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Definition
| A state in which a country does not engage in trade. No export, no import. |
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| If the opportunity cost of producing the good is lower for that country than another country (countries). |
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| If that country can produce more of the good than the other country. |
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| During trade consumption is... |
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| During trade production... |
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| If the world price is less than the autarky price the country will ____ |
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| If the world price is greater than the autarky price then the country will ____ |
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| They protect the domestic producers by lowering the amount of imports into the country. |
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| They also generate money for the government. |
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| A tariff set on imported goods aimed at raising revenue for the government. |
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| A tariff set at such a high rate that imports of that good fall to zero. |
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| A tariff designed to increase the price of imported goods to above the price of the good's domestic substitute. |
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| A tariff set on imported goods from other countries in order to limit their environmentally unfriendly processes. |
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| A tariff set on imported goods from countries who first placed a tariff on the exporting country's goods. |
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| The total market value of all the final goods and services produced WITHIN a nation's borders in a given time period. |
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| The total market value of all final goods and services produced by American owned businesses regardless of their location. |
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| Goods that are sold to an end user. |
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| Goods that are inputs for the production of final goods. The producer is NOT the end user. |
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Definition
| Survey firms and add up the total value of their production goods and services. Value added. |
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Term
Calculating GDP:
Aggregate |
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Definition
| Add up aggregate spending on domestically produced final goods and services in the economy. |
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Term
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Definition
| Sum the total factor income earned by households from firms in the economy. |
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Definition
| The total of GDP divided by the country's population. |
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Term
Expenditure Model:
Consumption |
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Definition
| Household spending on consumer goods and services within the nation's borders. 2/3 of GDP. |
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Expenditure Model:
Investment |
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Definition
Expenditures on plant of equippment for the business sector.
A. Replace worn out stock
B. Improve or grow existing stock. |
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Term
Expenditure Model:
Government Services |
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Definition
Goods and services funded by the government for use by the population of that country.
A. Income Transfers: payments to individuals for which no goods are exchanged (like welfare). |
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Term
Expenditure Model:
Net Exports |
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Definition
| Exports - imports. Specifically looking at current account. |
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| Debt is the total accumulated deficits. |
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| Is the total value of all final goods and services produced within a nation's borders in a given time period adjusted for changing prices. |
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| Is the total value of all final goods and services produced within a nation's borders in a given time period measured by the prices of that time period. |
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Definition
| A mix of goods and services that a typical consumer might purchase and consume. |
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Definition
| A price that refers to all final goods included in the true measure of GDP. |
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Definition
| A fixed basket oriented around producers and their inputs that they use for their production processes. Fluctuates more than the CPI. |
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Definition
| Decline in total output for two or more consecutive quarters. |
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Definition
| The percent change per year in the price index. |
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Definition
| The increase in the average prices of goods and services. |
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Definition
| The decrease in the average prices of goods and services. |
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Definition
| Changes in the CPI excluding food and energy prices. |
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Definition
| Economy killer. With deflation your money becomes more and more powerful so you don't wanna spend it. |
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Term
Inflation 3 Costs:
Shoe Leather Costs |
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Definition
| Costs associated with reducing ones money holdings. |
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Term
Inflation 3 Costs:
Menu Costs |
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Definition
| Costs associated with changing listed prices. |
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Term
Inflation 3 Costs:
Tax Bracket Creep |
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Definition
| By having your nominal income increase you have a chance of moving into a higher tax bracket without having a real income increase. |
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Term
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Definition
| When people only consider their income in nominal terms. |
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Term
Two Types of Inflation:
Cost Push Inflation |
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Definition
| A large decrease in the aggregate supply curve caused by an increase in factor costs increased prices. |
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Term
Two Types of Inflation:
Demand Pull Inflation |
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Definition
| Inflation caused by sudden increase in aggregate demand. |
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Term
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Definition
| America likes to spend money so stimulus bills work, other countries are kinda smart and save stimulus money because they think that taxes in the future are gonna increase in order to pay off the stimulus debt. |
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Term
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Definition
| Nominal interest rate- inflation rate. |
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Term
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Definition
| Inflation in excess or 200% lasting at least one year. |
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Term
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Definition
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Term
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Definition
| Is the number of people who currently hold full-time or part-time jobs. |
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Term
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Definition
| The number of people who are actively looking for work but are no currently employed. *Does not count discouraged workers. |
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Definition
| Workers who gave up looking for jobs because they're lazy. |
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Definition
| A situation where there is high inflation rate and high unemployment rate. |
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Term
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Definition
| Is the equal sum of the number of the employed and unemployed. |
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Term
Types of Unemployment:
Frictional Unemployment |
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Definition
| Unemployment due to the time workers spend in job search. |
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Term
Types of Unemployment:
Structural Unemployment |
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Definition
| Unemployment that results when there are more people seeking jobs in a labor market than there are jobs available at the current wage. |
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Term
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Definition
| Unemployment due to seasonal changes in employment or labor supplies. |
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Term
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Definition
| Amount of unemployment that deviates from the natural rate of unemployment. |
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Term
| Natural Rate of Unemployment |
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Definition
| The unemployment rate that arises from the effects of frictional plus structural unemployment. |
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Term
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Definition
| Graphs the negative short run relationship between the unemployment rate and the inflation rate. |
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Term
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Definition
| What consumers think the inflation rate will be. |
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Term
| Non- Accelerating Rate of Unemployment |
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Definition
| The unemployment rate at which inflation does not change overtime. |
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Term
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Definition
| Shows the regular relationship between the output gap and cyclical unemployment. |
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Term
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Definition
| Shows the relationship between the aggregate price level and the quantity of aggregate output demanded by the households, businesses, the government and the rest of the world. |
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Term
Two Reasons the Aggregate Demand Curve is Downward Sloping:
The Wealth Effect |
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Definition
| An increase in the aggregate price level other things equal reduces the purchasing power of many assets, therefore as the purchasing power of consumer's assets decrease, consumers purchase less. |
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Term
Types of Investment Spending:
Planned Spending |
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Definition
| The investment spending businesses intend to undertake during a given time period. |
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Term
Types of Investment Spending:
Unplanned Spending |
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Definition
| Occurs when actual sales are more of less than businesses expected leading to unplanned changes in inventories. |
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Term
| Aggregate Demand Determinants |
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Definition
Changes in expectations
Changes in wealth
Changes in fiscal policy
Changes in monetary policy |
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Term
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Definition
Shows the relationship between the aggregate price level and the quantity if aggregate output supplied in the economy.
*Fixed short run
*Fully flexible long run |
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Term
| Long Run Aggregate Supple Curve |
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Definition
| Changes in the aggregate supply level do NOT change the quantity of the aggregate supplied in long run. |
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Term
| Determinants of Short Run Aggregate Supply |
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Definition
Changes in commodity prices.
Changes in nominal wages.
Changes in productivity. |
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Term
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Definition
| Wages are slow to change. Nominal wages are slow to fall even in the face of high unemployment, and slow to rise in the face of labor shortages. |
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Term
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Definition
| The potential of the Real GDP the economy would produce if all nominal wages were fully flexible. |
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Term
| Short Run Macro Equilibrium |
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Definition
| When the quantity of aggregate output supplied is equal to the quantity demanded. |
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Term
| Long Run Macro Equilibrium |
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Definition
| When the point of SRME is on the long run aggregate supply curve. |
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Term
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Definition
| The combination of inflation and falling aggregate output. |
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Term
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Definition
| The difference between actual output and potential output. |
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Term
| Expansionary Fiscal Policy |
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Definition
| Government spending aimed at increasing aggregate demand. |
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Term
| Expansionary Fiscal Policy Includes: |
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Definition
*Increase in government purchase of goods and services (like building stuff).
* Tax cuts
* Decreases in the marginal tax brackets
* An increase in government transfers (entitlement programs) |
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Term
| Aggregate Demand Shortfall |
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Definition
| The amount of the shift in the aggregate demand curve needed to achieve full employment allowing for price flexibility. |
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Term
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Definition
| The multiple by which an initial change in aggregate spending will alter total expenditure after an infinite number of spending cycles. |
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Term
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Definition
| The direct exchange of one good for another without the use of money. |
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Characteristics of Money:
Medium of Exchange |
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Definition
| It is accepted as payment for goods and services. |
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Term
Characteristics of Money:
Store of Value |
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Definition
| It can be held for future purposes. |
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Term
Characteristics of Money:
Standard of Value |
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Definition
| Serves as a yardstick for measuring the price and value of goods and services. |
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Term
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Definition
| Money that has no intrinsic value that is used as "money" because of a government decree. |
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Term
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Definition
| This is a trust in the government that it will keep the value of money relatively constant. |
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Term
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Definition
| The quantities of money people are willing and able to hold at alternative interest rates. |
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Term
| Equilibrium Rate of Interest |
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Definition
| The interest rate at which the quantity of money demanded in a given time period equals the quantity of money supplied. |
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Term
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Definition
| Decentralized centralized banks. Twelve of them. |
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Term
| Federal Reserve Services Provided to Commercial Banks |
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Definition
1. Clears checks between private banks
2. Hold Bank Reserves 10%
3. They provide currency: more cash
4. Provide loans |
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Term
| Characteristics of a Bank: |
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Definition
1. Accept deposits
2. Offer checks
3. Make loans |
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Term
Different Types of Banks:
Commercial Bank |
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Definition
| Most common bank and provides a full range of services and is regulated by the feds. |
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Term
Different Types of Banks:
Savings and Loan Association |
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Definition
| Designed to be a depository for savings an a loan granter for home mortgages. |
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Term
Different Types of Banks:
Credit Union |
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Definition
| Cooperative bank formed by individuals generally associated by a common entity. |
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Term
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Definition
| Assets held by a bank to fulfill its debt obligations. |
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Term
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Definition
| The minimum amount of federal reserves a bank is required to hold. |
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Term
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Definition
| The use of money and credit controls to influence macroeconomic outcomes. |
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Term
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Definition
| The rate of interest in the federal reserve changes for lending reserves to private banks. |
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Term
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Definition
| Federal Reserve purchases (expansionary) and sales (contractionary) of government bonds for the purpose of altering bank reserves. |
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Term
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Definition
| A certificate acknowledging a debt and the amount of interest to be paid each year until repayment. |
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Term
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Definition
| When people are willing to hold unlimited amounts of money at the prevailing interest rate (which is generally low). |
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Term
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Definition
1. Unemployment insurance programs
2. Income tax brackets
3. Welfare/entitlement programs |
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Term
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Definition
| Government spends so in order to fund that spending they might sell bonds so market interest rates go up. |
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