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ECONS101 Test Two Macroeconomics

Dani Young Economics English 81 cards

Cards in this deck (81)

  1. 1What are the four sub groups that the working age population is divided into?- Labour force
    - Those of the labour force employed
    - Those of the labour force unemployed
    - Those of the labour force inactive (not seeking employment.
  2. 2What are the three commonly reported ratios derived from the working age population sub groups?- Participation rate, labour force/working age population
    - Unemployment rate, Unemployed/labour force
    - Employment rate, employed/labour force
  3. 3What is Employment Rent?The value of having a job compared to the value of not having one, determined by the formula Wage/reservation wage-disutility of work. Determined by wages, benefits of the jobs like company cars or disutility of work like transportation costs.
  4. 4What is a Labour Union?A collection of people representing an industry who gather together to negotiate wages and working conditions for workers, i.e TSA, TEU or E Tu.
  5. 5What are the four functions of money?-Medium of exchange
    - Unit of account (agreed measure of the value of goods and services)
    - Standard of deferred payment (contracts to be written for future receipts and payments)
    - Store of value that can be exchanged later for goods and services
  6. 6What is Base Money?Case held by the households, firms and banks, and the balances held by commercial banks in their accounts in the central bank, known as the reserves. A liability to the central bank.
  7. 7What is Bank Money?Money in the form of bank deposits, created by the commercial banks when extending credit to firms and households.
  8. 8Broad MoneyThe amount of Broad money in the economy is measured by the stock of money in circulation. The sum of bank money plus Base money that is in the hands of the non bank public.
  9. 9What is a balance sheet?What the household or firm owns or owes to others, its' assets and liabilities.
  10. 10What is Net worth?The difference between ones' assets and liabilities, what it owns, what it owes to others an what is owed to them.
  11. 11What is the Policy Rate?The interest rate set by the central bank, which applies to commercial banks that borrow base money from each other and the central bank.
  12. 12What is the Bank Lending Rate?The average interest rate commercial banks charge to households and firms. Typically above the policy rate to allow banks to make decent profit margins.
  13. 13Government BondFinancial instruments issued by the government to raise funds, paying flows of money at specific intervals
  14. 14What is a Yield?the implied interest rate of return that they buyer gets on their money when buying a bond at it's market price
  15. 15Present ValueThe today value of a stream of future income or other benefits
  16. 16What is a Reserve balance?A1-The cash a bank holds plus its balance in it's account with the central bank-Base money.
  17. 17What is a Banks own Financial assets?(A2)- Instruments banks use as collateral while borrowing in the money market. Borrowing the replenish balances (if running deficit)
  18. 18Bank Deposits(L1)- The bank owes these to households and firms.
  19. 19Secured borrowingThis is what banks have borrowed from households and firms and other banks in the money market
  20. 20Leverage RatioThe value of assets divided by the equity stake in those assets.
  21. 21How to calculate the Marginal rate of transformationMRT is the tradeoff between current and future consumption (1=r)
  22. 22Diminishing marginal returns to consumptionThe value to the individual of an additional unit of consumption declines the more consumption the individual has
  23. 23Discount rateA measure of a persons pure impatience, how much a person values an additional unit of consumption now over an additional unit of consumption later (slope of the indifference curve) MRS.
  24. 24Pure impatienceCharacteristic of a person who values an additional unit of consumption now over later because of myopia or weakness of will.
  25. 25CollateralAn asset that a borrower pledges to a lender as a security for a loan
  26. 26RecessionA period when output is declining. Or when the level of output is lower than it should be
  27. 27Okun's LawThe growth the GDP is negatively correlated with the rate of unemployment
  28. 28Aggregate outputThe total output across the entire economy, across sectors, firms and households
  29. 29Value addedThe value of output minus all the value of inputs
  30. 30GDPPTotal domestic production, measured as value added
  31. 31GDPETotal expenditure on domestic products (goods and services)
  32. 32Government TransfersSpending by the government in the form of payments to households or individuals
  33. 33Self insuranceSaving by a household in order to smooth consumption, maintaining a consistent level of consumption after a temporary shock to income.
  34. 34Co-insuranceA means of pooling savings across households in order for a household to maintain consistent level of consumption after a temporary shock to income.
  35. 35Capacity utilisation rateA measure of the extent to which a firm, household or entire economy is producing as much as the stock of capital goods and current knowledge would allow
  36. 36Investment coordination gameGame in which there are two Nash equilibria, of which one may be Pareto efficient (better than the other). i.e a two firms will invest, or not invest in the coordination game as this is a better outcome over one investing over the other and vice versa.
  37. 37InflationAn increase in the general price level of the economy
  38. 38Consumer price index (CPI)A measurement of the general level of prices that consumers have to pay for a bundle of goods and services, including consumption taxes
  39. 39GDP DeflatorA measure of the level of prices for domestically produced output.
  40. 40What is autonomous consumption, and what is autonomous demand?- Consumption that is independent of current income
    - Components of AD that are independent of current income
  41. 41Multiplier processMechanisms through which the direct and indirect effect of a change in autonomous spending on aggregate output
  42. 42Marginal Propensity to ConsumeThe change in consumption when income changes by one unit
  43. 43Marginal Propensity to importThe change in imports when income changes by one unit
  44. 44consumption FunctionShows how consumption spending in the economy as a whole depends on other variables
  45. 45Investment FunctionEquation showing how investment spending in the economy as a whole depends on other variables
  46. 46Goods market equilibriumPoint at which output meets aggregate demand in the home economy
  47. 47Target wealthThe level of wealth a household aims to hold, based on its economic goals
  48. 48Financial AcceleratorMechanism through which firms and households ability to borrow increases when the value of the collateral they pledged to the lender increases
  49. 49Automatic StabilisersCharacteristics of the tax and transfer system that have the effect of offsetting and expansions or contractions, i.e unemployment benefits
  50. 50Fiscal stimulusCombinations of tax cuts or decreases as well as increased transfers or other spending as a means of increasing aggregate demand
  51. 51Paradox of ThriftWhat holds true for an individual household does not always hold true for the entire economy. If a household saves and smooths consumption due to a temporary shock they are better off, if all households do this as a result of an economy wide shock output and aggregate demand will eventually decrease.
  52. 52Government Budget balance Government budget deficit Government budget surplus- The difference between tax revenue and spending
    - when the government budget balance is negative
    - when the government budget balance is positive
  53. 53Primary deficitThe government deficit, its revenue minus expenditure (excluding interest repayments)
  54. 54Sovereign debt crisisSituation in which government bonds come to be considered too risky that the government is rendered unable to borrow
  55. 55Positive Feedback Negative feedbackProcess whereby some initial change sets in motion a change that amplifies the initial change
    process where some initial change sets in motion a change that dampens the initial change
  56. 56Aggregate economy side components of supply and demandHow labour and capital are used to produce goods and services (labour market model) also wage and price setting model
    How spending decisions generate demand for goods and services (multiplier model)
  57. 57Long run, medium run and short run modelsLong run cost curve, refers to costs when the firm can fully adjust all its inputs
    In medium run, this refers to everything exogenous, capital stock, technology and institutions
    In short run what is exogenous is prices, wages, capital stock, technology.
  58. 58DisinflationA decrease in the rate of inflation
  59. 59Real interest rateThe interest rate corrected for inflation (nominal interest rate-rate of inflation)
  60. 60Protectionist policiesGovernment policies to limit trade to reduce the amount of imports into the economy.
  61. 61Bargaining gapThe difference in between real wages that firms wish to offer in order to provide incentives to work and the real wage that allows firms the markup that maximises profits given the level of competition
  62. 62Market Interest rate or Bank lending rateMarket Interest rate that banks set, that is above the policy interest rate that firms and households pay when taking out a loan
  63. 63Asset pricesFinancial assets in the economy like government bonds and shares issued by companies
  64. 64Profit expectations and confidenceInfluences the confidence and investment decisions of firms. Central banks try to build confidence through consistent policymaking and good communication to keep investment consistent.
  65. 65AD=C0+C1(1-t)Y+1(r)+G+X-mY
  66. 66What component of AD equation represents consumption spending?C0
  67. 67What component of AD equation represents the interest rate?r or (r)
  68. 68What component of AD equation represents InvestmentI or I(r)
  69. 69What are the two Important Limitations to the usefulness of monetary policy in stabalisation?- The short term nominal interest rate cannot go below 0
    - A country without its own currency cannot use monetary policy
  70. 70Zero lower boundThe interest rate cannot go below negative
  71. 71Quantitative easingCentral banks purchases of financial assets aimed at reducing interest rates on those assets when conventional monetary is not possible.
  72. 72Supply shockAn unexpected change on the supply side of the economy
  73. 73Demand shockAn unexpected change in the demand side of the economy, could be due to changes in autonomous consumption, investment or imports
  74. 74Capacity constrainedWhen a firm has more orders for its output than it can fill
  75. 75Creative destructionOld technologies and the firms that are unable to adapt are swept away by the new because they cannot compete
  76. 76Marginal product of capitalThe additional amount of output that is produced if a particular input was increased by one unit, keeping all other inputs constant
  77. 77Diminishing marginal product of capitalEach additional unit of capital or inputs results in a smaller increment in total output than did the previous unit
  78. 78Beveridge curveThe inverse relationship between the unemployment rate and the job vacancy rate
  79. 79Labour market matchingThe ways in which employers seeking employees to fill vacancies meet employees
  80. 80Diffusion GapThe lag between the first introduction of an innovation and its general use
  81. 81Adjustment GapThe lag between some outside change in labour market conditions and the movement of the economy to its new equilibrium.

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I decided that a wiser use of my time was sitting on my bed and watching Sex Education instead of studying. So now I am creating this studyset last minute. Live laugh love.
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