Econ 11 Questions – Flashcards

Everyone wants a job has a job employment is because of self choice the Solution is to increase G and Decrease t.

(9/112)*100=8.85 (11/140)*100=7.8

1. Concurrent Equilibrium the sum of vector forces through a point is zero. 2. Coplanar equilibrium, the sum of forces in a plane is zero and the sum of the torques around the axis of the plane is zero.

use of government revenue collection (mainly taxes) and expenditure (spending) to influence the economy. According to Keynesian economics, when the government changes the levels of taxation and government spending, it influences aggregate demand and the level of economic activity.

a government's or central bank's policy for control of the amount of currency available and the rate at which people can borrow money

1. Required Reserve Ratio - The portion (expressed as a percent) of depositors' balances banks must have on hand as cash. This is a requirement determined by the country's central bank, which in the U.S. is the Federal Reserve. The reserve ratio affects the money supply in a country. 2. Discount Rate - the minimum interest rate set by the Federal Reserve for lending to other banks. 3. Open Market Operations - is an activity by a central bank to buy or sell government bonds on the open market. A central bank uses them as the primary means of implementing monetary policy.

monetary policy is insufficient to boost demand. In a deep recession (liquidity trap). Higher government spending will not cause crowding out because the private sector saving has increased substantially.

supply-side economics- a school of macroeconomics that argues that economic growth can be most effectively created by lowering barriers for people to produce (supply) goods and services as well as invest in capital. Stagflation- persistent high inflation combined with high unemployment and stagnant demand in a country's economy.

monetaris-A policy that seeks to regulate an economy by altering the domestic money supply, especially by increasing it in a moderate but steady manner. Monetarists and Keynesians are in agreement over the fact that issues such as business cycles, unemployment, inflation are caused by inadequate demand, and need to be addressed, but they had fundamentally different perspectives on the capacity of the economy to find its own equilibrium and as a consequence the degree of government intervention that is required to create equilibrium. Keynesians emphasized the use of discretionary fiscal policy and monetary policy, while monetarists argued the primacy of monetary policy, and that it should be rules-based

The prolonged unemployment in the us

1970s-Inflation is caused by the printing of money. When the government prints money, there is more money in circulation in the country. When there is more money, the value of each dollar goes down. This means that you need more dollars to buy the same thing. 1980s-Reaganomics as it was called, contributed greatly to the inflation of the 80's. Everything was put back in check, and it stayed that way for a while, until now

Reaganomics- refers to the economic policies promoted by U.S. President Ronald Reagan during the 1980s. These policies are commonly associated with supply-side economics, referred to as trickle-down economics by political opponents and free market economics by political advocates. Supply-side economics-is a school of macroeconomics that argues that economic growth can be most effectively created by lowering barriers for people to produce (supply) goods and services as well as invest in capital.

a short run tradeoff between unemployment and inflation, it has not been observed in the long run.[1] In 1968, Milton Friedman asserted that the Phillips Curve was only applicable in the short-run and that in the long-run, inflationary policies will not decrease unemployment.

Greater income inequality can lead to monopolization of the labor force, resulting in fewer employers requiring fewer workers. Remaining employers can consolidate and take advantage of the relative lack of competition, leading to less consumer choice, market abuses, and relatively higher real prices It has also been argued that economic inequality invariably translates to political inequality, which further aggravates the problem. Even in cases where an increase in economic inequality makes nobody economically poorer, an increased inequality of resources is disadvantageous, as increased economic inequality can lead to a power shift due to an increased inequality in the ability to participate in democratic processes

While in this trap, interest rates are so low that any increase in money supply will cause bond-holders (fearing rises in interest rates and hence capital losses on their bonds) to sell their bonds to attain money

Raising the reserve requirement means that banks must hold more of their deposits in liquid form, so the money multiplier is smaller. Raising the discount rate means that institutions will borrow less from the fed discount window, and selling bonds means that the fed is taking in cash, which means it is going out of circulation. increase reserve requirements.

(1) regulation, (2) the tax system, and (3) government transfers

The developing world now spends $13 on debt repayment for every $1 it receives in grants. For the poorest countries (approximately 60), $550 billion has been paid in both principal and interest over the last three decades, on $540bn of loans, and yet there is still a $523 billion dollar debt burden. The causes of debt are a result of many factors, including: The legacy of colonialism — for example, the developing countries' debt is partly the result of the unjust transfer to them of the debts of the colonizing states, in billions of dollars, at very high interest rates. Odious debt, whereby unjust debt is incurred as rich countries loaned dictators or other corrupt leaders when it was known that the money would be wasted. South Africa, for example shortly after freedom from Apartheid had to pay debts incurred by the apartheid regime. In effect, South Africans are paying for their own oppression. Mismanaged spending and lending by the West in the 1960s and 70s

supply-side economics proposed that production or supply is the key to economic prosperity and that consumption or demand is merely a secondary consequence. Early on this idea had been summarized in Say's Law of economics Keynesianism, summarized Say's Law as "supply creates its own demand." He turned Say's Law on its head in the 1930s by declaring that demand creates its own supply

the Laffer curve is a representation of the relationship between possible rates of taxation and the resulting levels of government revenue. It illustrates the concept of taxable income elasticity—i.e., taxable income will change in response to changes in the rate of taxation. benefiting the wealthy will be paid for — plus interest — by taxes borne relatively evenly by all taxpayers. nefit from a greater supply of goods and services at lower prices.

federal support for virtually all categories of public investment has declined significantly it was driven by a large increase in private-sector investments in information and communications technology equipment

is a concept of economic activity developed in particular by Milton Friedman and Edmund Phelps in the 1960s, both recipients of the Nobel prize in economics. In both cases, the development of the concept is cited as a main motivation behind the prize.

Monetary Policy. Monetary policy is the most common tool for influencing economic activity. To boost AD, the Central Bank (or government) can cut interest rates. Lower interest rates reduce the cost of borrowing, encouraging investment and consumer spending. Lower interest rates also reduce the incentive to save, making spending more attractive instead. Lower interest rates will also reduce mortgage interest payments, increasing disposable income for consumers. Quantitative Easing. In a liquidity trap, where lower interest rates fail to boost demand, the Central Bank may need to pursue more unconventional types of monetary policy. Quantitative easing involves increasing the money supply and buying bonds to keep bond rates low. The hope is that the increase in the money supply and lower interest rates will boost investment and economic activity. The fear is that increasing the money supply could cause inflation. Though evidence from 2009-12 suggests that the inflationary impact was minimal. Without quantitative easing, the recession was likely to be deeper, though QE alone failed to return the economy back to a normal growth trajectory. Fiscal Policy. The government can boost demand by cutting tax and increasing government spending. Lower income tax will increase disposable income, encouraging consumer spending. Higher government spending will create jobs and provide an economic stimulus.

changes in labor's share of income; inequality at the bottom of the income distribution, including labor mobility; skill-biased technical change; inequality among high income groups; consumption inequality; geographical inequality; and international differences in the income distribution, particularly at the top.

Let's look at this visually on a very basic level and see how economists illustrate the differences between these two models representing what the economy looks like in the short run and also in the long run. Both models illustrate economic growth using a chart showing the relationship between economic output (which is real GDP) and prices. Since the economy operates according to the laws of supply and demand, we have two types of curves in this model, one representing supply and the other representing demand.

The post-World War II economic expansion, also known as the postwar economic boom, the long boom, and the Golden Age of Capitalism, was a period of economic prosperity in the mid-20th century which occurred, following the end of World War II in 1945, and lasted until the early 1970s.

As Americans migrated away from the manufacturing centers, they formed sprawling suburbs, and many former small cities have grown tremendously in the last 50 years. I

public goods are not excludable Open space,Air,TV,Movies (or concerts),Parks,Scenic views,Radio,Hiking,Water (recreation/use),Roads,

M2 = M1 + savings accounts & money market accounts

is the idea that a change in the stock of money affects only nominal variables in the economy such as prices, wages, and exchange rates, with no effect on real (inflation-adjusted) variables, like employment, real GDP, and real consumption.

a situation, described in Keynesian economics, in which injections of cash into the private banking system by a central bank fail to decrease interest rates and hence make monetary policy ineffective. A liquidity trap is caused when people hoard cash because they expect an adverse event such as deflation, insufficient aggregate demand, or war.

is a figure of speech for influence that is more effective in moving things in one direction than another - you can pull, but not push.

is an activity by a central bank to buy or sell government bonds on the open market. A central bank uses them as the primary means of implementing monetary policy. We see how the Fed can change the money supply, interest rates, investment, and the growth rate of GDP through open market operations. Unfortunately, Fed policy does not always work as smoothly as the Fed desires in this scenario. Let us examine in greater detail how open market operations actually work.

political and economic trend of the replacement of Keynesian economic theory with neoliberal economic theory, with the first neoliberal governments being created in Chile, where a military coup led by Augusto Pinochet took place in 1973

A) the bank holds a financial asset of $100 and you hold a financial liability of $100. b) the bank holds a financial liability of $100 and you hold a financial asset of $100. c) both you and the bank now have a financial asset of $100. d) both you and the bank now have a financial liability of $100.

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Inflation. If AD increases faster than AS then economic growth will be unsustainable. Economic growth tends to cause inflation when the growth rate is above the long run trend rate of growth. It is when demand increases too quickly that we get a positive output gap and firms push up prices. Boom and Bust Economic Cycles. If economic growth is unsustainable then high inflationary growth may be followed by a recession. This occurred in the late 1980s and early 1990s. Current account Deficit. Increased economic growth tends to cause an increase in spending on imports therefore causing a deficit on the current account. Environmental Costs. Increased economic growth will lead to increased output and therefore increased pollution and congestion. This will cause health problems such as asthma and therefore will reduce the quality of life. Economic growth also means greater use of raw materials and can speed up depletion of nonrenewable resources. Reduced Inequality Higher rates of economic growth have often resulted increased inequality because growth can benefit a small section of society more than others. However it depends upon things such as tax rates and the nature of economic growth

unemployment remains stubbornly high even as the economy grows.

Stimulus Spending growing four times faster