macroeconomics section 3

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  1. Market Basket
    the goods a typical consumer buys
  2. Consumer Price Index
    a measure of all the costs of goods and services used by a typical consumer

    formula: (CPIyear2)- (CPIyear1)/(CPIyear2)
  3. Sacrifice ratio:
    # of percentage points annual output lost (or unemployment gained) while reducing inflation by 1% point.
  4. Rational expectations
    people use all info they have, including info regarding govt policies, when forecasting the future
  5. substitution bias
    multiple goods out there, fixed basket overlooks substitution between goods.
  6. Quality Change
    A tv today is not that same thing as a TV 50 years ago
  7. Introduction of new goods
    New goods. Computer chips, the iPad
  8. Anticipated inflation
    suppose you know the prices will increase.  The general effect of anticipated inflation is that people put their money in a bank to earn interest.
  9. Unanticipated Inflation
    • Suppose inflation comes from nowhere
    • -decreases ability to purchase goods
    • -harms the ability of financial firms to make loans
  10. Cost of inflation
    Shoeleather co
Card Set:
macroeconomics section 3
2013-05-14 03:22:09
macro test

macro test
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