MACRO economics

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skhan11
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262558
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MACRO economics
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2014-02-18 03:35:29
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MACRO economics
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MACRO economics
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  1. Rule of scarcity …  if there is 100 dollar bills raining and easy to access it ____ be worth much because it is easily available. This will cause _______ and destroy the value of the ________.
    • Wont
    • Inflation
    • Currency
  2. Formula: Money = GDP
    • Money Supply (Then money supply should grow by 3% as well) = GDP (IF 3% economy grew)
    • Unless Rule of Scarcity is presnt
  3. The John Maynard Keynes View:
    Years?
    • Believe in:
    • GOV & Consumer spending
    • GOV to plan the economy
    • Raising/Cutting Gov Spending = Manage Business cycles
    • Cuting taxes – Lowering interest rates – expanding money supply (credit)
    • Spend $ we don’t have/borrow
    • Fiscal policy > vs Monetary policy
    • DO NOT INTRODUCE FEAR

    1930s-1980s
  4. Rational Expressions View:
    Year?
    • -Believe that the economy could be better managed if the GOV followed some simple rules.
    • -1970s
  5. Australian School of Economics:
    Year?
    Famous Promoted this school of thought?
    • Believe in:
    • GOV is to be kept at a minimum.
    • GOV must support private property rights and not interfere with private sectors.

    • -1920s
    • -F.A. Hayek promoted this school of thought
  6. The Monetarist View:
    years?
    Famous Promoted this school of though?
    • -Believe that $ supply, interest rates and banking rates….  
    •  - Came up with Money supply growth =GDP (formula)  
    •  -Federal reserve did not cover when the banks failed and people lost life savings

    (1960s – current) (Milton Friedman)
  7. The supply-Side View:
    Years?
    FNISH
    (1980s – Present)
    (1980s – Present)
  8. What makes AD shift to the right?
    • Increases in:
    • Consumption spending
    • Investment spending
    • Govt. Spending
    • Lower Taxes
    • Exports > Imports
    • Spending Multiplier
  9. What makes AD shift to the LEFT?
    • Decrease in:
    • Consumption spending
    • Investment spending
    • Govt. Spending
    • Lower Taxes
    • Exports < Imports
    • Spending Multiplier
  10. Aggregate demand curve & Aggregate supply (actual production) curve.
    When these two curves meet is _______ _______.
    Economy Equilibrium
  11. Demand Pull Inflation:
    Ex:
    Is where there is only a limited level of aggregate supply and then there is a spike in aggregate demand.

    • Ex: GOV may bid up the price of the limited steel supply for example vs a car company wantng the same steel.
    • RASING PRICES / CAUSING IINFLATION
  12. Cost Push Inflation:
    ex???
    When something makes ur supply or ability to make things GO DOWN.
  13. What were the three years in US history that we had oil embargos or oil was interrupted either by war or some other scenario.
    • 1973
    • 1979
    • 1990
  14. Transfer payment:
    Examples:
    When government gives you $$ and you didn’t do no direct job to earn that money.

    Example: Student grant (do not have to pay it back) – Social Security (elderly do not have to pay back debt) –
  15. When you increase G in Keynesian formula what ALSO increases?
    GDP
  16. Years ____  - ____ only microeconomics existed and was referred to as ______ ______.
    • 1776 - 1930
    • Classical Economics
  17. During a economic depression or slowdown crisis..... what 3 things sould be done to get out of it?
    • Reduce govt spending
    • Cut Taxes
    • Create huge Govt. Programs
  18. John Maynard Keynes was the father of?
    Macroeconomics
  19. What 3 things did FDR come up with?
    FDIC Federal Deposit Insurance Corporation – With over 9000 bank failures, this was vital to restore confidence in the banking system.

    SEC - Securities & Exchange Commission – The illogical and casino atmosphere of the stock market was replaced by a more orderly system of reforms that led to a more disclosure & above-board practices

    Glass Steagall Act (1933) - This new law made it illegal for banks to put depositor money at risk in the stock market. Essentially, it separated banking activities from stock market activities such as investment banking. This law was repealed in 1999 causing recent economic disaster.
  20. During FDR’s presidency Unemployment rates NEVER dropped below __% not even for a ____.
    1931- Natl Debt: $16billion
    1939- Natl Debt: $40billlion **************$250% INCREASE!!!
    • 10%
    • Month
  21. Why did GREAT DEPRESSION last so long?
    (Three Policies / Actions)
    • FDR............
    • raised tax rate from 24% - 64%
    • Then again from 64% - 79%

    NRA Set Price Ceilings (low prices)cause shortage

    Undistributed Profit Tax - Business could not keep their profits. They had to distribute their profits as dividends or salaries or face surtax penalties as high as 70%
  22. What is Undistributed profit tax?
    Business could not keep their profits. They had to distribute their profits as dividends or salaries or face surtax penalties as high as 70%
  23. What was the NRA & what did it do?
    • NRA set price ceilings (low prices) which leave to shortages.
    • If discounts were offered, seller would be jailed or faced penalties.
  24. Unfunded liability:
    Ex's
    You owe money but you don’t have the resources of coming up with it.

    Ex: Gov programs: Social Security Liability, Prescription Drug Liability, Medicare Liability = US Unfunded Liabilities.
  25. Formula: Debt / GDP
    Ex's
    Ex of person to bank:  Debt = 100,000 / Income (GDP) 100,000

    Ex of gov to GDP:   Debt = 177billion / GDP = 177billion
  26. How do you know that a country is in a recession?
    The GDP has to be shrinking for a duration of at least 6 months
  27. How do you know that a country is OUT of a recession?
    The GDP has to be GROWING for a duration of at least 6 months
  28. Since WWII how many recessions has the US been in?
    • 10
    • or 13.6% of the time

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