Flashcards on Economics unite 4 answers not terms
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what four categories of economic activity measure gdp
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1.Consumer Sector 2.Investment Sector 3.Government Sector 4.Net Export
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What 5 sources make up national income?
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wages and salaries, income of self employed individuals, rental income, corporate profits and interest on savings, and other investments.
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If you were given the statistic on disposable personal income, what other information would you need to derive personal income
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Personal Income equals Disposable Income plus Personal Savings
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list five items you have recently purchased
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YOUR OWN answer! ,Hint try to simplify it down to as little items as you can to just use very specific terms
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what is the relationship between the purchasing power of money and inflation
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Interest and inflation are related in one way,that is through the fluctuation of available money.Other wise known as income
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what are the commonly used price index
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price index, Producer price index and GDP deflator.
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What is the difference between inflation and deflation?
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Inflation is the rise in the general price level of final goods and services while deflation is the decline.
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if the PPIs measuring crude oil, agricultural products, and lumber decreases for three months in a row, what prediction could you make about the CPI?
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The CPI effect will be the same as PPI.
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what causes the aggregate supply curve to slope upward?
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Lower taxes or interest rates or lower prices for foreign oil.
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How do you use aggregate demand supply analysis to determine the equilibrium price level?
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Aggregate demand (AD) and aggregate supply(AS) are the relationship between price level and real GDP. If (AD) cuts (AS),it is an equilibrium price level and real GDP.
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what is determined at the intersection of the aggregate supply and aggregate demand curve?
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An inflationary gap,is what's noticed! in economics, is the amount by which the real Gross domestic product, or real GDP, exceeds potential GDP. A recessionary gap is the opposite.
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what would cause the Ad curve to shift to the right
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can shift to the right as the economy expands.
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What are the phases of a typical business cycle?
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Expansion,Peak,Trough,Recession. examples- Expansion- GDP increasing at an increasing rate Peak- GDP increase constant Contraction (recession)- GDP decrease at an increasing rate Trough- GDP decrease constant
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when the economy enters a recession what normally happens?
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People and major companies owe huge debts. Example- People are lay'ed off of work and causes lack of money to spend and causes a vicious cycle of lack of money flow incoming or going.
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What are three major categories of economic indicators?
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Leading indicators, coincident indicators, lagging indicators
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what innovation do you think has the most influence on expanding the american economy?
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YOUR OWN answer! ,Hint ,MAjor events such as the first ever blood bank..or first ever cell phone that impacted america greatly.
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What two aspects of government activity affect business cycles?
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through its policies on taxing and spending through its control over the supply of money available in the economy
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what are the three functions of money?
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A store of value, A unit of account,A medium of exchange
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what is the alternative of using money?
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Trading in exchange for goods or services
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Money should be durable and divisible. What other characteristics should money have?
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Portable, Stable in Value, Scarce, and Accepted
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what is the type of money used by the united states?
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The united states Dollar
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What are the six services offered by banks and savings institutions?
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checking accounts, interest on certain types of checking accounts, automatic deposit and payment, storage of valuables, transfer of money from 1 to another and overdraft checking.
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how has electronic banking changed banking services?
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efficient of making payments and delivery of services in home or on the go making it more accessible.
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what type of system did the early colonists use when they bought and sold goods and services?
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The early colonists utilized trading and bartering
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what does the m2 definition of money includes?
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broader def of the money supply, including all of the M1, plus such near moneys as savings deposits, small denomination time deposits, money market deposit accounts, and retail money market mutuals fund balances.
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what are the only denominations of paper currency being used today by the federal government?
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American dollars in 1, 5, 10, 20, 50, and 100 dollar values with regularity
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Why were checking accounts formerly called demand deposits?
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Because the person can withdraw it at any time by writing a check, the bank must pay that amount on demand
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what is the difference between money and near moneys?
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numerous other assets are almost, but not exactly, like money. their values are stated in terms of money, and they have high liquidity in comparison to other investments, such as stocks. near moneys can be turned into currency or into a means of payment, such as a check
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Why is M1 considered a narrower definition of the money supply than M2?
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Because M2 includes everything in M1 plus more specialized account balances
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what various types of money and near moneys do you use?
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The various forms of money are Commodity Money,Fiduciary Money and Fiat Money. Drafts and Bills of Exchange, Treasury Bills, Bonds, Equity Shares, Fixed and Saving Deposits, Saving Certificates,
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how is the Fed organized?
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monetary policy and other major decisions are made on a national basis.Through congress
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what does the board of governors do within the fed?
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The members of the Board of Governors have a majority of the votes ,Maine role is to help pass certain laws/Restrictions.
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how many fed banks and branches are there?
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Consisting of twelve Federal Reserve Banks, the Fed facilitates the exchanges of cash, checks and credit; it regulates the member banks, and it uses monetary policies to fight inflation and deflation
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which agency of the federal government is responsible for supplying paper currency and regulating the money supply?
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The federal reserve bank
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explain why you agree or disagree with the following statement the Independence of the Federal Reserve System is essential to the health of the economy
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YOUR OWN answer!
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what is the purpose of fractional reserve banking?
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The practice of fractional reserve banking expands credit and also expands the money supply
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how does the money supply expand?
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The Federal Reserve seizes control on the expansion of central money supply
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what are the two basic types of monetary policies?
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loose money policy and tight money policy
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why do banks have to keep money in reserve accounts?
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Cash reserves are needed not only for debt defaults, but also for cash withdrawals.
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in a 10 percent fractional reserve banking system what happens to the money supply when the fed injects $100 of new money into the american economy?
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$100 of central bank money,turns to the initial deposit with a fractional-reserve rate of 10% which will ultimately create $500 of commercial bank money
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how can the fed use reserve requirements to alter the money supply?
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It can change the reserve requirements by raising or lowering the limit affecting the amount banks can loan out. and increasing ,or decreasing bonds
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how does the discount rate affect the money supply?
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A decrease in the discount rate makes it cheaper for commercial banks to borrow money, which results in an increase in the supply of money in the economy.
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What are some of the difficulties of carrying our monetary policy?
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Time lag between the implementation on the policy and detectable effects in the economy and inflationary effects driven by influences demand
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why do some of the fed's critics think the fed should not engage in monetary policy?
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Critics believe its because it increases the likelihood of wasteful spending and craft.
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according to Ben s.Bernanke what can the central bank do to keep the economy stable even with a stock market crash?
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By cutting rates down.which helps with deflation
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what does Bernanke study when looking for lessons on how to handle the u.s economy?
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Ben Bernanke looks at several factors when studying how to handle the US economy including past economic behavior And also following trends
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what are the two measurements of government growth?
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How man public programs are implemented and how much taxes have been raised.
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in what ways has the government grown since the Great Depression?
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Government spending at all levels-federal, state, and local-has increased significantly over the years.
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What percent of GDP accounts for government purchases?
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19%
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do you think it's easier to increase or decrease government spending? why?
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YOUR OWN ANSWER!! OR, >Its generally easier to increase government spending because there's almost always benefits to spending more
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What are some criticisms of government involvement in the economy?
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The government sets taxes, imports & exports laws has the treasury dept. and fed. reserve which sets interests rates.
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what are government's main functions?
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to provide a structure for society. The government develops laws and enforces them with the goal of promoting peace.
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Give 5 examples of public goods.
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insurance, health, communication, transportation, military
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what would be a negative externality of having an airport built near your home what would be a positive externality?
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negative externalities would be noise pollution and inconvenient accommodations made to you and your household.positive externalities when examining the aviation industry is its effect on the economy.
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compare and contrast merit and demerit goods
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a merit good is something in which people don't realize the benefit (museums) a demerit (smoking) in a free market
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What are the five largest federal expenses?
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health and human services, department of defense, treasury department, department of agriculture, and department of education.
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about how long does it take the federal government to prepare a budget?
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A year
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what causes national debt?
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Government taking money for the need of expansion ,Also used for national security and many other government/national need that affects many
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how does deficit spending financing increase the size of the national debt
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when govt. spending cannot be reduced and goes beyond revenues and taxes cannot s be raised
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What are the two principles of taxation?
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The benefits-received principle and the ability to pay principle.
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list and describe the kinds of taxes you pay
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federal income tax, social security tax,property tax, and sales tax.
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if all income were taxed at exactly the same rate what type of tax would be in existence
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"flat tax" which treats all taxpayers equally
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which of the two principles of taxation is more equitable? explain your answer
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direct and indirect. Neither is equitable reason why is because there are larger means of taxation and they make an increase in taxation among all
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what is ellen's goal as head of one of the nation's 12 federal reserve banks
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economic analysis, delivering financial services to banks, and supervising banks.
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what does it mean to smooth out business cycles?
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means reduce fluctuations within the economy
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what actions are banks taking to earn more profits
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by adding charges to checking accounts, raising fees, and some have actually tried to charge you if you do not use your bank account enough
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how can you as a customer avoid the fees in the article
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Page-384 Your answer!
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what influential government position did hector barreto hold
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was the 21st Administrator of the U.S. Small Business Administration also elected by George W.Bush
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what is your opinion on a 9 year old working in a family business? what do you think Barreto's opinion is?
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YOUR OWN ANSWER!! Example- Opinion would be that is is a good idea as long as the family is willing to take responsibility for child's mistakes.I believe he would have the same mind set!
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how much time and money does the average victim of identity theft lose
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Between 40 hours and 5 thousand to 6 thousand lost
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what are three things you can do to protect you identity?
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Secure your information,Review your credit reports ,Determine where you stand for your risk of credit and identity fraud.
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what was the alternative keynes offered in his general theory of employment,interest,and money?
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Read page_424
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why does the government instead of a private business actively intervene in the economy to help the disadvantaged
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The government does not have time nor the money to help those slipping through the cracks of the economic struggle so business that are privately owned help in doing so.
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two principles of taxation
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YOUR WORDS!
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MATCHING KEY TERMS Fed -The Federal Reserve System created by Congress in 1913 as the nation's central banking organization Tight Money Policy -monetary policy that makes credit expensive and in short supply in an effort to slow the economy Prime Rate -rate of interest that bans charge on loans to their best business customers Income Redistribution -government activity that takes income from some people through taxation and uses it to help citizens in need Medicaid- state and federal public-assistance program that helps pay health costs for low-income and disabled persons budget deficit -situation when the amount of government spending exceeds its receipts during the fiscal year Proportional tax -tax that takes the same percentage of all incomes; as income rises the amount of tax paid also rises
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GDP -total dollar value of all final goods and services produces in a nation in a single year inflation -prolonged rise in the general price level of goods and services aggregate supply- real domestic output of producers based on the rise and fall of the price level trough -lowest part of the business cycle in which the downward spiral of the economy levels off economic indicators- statistics that measure variables in the economy commodity money- a medium of exchange such as cattle or gems that has value as a commodity or good aside from its value as money M1 -narrowest definition of the money supply, consists of moneys that can be spent immediately and against which checks can be written regressive tax -tax that takes a larger percentage of low incomes than higher incomes
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REVIEW
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YOUR ANSWERS
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What 5 sources make up national income?
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wages and salaries, income of self employed individuals, rental income, corporate profits and interest on savings, and other investments.
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What is the difference between inflation and deflation?
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Inflation is the rise in the general price level of final goods and services while deflation is the decline.
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What are the phases of a typical business cycle?
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Expansion- GDP increasing at an increasing rate Peak- GDP increase constant Contraction (recession)- GDP decrease at an increasing rate Trough- GDP decrease constant
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What are three major categories of economic indicators?
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Leading indicators, coincident indicators, lagging indicators
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What are three functions of money?
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Medium of exchange, unit of accounting, store value
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What is the type of money used by the United States?
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Fiat money
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When was the most serious banking panic of the twentieth century?
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the banking panic of 1907 was the most severe banking panic in the United States for 6 short years later the federal reserve was created.
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Which agency of the federal government is responsible for printing and maintaining paper currency?
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The Fed
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What are the two basic types of monetary policies?
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1. Central Bank Policy 2. Money Supply Policy
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What are two measurements of government growth?
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How man public programs are implemented and how much taxes have been raised.
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What are government's main functions?
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Providing public goods, promoting the general welfare, regulation economic stability
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Give 5 examples of public goods.
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insurance, health, communication, transportation, military
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What are the five largest federal expenses?
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health and human services, department of defense, treasury department, department of agriculture, and department of education.
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What are the two principles of taxation?
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The benefits-received principle and the ability to pay principle.
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Essay!
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why are debt cards just like money
