macro econ

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  1. fiat money
    • commodity money
    • shells, cocoa, beads, rocks
  2. why do people hold money
    precautionary, transactionary, speculative
  3. adam smith
    • father of economics
    • wrote wealth of nations
    • free market
    • invisible hand
    • invented ad and how long run affected ad
  4. average propensity to consume APC
    consumption/disposable income
  5. how does frictional reserve sysem create money
    banks lend money from a single deposit
  6. money expansion multiplier
    • calculates the maximum amount of money that an initial deposit can be expanded to within a given reserve ratio
    • m=1/r
  7. 3 functions of money
    • medium of exchange
    • store of value
    • unit of account
  8. why is nominal interest rate (i) viewed as the "price of money"
    opportunity cost of keeping mondy in your pocket
  9. quantity theory of money
    • increasing the amount of money will lead to an equall percentage change in prices of products and services
    • %^ms+%^v=%^p+%^Y
  10. what are the total reserves and how are they changed
    • the sum of all deposits that a bank can take in
    • changed by
    • changing required reserve ratio
  11. liquidity
    ease in which you can convert an asset into cash
  12. velocity
    rate at which money is spent and respent in the market
  13. four characteristics of money
    • durability
    • portability
    • divisibility
    • indentifiable
  14. marginal propensity to comsume
    • shows the likely hood of a ^ in c due to a ^ in Yd
    • MPC=^C/^Yd
  15. say's law
    supply creates its own demand
  16. john keyns
    • The General theory
    • fiscal policy
    • SRAS
  17. Reasons for SRAS
    • sticky prices
    • sticky wages
  18. Shifts in SRAS
    • changes in wages
    • changes in prices of non labor inputs
    • productivity (training, education)
  19. Y*
    non inflationary full employment level of real GDP
  20. shifts in LRAS
    • change in technology, T up lras right
    • change in resources
  21. real balance effect
    as prices fall, buyers "real" purchasing power goes up so they buy more stuff
  22. intterest rate effect
    as prices fall, savings increase, money for loans increase, demand for loans increase, ppl buy more stuff
  23. international trade effect
    as prices fall, U.S. exports more, ppl buy more U.S. stuff
  24. shifts in AD
    • change in consumer spending: c up, ad up
    • change in investing
    • change in gov spending
    • change in net exports
  25. required reserve ratio
    the portion of deposits that banks must hold in reserve
  26. aggregate demand
    the total demand for goods and services in the economy at a givin time and price level
  27. LRAS
    total planned output when prices and wage rates can change
  28. SRAS
    total planned output when prices can change but inputs stay the same
  29. fundamental psychological rule
    0<MPC<1 some money will be spent, some will be saved
Card Set
macro econ
macro econ
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