Term
| why is social science at a disadvantage compared to other sciences? |
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Definition
| Can't actually perform experiments with people's lives |
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Term
| What tools do economists use instead of experiments? |
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Definition
| historical/cross country data, experiments in models |
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Term
| Three actors in the general equilibrium model |
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Definition
| households, firms, government |
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Term
| Three markets in our gen. equil. model |
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Definition
| labor, goods, asset markets |
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Term
| The asset market includes... |
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Definition
| money and non-monetary assets |
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Term
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Definition
| ignore heterogeneity of workers/jobs/goods/assets used as money, other financial assets, etc. |
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Term
| The big picture in gen. equil. model |
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Definition
| functioning of each market, and interactions between markets |
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Term
| What do households act as what in each of the markets? |
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Definition
| labor: supply labor, goods: demand goods/investments, asset: hold money, financial assets, and have debt |
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Term
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Definition
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Term
| When households maximize utility, they get utility from |
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Definition
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Term
| The budget contraint of a household is |
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Definition
| income from labor, assets which must balance with debt over their lifetime (must pay all over their lifetime) |
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Term
| What do firms act as in each of the markets? |
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Definition
| labor: demand labor, goods: supply output for households, demand investment goods, asset: CAN hold money, financial assets, debt |
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Term
| The firm's contraint is... |
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Definition
| technology, capital, and labor |
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Term
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Definition
| maximize profits (a profit stream of current and expected future) |
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Term
| The government acts as what in each of the markets? |
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Definition
| goods: demands goods, asset: supplies money, labor: we won't assume they demand labor i guess |
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Term
| The government's goal is to |
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Definition
| not optimize anything, choices will just effect money supply, taxes, etc for goods/labor/asset market |
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Term
| The gov. budget contraint... |
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Definition
| exists as a lifetime budget contraint, where its accumulated debt MUSt be paid back, "everything connected to everything else" |
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Term
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Definition
| complete dynamic plan that deals with lifetime gov. budget contraint |
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Term
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Definition
| just one part of the plan, cannot be analyzed on its own (cut taxes now but what about the future?) |
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Term
| Fiscal policy is controlled by |
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Definition
| taxes/gov spending, federal, state, and local legislatures |
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Term
| Monetary policy is controlled by the |
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Definition
| Fed, the money supply/interest rates |
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Term
| How are monetary policy and fiscal policy connected? |
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Definition
| the gov. budget contraint |
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Term
| In the labor market, who does what? |
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Definition
| households supply labor, firms demand labor, real wage equilibrates market |
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Term
| What price equilibrates the labor market? |
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Definition
|
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Term
| What is the national income accounting identity? |
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Definition
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Term
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Definition
|
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Term
| What price equilibrates the goods market? |
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Definition
|
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Term
| In the asset market, who does what? |
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Definition
| households&firms demand money, gov supplies money |
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Term
| What price equilibrates the goods market? |
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Definition
| the "price level" (i assume like inflation + fed rate or something) |
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Term
| Our assumption is that markets must be... |
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Definition
|
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Term
| If a variable is "given", it must be... |
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Definition
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Term
| If a variable is sought to be explained by the model, it is... |
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Definition
|
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Term
| Is gov. policy endo or exo genous? |
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Definition
|
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Term
| Does Macro have more endo. or exo. variables? |
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Definition
| Endogenous, "almost everything" |
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Term
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Definition
| statement of fact or theory |
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Term
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Definition
| expression of value judgement |
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Term
| Stock quantities are measured... |
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Definition
|
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Term
| Flow quantities are measured... |
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Definition
| between one time and another |
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Term
| Capital, private debt and gov. debt are stock or flow? |
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Definition
|
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Term
| GDP is a stock or flow measure? |
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Definition
|
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Term
| investment, net export, gov purchases are stock or flow measures? |
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Definition
|
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Term
| the government deficit is a stock or flow measure? |
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Definition
|
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Term
| private, government or national saving are stock or flow measures? |
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Definition
|
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Term
| the growth rate of X is WHAT (in words) |
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Definition
| the change in X divided by initial value of x |
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Term
| the growth factor of X is WHAT (in words) |
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Definition
| the future X divided by the initial x |
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Term
| The relationship between the growth rate of x and the growth factor of X is WHAT (in words) |
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Definition
| growth factor=growth rate + 1 |
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Term
| The nominal interest rate is the rate before what is taken into account? |
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Definition
|
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Term
| WHAT is adjusted for inflation to give the real interest rate? |
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Definition
|
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Term
| The nominal interest rate is adjusted for inflation to give... |
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Definition
|
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Term
| What can growth factors be added over a few years to give an approximation of the overall growth? |
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Definition
| when the growth rates are small and only a few of them together |
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Term
| Average growth rate approximation is |
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Definition
| add up growth rates, divide by number of years |
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Term
| When compounding, what is the equation for annualized growth rate? |
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Definition
| annual growth rate = (1+growth rate for slice of the year)^(how many slices of the year there are) - 1 |
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Term
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Definition
| measure to level of a variable proportionally, giving a base value |
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Term
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Definition
| Cross-country data, or when variables only have growth rates (no base levels) |
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Term
| What is the goal of GDP accounting? |
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Definition
| measure country's economic OUTPUT |
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Term
| Three ways to measure GDP |
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Definition
| income, product, expenditure |
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Term
| The value of goods/services sold= |
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Definition
| value of expenditures on goods/services |
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Term
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Definition
|
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Term
| An equilibrium condition of the goods market includes |
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Definition
| Y=C+I+G+NX, the NI identity |
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Term
| Intermeidate inputs are defined as... |
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Definition
| being USED UP in production of other goods |
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Term
| Factors of production include |
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Definition
| labor, capital, and "land"/natural resources |
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Term
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Definition
| the value of final output - cost of intermediate inputs |
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Term
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Definition
| Output - Intermediates - payments to factors of production |
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Term
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Definition
| Output - Intermidates - payments to factors unowned - depreciation of capital owned |
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Term
| The major difference between economic profit and corporate profit is |
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Definition
| the exclusive of facot payments owned, and inclusion of depreciation of capital owned by firm (both in corp. profit) |
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Term
| GDP is measured at what value? |
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Definition
| MARKET value (not book value, aka what you paid for it - its about what its worth) |
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Term
| In the Value added approach, GDP includes goods/services that are produced |
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Definition
| as NEW, FINAL goods/services, WITHIN a country (as opposed to GNP), during a specific period (flow) |
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Term
| The exception to GDP being measured at market value is |
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Definition
| gov. output, which is valued at cost |
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Term
| In the expenditure approach, we used what identity? |
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Definition
| National Income Accounting, Y=C+I+G+NX |
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Term
| The income approach includes what components? |
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Definition
| pretax wages, proprietors income, rental income of person, corporate profits, net interest, taxes on production and important, business current transfer payments, current surplus of gov. enterprises |
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Term
| The three adjustment needed to make the income approach are |
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Definition
| "national" to "domestic", "net" income to "gross" production, and adjustment for statistical discrepancy |
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Term
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Definition
| national income + statistical discrepancy |
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Term
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Definition
|
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Term
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Definition
|
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Term
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Definition
| net takes out depreciation, gross doesn't take it out (or deal with it) |
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Term
| The statistical descrepancy= |
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Definition
|
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Term
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Definition
|
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Term
| Private disposable income = |
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Definition
|
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Term
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Definition
|
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Term
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Definition
| private disposable income - consumption |
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Term
| Gov. saving is the same things as gov. |
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Definition
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Term
|
Definition
|
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Term
| Gov. saving is the diferrence between |
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Definition
| gov. receipts - gov outlays |
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Term
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Definition
|
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Term
|
Definition
| private saving + government saving |
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Term
| New goods that are not consumed by gov. or by private sector is called |
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Definition
|
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Term
| Current income not spent on new goods by gov. or by private sector is |
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Definition
|
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Term
| consumption + saving MUST equal |
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Definition
|
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Term
| consumption + "other expenditure components, aka saving" MUST equal |
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Definition
|
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Term
| Saving = private saving + gov saving = (3 things) |
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Definition
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Term
|
Definition
|
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Term
| The government deficit is equal to |
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Definition
| gov. saving (when it is negative) |
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Term
| The gov. deficit is financed by |
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Definition
|
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Term
| Domestic investment is financed by |
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Definition
|
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Term
|
Definition
|
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Term
| If government deficit goes up, one of what three things must happen? |
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Definition
| Private saving up, investment down, or CA down |
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Term
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Definition
| payments AND good outflow from our country (or into it) |
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Term
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Definition
|
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Term
| National wealth does or does not include human capital? |
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Definition
| in this stuff, it does NOT |
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Term
| National wealth can change if two things happen... |
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Definition
| market value of assets changes, or CA changes via accumulating more foreign assets |
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Term
| The level of output is determined by what two FACTORS of PRODUCTIOn |
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Definition
|
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Term
| In our Cobb-Douglass production function, "A" represents level of |
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Definition
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Term
| In our Cobb-Douglass production function, alpha must be... |
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Definition
|
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Term
| An increase in technology ______ the production function ___ |
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Definition
| SCALES the production function UP |
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Term
| In the long run, technology (A) tends to _______, leading to ___________________ |
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Definition
| technology increases, leading to technological progress |
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Term
| In the short run, technology (A) tends to _______, leading to ___________________ |
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Definition
| technology fluctuates, leading to technological shocks |
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Term
| These three things can create a technological shocks: |
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Definition
| weather, rel. price of intermediate goods, gov regulations |
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Term
| Total factor productivity is the level of |
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Definition
| technological advancement in general fields, or technological progress |
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Term
| The Real Business Cycle Theory states what? |
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Definition
| the main source of bus. cycle fluctuations is TFP shocks |
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Term
| The Real Business Cycle Theory examines ________ in what two main channels? |
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Definition
| how the economy responds to TFP shocks, via direct channel or indirect channel |
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Term
| The marginal product of an additional unit of labor assumes what is constant? |
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Definition
|
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Term
| The marginal product of an additional unit of capital assumes what is constant? |
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Definition
|
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Term
| The marginal products of capital/labor are always positive or negative? |
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Definition
|
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Term
| If you increase labor or capital when the other is fixed, output must |
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Definition
|
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Term
| MPN and MPK are both decreasing functions of |
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Definition
| their respective variables (MPN decr. function of N, MPK decr. function of K) |
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Term
| MPN and MPK are both increasing functions of |
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Definition
| their opposite respective variables (MPN incr. function of K, MPK incr. function of N) |
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Term
| What returns to scale is best in Macro? |
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Definition
| Constant returns to scale |
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Term
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Definition
|
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Term
| Labor level can be changed quickly or slowly? |
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Definition
|
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Term
|
Definition
| price per hour of work in terms of consumption goods earned |
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Term
| Firms will maximize _____, given the subtraction of _____ and _____ |
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Definition
| output value, given the subtraction of wage and labor |
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Term
| The firm will choose the amount of labor such that... |
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Definition
| the real wage rate = the marginal product of labor |
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Term
| The labor demand curve is the same as the |
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Definition
| marginal product of labor curve |
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Term
| If TFP up, labor demand will... |
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Definition
|
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Term
| If amount of K up, labor demand will... |
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Definition
|
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Term
| If TFP down, labor demand will... |
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Definition
|
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Term
| If amount of K down, labor demand will... |
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Definition
|
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Term
| Households act to maximize their |
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Definition
|
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Term
| Households utility is a trade-off between |
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Definition
| benefits of working (consumption ability), vs cost of working (aka leisure) |
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Term
| In our to decide how much a household will work/consume or not work/consume leisure, we must have |
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Definition
| preferences and budget set of that household |
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Term
| Comsumption and leisure are both what type of goods? |
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Definition
|
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Term
| If income increases, consumption must... |
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Definition
|
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Term
| If income increases, leisure must... |
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Definition
|
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Term
| If income decreases, consumption must... |
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Definition
|
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Term
| If income decreases, consumption must.. |
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Definition
|
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Term
| The budget set for a household consists of what two contraints? |
|
Definition
| time constraint and income constraint |
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Term
| The time constraint for a household includes |
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Definition
| labor hours + leisure hours = total hours |
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Term
| The income constraint for a household includes |
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Definition
| consumption <= wage*labor hours + previous wealth(saving) |
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Term
| The budget constraint for a household is |
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Definition
|
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Term
| Households supply labor where |
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Definition
| the highest indifference curve of utility is tangent to the budget constraint |
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Term
| The substitution effect of increased wage (income) on a household says that |
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Definition
| leisure is now more expnsive, or labor supply (people and hours) up |
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Term
| The income effect of increased wage (income) on a household says that |
|
Definition
| value of available time increases, consume more of everything (leisure and goods), labor supply falls |
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Term
| If there is a temporary pos. change in the real wage, which effect dominates (income or subst)? |
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Definition
| substitution effect, labor supply up |
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Term
| If there is a permanent pos. change in the real wage, which effect dominates (income or subst)? |
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Definition
| income effect, labor supply falls |
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Term
| The labor supply curve is in the short run or long run? |
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Definition
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Term
| In illustrating the effect of change in w on labor supply, our graph will be in long or short run? |
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Definition
|
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Term
| If wealth up, labor supply goes |
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Definition
|
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Term
| If wealth down, labor supply goes |
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Definition
|
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Term
| The pure income effect can be thought of as |
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Definition
| a promised increase in future real wages, which in turn effects how much you can borrow now |
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Term
| Increase in population will do what to labor supply in the aggregate? |
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Definition
|
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Term
| Increases in immigration, etc, will do what to labor supply in the aggregate? |
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Definition
|
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Term
| If the real interest rate goes up, there is an incentive to... |
|
Definition
| save more, borrow less, work more to get more money to save |
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Term
| The real interest rate going up will cause labor supply to... |
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Definition
|
|
Term
| The equilibrium level of employement is the |
|
Definition
| full employment level of employment |
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Term
| The full employment level of employment is also known as |
|
Definition
| the equilibrium level of employment |
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Term
| The full employment level of output is |
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Definition
| the amount of output produce at the full employment level of employment |
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Term
| A recession occurs because... |
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Definition
|
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Term
| Amplification is a concept entailing... |
|
Definition
| that the labor market amplies technology fluctuations in the output market |
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Term
| Amplification means that output will fluctuate more than |
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Definition
|
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Term
| Five shifters of the labor supply include |
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Definition
| real wage, wealth, real interest rate, total factor productivity, population |
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Term
| The increase in aggregate labor supply due to an increase in real interest rate is probably large or small? |
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Definition
| SMALL, real interest rate will not effect labor supply too much. |
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Term
| The relative price of consumption in terms of leisure is |
|
Definition
| leisure price divided by real wage |
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Term
| The goods market is in equilibrium when... |
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Definition
| DESIRED levels of expenditure components (demand) = total output produced (supply) |
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Term
| Gov. purchases and taxes are endo. or exo.geneous from economic perspective? |
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Definition
|
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Term
| In the goods market, we will assume for now that.. |
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Definition
| NX = 0 and NFP = 0 (CA = 0) |
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Term
| In a closed economy, the national income identity is |
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Definition
|
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Term
| In a clsoed economy, NX = ? and NFP = ? and S = ? |
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Definition
|
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Term
| The goods market equilibrium condition in a closed economy is |
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Definition
|
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Term
| The goods market is in equilibrium when |
|
Definition
| desired level of national saving = desired level of investment (plus a current account of 0) |
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Term
|
Definition
|
|
Term
|
Definition
|
|
Term
| If inflation is greater than expected... |
|
Definition
| borrowers benefit, lenders lose, r is underestimated |
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Term
| If inflation is less than expected... |
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Definition
| borrowers lose, lenders benefit, r is overestimated |
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Term
| The budget constraint for the trade off between cF and c is |
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Definition
| (a+y-c)*(1+r)>=aF, or aF +yF>=cF |
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Term
| The present value lifetime resources (PVLR) is |
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Definition
|
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Term
| The present value lifetime consumption (PVLC) is |
|
Definition
|
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Term
| The future value lifetime resources (FVLR) is |
|
Definition
|
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Term
| The future value lifetime consumption (FVCR) is |
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Definition
|
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Term
| No borrowing no lending point is |
|
Definition
| current consumption takes no money from future, and future income has no saving |
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Term
| Slope of budget line between current and cuture consumption is |
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Definition
|
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Term
| Present consumption + pv of future consumpion must be |
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Definition
|
|
Term
| Private saving for a consumer is |
|
Definition
| Private saving = y-nt-c=y-c |
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Term
|
Definition
|
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Term
|
Definition
| current consumption and future consumption increase because normal goods |
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Term
|
Definition
|
|
Term
| Consumption saving means that... |
|
Definition
| at least SOME money will be saved or borrowed |
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Term
| Marginal propensity to consume is |
|
Definition
| % of new income that is consumed |
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Term
| The effect of a change in income on SOMETHING is |
|
Definition
| the derivate of that SOMETHING with respect to income |
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Term
| A change in income will change private saving by |
|
Definition
| 1-MPC....(Spvt=Y-C, so 1-MPC is deriv) |
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Term
| A change in income will change future consumption by |
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Definition
| (1-MPC)*(1-r)....(cF=(a+r-c)*(1-r), so take deriv and ignore the a I guess) |
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Term
| An increase in wealth will do what to budget line between c and cF? |
|
Definition
|
|
Term
|
Definition
|
|
Term
| If wealth increases, saving will |
|
Definition
| fall, because income does not change with increase in consumption |
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Term
| If wealth increases, net lending will |
|
Definition
| increase, because more money in bank |
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Term
| If future income increases, budget set will |
|
Definition
|
|
Term
| If future income increases, Spvt will |
|
Definition
| fall, since income does not change but consumption increases |
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Term
| If future income increases, lending will |
|
Definition
|
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Term
| If r is held constant, and PVLR for the assets/income/taxes is set, then there can only be one |
|
Definition
| optimal consumption choice |
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Term
| The response of consumption to changing different income effect variables, i.e. y, nt, yF, ntF, or a, is |
|
Definition
| MPC*partialderiv(PVLR) w.r.t. that variable |
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Term
| If the real interest rate goes up, the income effect on lenders will... |
|
Definition
| save less, consume more now, consume more in future |
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Term
| If the real interest rate goes up, the income effect on borrowers will... |
|
Definition
| consume less now, consume less in future, save more |
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Term
| If the real interest rate goes up, the substitution effect on borrowers & lenders will... |
|
Definition
| consume less now, consume more in future, save more now |
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Term
| The net effect of a real interest rate increase shows that lenders will definitely... |
|
Definition
| consume more in the future, but we don't know if they will consume more now or save more now (or less) |
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Term
| The net effect of a real interest rate increase shows that borrowers will definitely... |
|
Definition
| consume less now & save more now, but we don't know if they will consume more or less in the future |
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Term
| Aggregate private saving is a slightly increasing function of |
|
Definition
|
|
Term
| Aggregate consumption is a slightly increase function of |
|
Definition
|
|
Term
| Current government expenditures must = |
|
Definition
|
|
Term
| Future government expenditures must = |
|
Definition
| future net taxes - (past bond issues)*(1+r) |
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|
Term
| Present value of gov expenditures = |
|
Definition
| present value of net taxes |
|
|
Term
|
Definition
| present value of gov expenditures |
|
|
Term
| A change in net taxes will cause consumption to change by |
|
Definition
|
|
Term
| A change in future net taxes will cause consumption to change by |
|
Definition
|
|
Term
| A change in net taxes will case Spvt to change by |
|
Definition
|
|
Term
| A change in future net taxes will cause Spvt to change by |
|
Definition
|
|
Term
| Given a tax cut but ultimately higher future net taxes, the effect on consumption will be |
|
Definition
|
|
Term
| Given a tax cut but ultimately higher future net taxes, the effect on private saving will be |
|
Definition
|
|
Term
| Given a tax cut but ultimately higher future net taxes, the effect on government saving will be |
|
Definition
|
|
Term
| Given a tax cut but ultimately higher future net taxes, the effect on national saving will be |
|
Definition
|
|
Term
| Ricardian equivalence states that given... |
|
Definition
| a tax cut, people will save it all to be able to pay the higher taxes later |
|
|
Term
| Given a tax increase but ultimately lower future net taxes, the effect on consumption will be |
|
Definition
|
|
Term
| Given a tax increase but ultimately lower future net taxes, the effect on private saving will be |
|
Definition
|
|
Term
| Given a tax increase but ultimately lower future net taxes, the effect on government saving will be |
|
Definition
|
|
Term
| Given a tax increase but ultimately lower future net taxes, the effect on national saving will be |
|
Definition
|
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Term
| Given a higher future net taxes to pay for current government borrowing, the effect on consumption will be |
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Definition
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Term
| Given a higher future net taxes to pay for current government borrowing, the effect on private saving will be |
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Definition
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Term
| Given a higher future net taxes to pay for current government borrowing, the effect on government saving will be |
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Definition
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Term
| Given a higher future net taxes to pay for current government borrowing, the effect on national saving will be |
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Definition
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Term
| In private saving, the _______ effect dominates the ______ effect |
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Definition
| subsitution effect dominates the income ffect |
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Term
| What five things shift the saving supply curve? |
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Definition
| current income, expected future output, wealth, taxes, current gov expenditures |
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