ECON 131 Review

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  1. Unanticipated inflation is good for borrowers
  2. What causes the shape of the PPC to be bowed?
    Increasing Opportunity Costs
  3. What is the largest portion of the current account?
    Imports and Exports
  4. What are unilateral transfers?
    Gifts from one country to another
  5. What is the largest component of GDP?
    Personal Consumption Expenditures
  6. Labor Productivity refers to output per worker
  7. Classical Model
    • Long Run Equilibrium
    • Flexible Wages
  8. Unanticipated inflation is good for borrowers
  9. Keynesian Economics
    • Government Intervention can stabilize the Economy¬†
    • Prices are sticky
    • Changes in AD have their greatest Short run effect on real output and employment
  10. Two tools of Fiscal Policy
    • Government Expenditures
    • Taxes
  11. Adverse Selection
    The potential for borrowers to use the borrowed funds in high risk situations
  12. What is an important factor that affects the rate of economic growth and hence long term living standards
    Rate of Saving
  13. Saving is important to Economic growth because without saving we cannot have investment
  14. How to calculate Real rate of interest
    Nominal rate of interest - anticipated rate of inflation
  15. comparative advantage
    those who have a smaller opportunity cost
  16. Absolute Advantage
    More output per unit of input
  17. National Income Accounting
    A measurement system use to estimate national income and its components
  18. What does GDP not include?
    • Financial Transactions
    • Transfer Payments
    • Secondhand Goods
    • GDP is not a measure of a nation's overall welfare
  19. Two ways to measuring GDP
    • Expenditure Approach
    • Income Approach
  20. Expenditure Approach
    add the dollar value of all final goods and services
  21. Income Approach
    • Add the income received by all factors of production
    • Add up all components of national income, including wages, interest, rent, and profits
  22. Examples of Automatic Stabilizers
    • Unemployment
    • Welfare
    • Tax Structure
  23. Four Functions of Money
    • Medium of Exchange
    • Unit of Accounting
    • Store of value
    • Standard of Deferred Payment
  24. Three functions of Central Banks
    • Conduct Nation's monetary policy
    • Provide Currency to nation
    • act as government fiscal agent
  25. 8 functions of the Fed
    • Supplies economy with Fiduciary currency
    • holds depository institutions' reserves and provides payment clearing systems
    • acts as the government's fiscal agent
    • supervises depository institutions
    • conducts monetary policy
    • intervenes in foreign currency markets
    • acts as a lender of last resort
  26. 3 tools of the Fed
    • OMO
    • Discount Rate
    • Reserve Requirement Ratio
  27. 3 reasons for money demand
    • Transactions demand
    • Precautionary Demand
    • Asset Demand
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ECON 131 Review
2014-12-15 09:09:42
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