Flashcards
Macro Chp. 8
Flashcards do conjunto (47)
- 1Classical MacroeconomicsIdea that markets work well and deliver the best available macroeconomic performance.
- 2What are the ideas of Classical MacroeconomicsAggregate Fluctuations are a natural consequence of expanding economy with rising living standards and gov. intervention hinders allocation of resources. (Markets work well by themselves)
- 3Keynesian MacroeconomicsThe Market Economy is inherently unstable
- 4What are the Ideas of Keynesian MacroeconomicsThe market economy requires government intervention to achieve full employment and sustained economic growth
- 5What was Keynes theoryKeynes theory was that if consumer spending went down then there would be a recession so gov. spending needed to increase so it would balance out
- 6Monetarist MacroeconomicsIdea that Classical view of world is broadly correct
- 7What are the ideas of Monetarist MacroeconomicsClassical view is mostly correct but in addition to fluctuations that arise from the normal fluctuations of an expanding economy, fluctuations in the quantity of money generate the business cycle
(More money = Expansion V.V.) - 8An example of Monetarist IdeasThe slowdown in growth rate of money causes a slowdown and large decreases quantity of money brought the Depression
- 9Today's ConsensusA mix of Classical, Monetarist, Keynesian Macroeconomics.
- 10What is the Classical Part of Today's ConsensusThe Classical Part tells most of the story for full employment but it does not explain recessions or slumps
- 11What is the Keynesian Part of Today's ConsensusWhen spending is cut and demand for goods go down and plus a decrease in labor demand with the same real wage rate the economy goes into a recession because no one is buying and being hired. The gov. has to pump money and lower taxes
- 12What is the Monetarist Part of Today's ConsensusThe Monetarist part emphasizes that a contraction in the quantity of money brings higher interest rates and borrowing costs which are a major source of cuts that bring recession. By keeping quantity of money growing and lowering interest rates can restore full employment
- 13How Can Monetarist Ideas help economyBy controlling economy with interest rates and quantity of money near PPF you can minimize affect of recession and keep inflation in check
- 14Today's Consensus view on long term vs. short termThe long term economic growth is more important than the short term recession because a small slowdown in economic growth will bring huge cost in permanentely lower level of income per person. This is more serious than income loss in a recession.
- 15Potential GDPThis is the value of Real GDP when all the economies factors of production are fully employed.
- 16Production FunctionThis shows the relationship that shows the maximum quantity of real GDP that can be produced as the quantity of labor employed changes and all other production factors remain the same.
- 17PF explainedThe more real GDP the more labor and labor hours are being employed
- 18What happens at the top of PFDiminishing Returns
- 19Diminishing ReturnsEach additional hour of labor employed produces less real GDP the longer you go. It happens at top of PF
- 20Why do Diminishing Returns happenThe amount of factors of production is fixed so this affects capitol and labor. The more labor you have the less capitol you have for each employee (Less work per worker and less goods made)
- 21What are three factors of the Labor Market1.Demand For Labor
2. Supply of Labor
3. Labor Market Equilibrium - 22Demand For Labor = (What decision maker)Firms ( They want to see how many people they can hire at certain wages. Cheaper Better)
- 23Quantity of Labor DemandedA vertical move on Demand curve.
Total labor hours that all firms in the economy plan to hire during a given time period at real wage rate - 24Demand for laborIs a horizontal move of Demand Curve
Is the relationship between the quantity of labor demanded and the real wage rate when all other influences on the firms hiring plans remain the same. - 25What happens to Quantity demanded when wage rate is loweredQuantity demanded is increased and is shown in a downward movement along the Demand Curve
- 26Give me an example of Demand for LaborSo when you have a product you have to hire ppl to make it. Ex 10 bottles of coke = 1 hour of labor. So if a company can hire to make more than 10 bottles an hour they will keep hiring and demand will be more. Once you reach hiring that equals 10 bottles companies stop hiring and demand will be less
- 27Supply of Labor = (What decision makers)Households (They decided at what price they're willing to go work)
- 28Quantity of Labor SuppliedIt's a vertical Movement
Is the numbers of hours that all the households in the economy plan to work during a given time period at a given real wage rate. - 29Supply of LaborIt's a Horizontal Move
It shows the relationship between the quantity of labor supplied and the real wage rate when all other influences on work plans remain the same - 30What are the two reasons why Labor supplied increases when real wage rate increases1. Hours Per Person
2. Labor Force Participation - 31Hours Per PersonThe longer you work the more money you get so people would like to work. But if it gets too high people will want to stop working and use leisure time
- 32Labor Force ParticipationMost people have productive opportunities outside the labor force and only choose to work if the real wage rate exceeds the value of the productive opportunities. Ex. Productive Oppor. = Baby
- 33Factors of Labor SuppliedTaxes and Unemployment Benefits
The less taxes more people will want to work because they keep more money. Unemployment the better benefits the longer going to take to find job (decrease in labor supply) and V.V. - 34Labor Market EquilibriumThe Demand and Supply are intersecting.
If one goes higher than than thye have to go lower to restore balnce - 35Natural Unemployment RateWhat the the unemployment rate is called at when economy reaches full employment
- 36What are the two causes of unemployment1. Job Search
2. Job Rationing - 37Job SearchWhen someone is looking for a job that is acceptable
- 38What three things do job search depend on1. Demographic Change
2. Unemployment Benefits
3. Structural Change - 39Demographic Change (Job Search)When there is a boom in population there will be more people than jobs because jobs weren't prepared for the boom. This makes it harder to find jobs and more unemployment. Also V.V.
- 40Unemployment Benefits (Job Search)When you have better unemployment benefits you will take longer to find a suitable job meaning longer unemployment. Also V.V.
- 41Structural Change ( Job Search)When there is structural change the industry lost jobs so you can't go back to industry and you will be unemployed for longer. (V.V) There are also structural booms like Tech Industry that provide more jobs in a new industry.
- 42Job RationingWhen the real wage rate is above the full employment equlibrium level.
(The real wage rate is above what the wage rate should be at) - 43Efficiency Wage (Job Rationing)When the wage is above what it should be to promote work (not goof off), loyalty and attract top talent.
- 44Union Wage (Job Rationing)When collective bargaining from a union gets a money wage higher than were it should be because you are unionised and can stop production
- 45Minimum Wage (Job Rationing)Whent he government sets a wage limit that is above where it should be. But the gov. wage can be lower than were the real wage is.
- 46What does Job rationing do to unemploymentIt increases the natural unemployment rate and the quantity demanded is decreased while the labor supplied increases
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