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Economic Policies

Unempl-oyment GDP

Key Terms Misc.

Graphs & Curves

- $100

What is PPC graph?

What graph is represented on the right?

C1-$200

- $200

What is equilibrium point (on Demand and Supply Model)?

What is the point on the graph on the right called?

- $300

What is GDP graph?

What does the graph on the right represent?

- $400

What gap is shown on the graph on the right?

What is recessionary gap?

- $500

What is Business Cycle?

What cycle is being shown on the right?

C2-$100

- $100

What is fiscal policy?

The use of taxes, government transfers, or government purchases of goods and services to stabilize the economy.

- $200

What is monetary policy?

Is the central bank’s use of changes in the quantity of money or the interest rate to stabilize the economy.

C2-$300

- $300

What are tools for regulating fiscal policy?

The government has two tools for regulating this policy: a change in government spending or changes in taxes. The government can also use both if it thinks the economy needs it. What tools are these for?

- $400

If the government were to finance a deficit by entering the money market and borrow money, it would make less room for investment, since as the government’s share grows, everyone else’s becomes smaller. Then, investment spending decreases, causing aggregate expenditures to not increase as much. What is this effect called?

What is Crowding Out Effect?

- $500

What is net export effect?

Easy money policy → decreased foreign demand for dollars → dollar depreciates → net exports increase (AD increases, strengthening the easy money policy) Tight money policy → increased foreign demand for dollars → dollar appreciates → net exports decrease (aggregate demand decreases, strengthening the tight money policy)

- $100

What is unemployment rate?

Is the percentage of the total number of people in the labor force who are unemployed. Only includes those that are actively looking for work but cannot find a job.

- $200

What is frictional unemployment?

Unemployment due to the time workers spend in job search (searching or waiting for jobs…recent college graduates).

- $300

Is the deviation of the actual rate of an unemployment from the natural rate (due to recession).

What is cyclical unemployment?

- $400

What is structural unemployment?

Type of frictional unemployment that results when there are more people seeking jobs in a labor market than there are jobs available at the current wage rate (often due to creative destruction…new skills have made old skills outmoded)

- $500

What is natural rate of unemployment?

The unemployment rate that arises from the effects of frictional plus structural unemployment. AKA full employment

- $100

What is Gross Domestic Product or GDP?

The total value of all final goods and services provided in the economy during a given year.

- $200

What is real GDP?

The total value of all final goods and services produced in the economy during a given year, calculated using the prices of a selected base year.

C4-$300

- $300

Measures the cost of purchasing a given market basket in a given year. The index value is normalized so that it is equal to 100 in the selected base year.

What is Price Index?

- $400

What is GDP growth?

The GDP growth rate is calculated with the formula:Growth Rate= GDPnew – GDPold x 100 GDPold

- $500

For a given year is 100 times the ration of nominal GDP to real GDP in that year.

What is GDP deflator?

- $100

What is scarce/scarcity?

Resources (anything that can be used to produce something else) are not unlimited and are not available in sufficient quantities to satisfy all the various ways a society wants to use them.

- $200

What is opportunity cost?

The real cost of an item, what you must give up in order to get it.

- $300

What is Positive Economics?

Branch of economic analysis that describes the way the economy actually works, fact based statements.Ex: unemployment is at 8%

C5-$400

- $400

What is Law of Supply?

The higher the price for a good or service, all other things being equal, leads suppliers to supply a greater quantity of that good or service. Illustrated as a direct or positive relationship.

- $500

An economic system based on supply & demand with little or no government control. Buyers and sellers are allowed to transact freely based on mutual agreement.

What is Free Market Economics?

- $100

What is market basket?

A hypothetical set of consumer purchases of goods and services.

- $200

What is absolute advantage?

An individual or country is able to produce MORE total outputs of a good or service with a given amount of time or resources.

- $300

Their theory is that when the economy occasionally diverges from its full-employment output, internal mechanisms within the economy automatically move it back to that output. In their opinion, if a change in AD moves the equilibrium outside of ASLR, there will be a change in AS that will bring it back.

What is the “New” Classical Theory of Economics?

C6-$400

- $400

The higher the price for a good or service, all other things being equal, leads people to demand a smaller quantity of that good or service. Illustrated as an inverse or negative relationship.

What is Law of Demand?

- $500

1 Tastes and Preferences2 Number of Consumers3 Price of Related Goods4 Income5 Future Expectations

Changes in PRICE do not shift the curve. It only causes movement along the curve.

What are Shifters of Demand (changes)?