrepreneurial ability
What is a primary gain of international trade (Ch. 38)
each country can specialize in goods that they are most productive in making
What is a phenomenon which Adam Smith called invisible hand (Ch.2)
effect of individual decision making in spending
What are the conditions for a shortage to happen (Ch.3)
Quantity demanded must be larger than quantity supplied.
What stops private firms from producing public goods (Ch.4)
*look in chpater
What is real GDP (Ch.25)
GDP with prices adjusted for inflation, different from nominal GDP. Found by nominal GDP/Price Index
What types of goods are apart of GDP calculation (Ch.25)
all goods produced in a given year within a country. Gov't purchases (G) , net exports (Xn), gross private domestic investment (Ig), & personal consumption (c)
Is it possible for "follower" (developing) countries to catch up with "richer" (developed) countries (Ch.26)
yes b/c leader countries have already developed technologies and the follower countries just need to adopt the technology, the follower countries will then grow much faster
What is real GDP per capita (Ch.26)
the amount of real output per person in a country, a good measure of individual's well being. Calculated by Real GDP/population
Who is classified as being part of labor force and who is not (Ch.27)
the labor force is the number of employed plus the number of unemployed. Full time students, stay at home parents and retirees are not in the labor force, potential employees who are not employed and do not want to work. People under 16 or people institutionalized are also not included.
What is inflation (Ch.27)
increase in the overall level of price, not all prices but most prices.
Explain the shape of the investment demand curve (Ch.28)
Why investment spending is not stable (Ch.28)
What is a multiplier effect (Ch. 28)
increase in final income from any new injection of any spending.
What could explain a phenomenon of prices being "sticky" with downward pressure (Ch. 30)
prices don't drop ?
Banking system in most modern societies being used
fractional reserves for operation
Which one from below works most effectively to prevent bank runs in the U.S. today?
For banks, what is excess reserves?
difference between actual reserves and required reserves
What happens when a check "clears" the banking system?
A bank against which the check is cleared loses reserves and deposits equal to the amount of the check.
In which case a commercial bank will create money?
when it creates checkable deposits in exchange for IOUs
Which transaction leads to money creation?
banks buy government bonds from households
The monetary multiplier can be calculated by taking the reciprocal of:
the reserve ratio
Which statement from below accurately describes the U.S. Federal Reserve System?
there are 12 regional Federal Reserve Banks
Which activity of the Federal Reserve Bank is its vital everyday function?
To provide facilities by which commercial banks and thrift institutions may collect checks.
Economists say that the value of money changes:
inversely with the price level
The money definition M1 in the U.S. is composed of:
coins, paper currency, and checkable deposits
Personal checkable deposits are called money because:
they can be readily used in purchasing goods and paying debts
When you buy a new phone by writing a check on your checkable deposit with a bank, you are essentially using money as:
a medium of exchange
When you deposit some of you part-time job earnings in your saving account, you are essentially using money as a:
store of value
FOMC stands for:
Federal Open Market Committee
privately owned and publicly controlled central banks whose basic goal is to control the money supply and interest rates in promoting the general economic welfare.
the 12 owned federal reserve banks
What provides backing for the money supply in the U.S.?
The government's ability to control the supply of money and therefore to keep its value relatively stable.
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