question

What does the aggregate supply and demand model show?

answer

It shows the relationship between a nation's overall price level, and the quantity of goods and services produces by that nation's suppliers, at various price levels.

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If we need a shift right in the aggregate demand model, what point are we in the Business Cycle?

answer

we are in the trough point in the business cycle.

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If we need a shift Left in the aggregate demand model, what point are we in the Business Cycle?

answer

we are in the peak of the business cycle. We are growing too quick!

question

According to the Aggregate supply and Demand model if we need to Expand the market which direction do we shift, Left or Right?

answer

Shift to the Left

question

According to the Aggregate supply and Demand model when we need to shift to the left under Fiscal Policy what can be done? Name 1 of 2 things.

answer

Government Spending Increases ( G) & Taxes Decrease (Tax)

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According to the Aggregate supply and Demand model when we need to shift to the left under Monetary Policy what can the Fed. do? Name 2 of 3 things.

answer

Decrease Discount Rates ( Dis. R.), Decrease Reserve Requirements ( Res. Req.), Buy bonds

question

According to the Aggregate supply and Demand model if we need to Contract the market which direction do we shift, Left or Right?

answer

Shift To the Right

question

According to the Aggregate supply and Demand model when we need to shift to the Right under Fiscal Policy what can be done? Name 1 of 2 things.

answer

Government Spending Decreases ( G), & Taxes Increase (Tax)

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According to the Aggregate supply and Demand model when we need to shift to the right under Monetary Policy what can the Fed. do? Name 2 of 3 things

answer

Increase Discount Rates ( Dis. R.), Increase Reserve Requirements ( Res. Req.), Sell bonds

question

How much will Balance of Payments come to?

answer

They always equal to zero.

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What is the Balance of Trade

answer

A nation's balance of trade = exports - imports.

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What is the definition of Balance of Trade surplus

answer

A nation that exports more than imports will have a trade surplus.

question

What is the Definition of Balance of Trade Deficit

answer

A nation that imports more than exports will have a trade deficit.

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What are the Causes of Balance of Trades deficit

answer

Exports may be inferior quality, Country may not have many products to export, A nation's currency may be overpriced, making imports cheaper. , A nation may have higher incomes than its trading partner, & Poorer nations cannot afford richer nation's products.

question

What helps moderate the inflation and deflation in the Business cycle

answer

We need Policy to help moderate inflation and deflation

question

What is the ideal growth in the Business cycle?

answer

2% - 4%

question

What is the definition of Capital Account or Financial Account?

answer

That part of balance of payments which records net changes in a country's international financial assets and liabilities.

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Ceteris Paribus

answer

Ceteris paribus or caeteris paribus is a Latin phrase meaning "with other things the same" or "everything will remain the same".

question

What is Change in Quantity Demanded?

answer

A change in price is a change in quantity demanded Example, Netflix increases their rate from $8 to $10. Because of their price increase their quantity demanded decreased.

question

What is Change in Demand

answer

A change in the quantity of a good that buyers are willing and able to purchase that results from a change in some conditions other than the price of that good, shown by a shift in the demand curve

question

What is Circular Flow Model of the Economy

answer

Your Skills enter the market, Business come into the market to buy your skills, Business buys your skills, You get a job and earn money, Your skills are used by the business to create a product to put into the market, You use the money that you earned from your job to purchase products from the market, The business's product sells in the market and generates cash inflow, & You purchase products from the market and bring them home to use.

question

What is Comparative Advantage

answer

The ability to produce a good or service at a relatively lower opportunity cost then someone else.

question

Government Expenditures, what are they?

answer

The Purchase of goods by all levels of government plus purchase of services from contractors and wages of government employees.

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What is not included in government expenditures?

answer

Transfer Payments(Free money), i.e. Social Security, Disability payments & Unemployment compensation

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Who Determines Government Expenditures?

answer

They are determined by politics or other considerations that lie outside the model other than by any variables that are included in the model.

question

Consumer Price Index

answer

A price index based on the market basket of goods and services purchased by a typical urban household.

question

Current Account

answer

The value of a country's exports of good's & services minus the value of its imports of goods & services plus its net transfer receipts from foreign sources.

question

What are the Determinants of Demand?

answer

Income, Taste, Expectations, Number of Buyers, & Price of other Compliments & Substitutes.

question

Economic Modeling

answer

A synonym for theory; in economics, often apply to theories that are stated in graphical or mathematical form.

question

Economics

answer

The social science that seeks to understand the choices people make in using scarce resources to meet their wants

question

Elastic Goods

answer

Think Quality & Luxury. Like GUCCI!

question

What are the examples that show impact on Total Revenue for Elastic goods?

answer

P↑Q↓TR↓ =Elastic P↓Q↑TR↑ =Elastic

question

What is the Equation of Exchange

answer

An equation that shows the relationship among the money stock (M), the income velocity (V), the price level (P), and gross domestic product (GDP). M x V = P x GDP

question

Exchange Rate Definition

answer

The exchange rate is the rate at which one currency trades against another on the foreign exchange market.

question

How is Currency effected?

answer

Economics, Politics, Products, Speculation

question

How do you state strengths & Weaknesses of Currency's

answer

The (Currency) is Strong relative to the (Currency). The (Currency) is Weak relative to the (Currency).

question

Increase in currency relative to another currency

answer

If the U.S. currency Increases relative to the British pounds then, for example, British tea kettles would become cheaper.

question

Decrease in Currency Relative to another Currency

answer

If the U.S. currency decreased relative to the British pounds then, for example, British tea kettles would become more expensive.

question

What is Contractionary Fiscal Policy

answer

Its used during economic growth to lower inflation. To cut government spending which impacts aggregate demand by decreasing it & it Increase Taxes to reduce the purchasing power of consumers and business investments.

question

What does Expansionary Fiscal Policy do

answer

Cut government spending, Increase of taxes - to reduce purchasing power, & Rebates.

question

What does Expansionary Monetary Policy do?

answer

Its used during economic downturn & The Federal Reserve can raise the money supply in 3 ways, Buy bonds, & Lower the discount rate, & Lower the Reserve Rate

question

What does Contractionary Monetary Policy do?

answer

Its used during economic growth & The Federal Reserve can decrease the money supply in 3 ways: Sell bonds on the open market, Raise the discount rate, & Raise the Reserve Rate.

question

What is the Expenditure Component of GDP?

answer

C (consumer) + I (Business & Investment) + G (Government) + [X(export) - M(Import)] or C + I + G + ( X - M )

question

What are Expenditures

answer

C= consumer I= Business & Investments G= Government X = Exports M= Imports

question

Factors of Production

answer

The basic inputs of labor, capital, and natural resources used in producing all goods and services.

question

Financial Inflow

answer

Purchase of domestic assets by foreign buyers and borrowing from foreign lenders; also often called capital inflows.

question

What happens if Imports Exceed Exports in an open economy - where do we get the money now to buy all the imports?

answer

We use our financial inflows, so we...Borrow from foreign banks or other lenders & Sales of domestic securities like stocks or bond to foreign investors

question

Financial Outflow

answer

Purchases of foreign assets by domestic residents or loans by domestic leaders to foreign borrowers-also often called capital outflows.

question

What happens If Exports Exceed Imports in an open economy - Where do foreign buyers afford the exports since only part of them can be paid for by the payments they receive through imports?

answer

They use the financial outflow, which are ... Lending by domestic banks and other financial institutions, Foreign borrowers &, Purchase of foreign securities like stocks or bonds by domestic investors.

question

What is Fiscal Policy

answer

Policy that is concerned with government purchases, taxes, and transfer payments. Or Simply, Government spending and taxes.

question

Definition of fiscal policy

answer

Fiscal policy involves the government changing the levels of taxation and government spending in order to influence Aggregate Demand (AD) and the level of economic activity.

question

What is the The purpose of Fiscal Policy?

answer

Stimulate economic growth in a period of a recession, Keep inflation low, it aims to stabilise economic growth, avoiding a boom and bust economic cycle. this is often used in conjunction with monetary policy.

question

What is Expansionary (or loose) Fiscal Policy

answer

Increasing AD, government will increase spending (G) and / or cut taxes (T). Lower taxes will increase consumers spending because they have more disposable income (C), & This will tend worsen the government budget deficit and the government will need to increase borrowing.

question

GDP - Gross Domestic Product

answer

The value at current market prices. Of all final goods and services produced in a given country in 1 year.

question

What are the Consumed Products of GDP?

answer

Business, Consumer, Government, &Net Exports

question

What is the GDP Growth Rate

answer

The ideal Growth Rate is 2-4%

question

Unemployment Rate

answer

The Ideal rate is 4-6%

question

GDP Deflator

answer

A weighted average of the prices of all final goods and service produced in the economy.

question

What are Inelastic Goods?

answer

Addictive - Coffee, Necessities, & Medicines.

question

What are the examples that show impact on Total Revenue for Inelastic goods?

answer

P↑〖 Q〗_(↓ ) TR↑ =Inelastic P↓ Q^(↑ ) TR ↓ =Inelastic

question

Inflation

answer

A sustained increase in the average level of prices of all goods and services.Intermediate Goods: A Intermediate good is a good or service that is used in the production of a final good or finished product. These goods are sold by industries to one another for the purpose of resale or producing other goods. Example, Sugar is directly consumed but is also used to manufacture food products.

question

Invisible Hand

answer

In economics, this is a metaphor used by Adam Smith to describe unintended social benefits resulting from individual actions. The phrase is employed by Smith with respect to income distribution (1759) and production (1776).

question

Laissez faire

answer

This is an economic system in which transactions between private parties are free from government interference such as regulations, privileges, tariffs, and subsidies. This phrase is part of a larger French phrase and literally translates to "let (it/them) do", Basically, let the market be. It will correct itself.

question

Law of Comparative Advantage

answer

The ability of a firm or individual to produce goods and/or services at a lower opportunity cost than other firms or individuals. A comparative advantage gives a company the ability to sell goods and services at a lower price than its competitors and realize stronger sales margins.

question

Law of Demand

answer

Price ↑→Quantity Goes↓

question

What are the Macro Goals

answer

Low unemployment rates, Growth - Gross domestic product (GDP), stable Prices, Not going down to much - deflation, & Not going up to much - inflation.

question

What is a Mixed Economy

answer

A mix of market & Government.

question

Macroeconomics

answer

The branch of economics that studies large-scale economic phenomenon, particularly inflation unemployment and economic growth.

question

What are Major Economic Questions

answer

How? What? & Whom? How are we going to produce it? What are we going to produce? Whom will we produce it for?

question

Microeconomics

answer

The branch of economics that studies the choice is up individual units including households, business firms, and government agencies.

question

Monetary Policy

answer

Monetary policy influences the decisions that we make about how much we save, borrow and spend.

question

Keynesian Multiplier Definition

answer

The ratio of change in equilibrium level of real national income to the change in autonomous expenditures.

question

Keynesian Multiplier Equation

answer

???????????????????????????????????????? = 1/1−???????????? = 1/ ????????????

question

Tax Multiplier Formula

answer

???????????? ???????????????????????????????????????? = ????????????/????????????

question

What is the Tax Cut Multiplier?

answer

Tax cuts and government spending increase aggregate demand during a recession.

question

Money Multiplier Formula

answer

???????????????????? ???????????????????????????????????????? = 1 /???????????????????????????? ????????????????

question

What is the money multiplier

answer

When bonds are sold, it is negative, When bonds are bought, it is positive.

question

Expenditure Multiplier

answer

1/(1-NPC)

question

National Income

answer

The total income earned by a country's residents, including wages, rents, interest payments, & profits.

question

Nominal

answer

In economics a term that refer to data that have not been adjusted for the effects of inflation.

question

Normal good

answer

A good for which an increase in consumer income result in an increase in demand.

question

Inferior good

answer

A good for which an increase in consumer incomes results in a decrease in demand.

question

Normative Economics

answer

The area of economics that is developed to judgments about whether economic policies or conditions are good or bad.

question

Opportunity cost

answer

The cost of a good or service measured in the terms of forgone opportunity to pursue the best possible alternative activity with the same time or resource.

question

Positive Economics

answer

The area of economics that is concerned with facts and the relationships among them.

question

Price Elasticity of Demand

answer

(% Percentage of Change∆ in Quantity)/(% Percentage of Chane ∆ in Price) If quantity changes more than 1 it's Elastic. If quantity changes less than 1 it's Inelastic.

question

Production possibility frontier

answer

A graph that shows possible combination of goods that can be produced by an economy given available knowledge and factors of production.

question

Real

answer

In economics a term that refers to data that has been adjusted for the effects of inflation

question

Real Interest Rate

answer

A real interest rate is an interest rate that has been adjusted to remove the effects of inflation to reflect the real cost of funds to the borrower, and the real yield to the lender. Real Interest Rate = Nominal Interest Rates - Inflation Rate

question

Role of the Banking System

answer

The main points of the banking system is that they help with; Internet banking and transfers, Over the counter, Cash Payments, Management of Cash Flow over time, & Help Manage Risks for Promising/ Business ventures.

question

What is Movement?

answer

This is a multivariable function. If income and other determinants of demand such as tastes of the consumers, changes in prices of related goods, income distribution, etc., remain constant and there is a change only in price of the commodity, then we move along the same demand curve.

question

What is a Shift?

answer

When there is a change in demand due to one or more than one factors other than price, results in the shift of demand curve.

question

Substitutes

answer

A pair of goods for which an increase in the price of one causes an increase in demand for the other.

question

Compliments

answer

A pair of goods for which an increase in the price of one results in a decrease in demand for the other.

question

What are the Tools of the Federal Reserve?

answer

Discount Rate, Open Market, & Buy or Sell Bonds in the Market.

question

Transfer Payments

answer

Payments by the government to individuals not made in return for services currently performed, for example, unemployment compensation and pensions.

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