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Final Review

by: Caitlyn Millard

Final Review ECN*120 25

Marketplace > Business > ECN*120 25 > Final Review
Caitlyn Millard
GPA 3.241
Principles of Macroeconomics
Jenny Howk

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Principles of Macroeconomics
Jenny Howk
Study Guide
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This 4 page Study Guide was uploaded by Caitlyn Millard on Thursday July 9, 2015. The Study Guide belongs to ECN*120 25 at a university taught by Jenny Howk in . Since its upload, it has received 53 views.

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Date Created: 07/09/15
Final Review Ch 1 Difference Between Macro and Micro MacroLooks at economy as a whole Whole United States MicroFocuses on one piece of the economy Each one of these have positive and normative economics built into them PositiveStatements that could be veri ed or true Normative Statements based on opinions Should be is a clue Society s Economizing Problem Wants are unlimited Resources are limited Used the Production Possibilities Curved to explain the society s A economizing problem Assumptions Fixed c technology and resources full employment e D Unemployment O C Maximum Com nor goods Capital gooas o Ch 2 Market System Private Property Freedom of business and choices Selfinterest Competition Market and Prices are a key part of capitalism Specialize Efficient technology Money Active but limited Government Government s Role 1 Makes and Enforce Laws 2 Maintaining Capitalism 3 Redistributing Income Transfer payments welfare unemployment Taxes Market Intervention 4 Reallocating Resources Public Goods 5 Promoting a stable economy ALL Multiple choice Questions Economic Resources Land Labor Capital and Entrepreneurial Ability Capital GoodsSomething we can do to make a humans job more efficient easier Like tools technology buildings etc Investment Purchase or obtaining more of capital goods EX Country produces more consumer goods vs a country that produces more capital goods One puts resources for products right now and one for future Capital will have more economic growth for the future gt quot Anything outside of the curve is unattainable PPC moves right Resources Quantity goes up more Resources quality is better makes more Technology improves Circular Flow M yu l mu 0 M J b 0 fr Ontads someV h JIM Y iu n39 f3939I39J if it 00 ii ruin Households sell to the resource market and buy from the product opposite for businessFIRM side Ch3 Market Brings buyers and sellers together Demand Shows amount buyers will buy at different prices Law of Demand Price is High Quantity is Low Price is Low Quantity is High Change in quantity demand caused by price changes Demand curve moves right Increase in Demand Demand curve moves left Decrease in Demand Ouuu39 2 Tswana 1 I Final Review Demand Determinants P Price Expected P Price of Other Goods I Income NormalInferior N Number of Buyers T Taste and Preferences Supply Curves moves right Increase in supply Supply Curves moves left Decrease in supply Supply Determinants P Prices of other goods P Price of resources E Expectations of Producers S Seller numbers T TechnologyEfficiency S Subsidies and Taxes 3 supply 3 Si 5 Eqmllbrium P39 I Demand Di I 039 Quantity Capra m ownedo um Ch 2626 Gross Domestic Product Money amount of output produced within a Countries Boarders TOTAL OUTPUT Two ways to gure this Add up all the expenditures spending Add up all the Income Expenditures Approach Income Approach Ch 27 Business Cycle Instability in GDP Main cause in Business Cycle is changes in Spending Expansion GDPOutput goes up Unemployment Falls Prices go up In ation Recessions GDPOutput goes down no jobs in ation is controlled Durable Furniture Computers Most affected by business cycle Nondurable Food Clothes Services Doctors Law Firms Perfect In ation Rate 2 Unemployment 45 ALL Multiple choice Questions SupplyAmount that sellers are willing to sell at different prices Law of Supply Prices go up quantity goes up Prices go down quantity goes down h 0 HI 39 2 3 Pnco p Dachau 5 x u I39 3 Cummy g Suponod Decreases 0 o u 4 a n b Quaquot11 Supplied Supply increase moves line to the right beneath it Demand decreases moves to the left besides it Price Falls Quantity is unknown Spending of Consumers Businesses Government Next Exports Foreigners Expenditures Approach Excluded from GDP Transfer Payments Stock and Bond Purchases Secondhand Sales Underground Economy Fina Review ALL Multiple choice Questions TWO Main ISSUES 2 In ation 1 Unemployment O erall rice are risin oin u Percent of Labor forces that is unemployed Helped by in at ign g g g p Types of Unemployment Borrowers Frictional New Graduates People who quite to Hurt by In ation do something different Fixed Income Peo le Structural Got replaced by machine or company p Anyone who saves money relocated Lenders 39CyChcal RPCCSSIOH Real Income Purchasing Power M In 14330 F irge39 In ation is high Real Income goes down n er In ation is low Purchasin Power oes u Anyone who physically cannot work g g P People who chose not to work Retired Stay at home parents students Ch 28 Rate of Return Expected Revenue Cost Cost Dissavings Spend more then their income credit Ex 15 23002000 2000 cards Nonincome Determinants of Spending and Savings 1 Wealth Spend more Save less 2 Expectations Spend more Save less 3 Interest Rates Go down Spend more Save Less 4 Debt increases Spend more Save less 5 Taxes Spending and Savings move in same direction Determinants of Investment Demand 1 Other Costs go up Investment Demand goes down 2 Taxes go down Investments of up 3 Technology goes up Investments go up 4 Stock and Capital goods go up business is plentiful Investments go down 5 Expectations r gt i Yes We would invest r i Yes We would invest r lt i No We wouldn t invest Multiplier Effect Any Change in Spending will cause a larger change in GDP Ch 30 Change in Aggregated Demand is caused by change in spending Change in Aggregated Supply is caused by production cost Ch 31 Fiscal Policy president manipulates government spending and taxes to cause changes in GDP in the business cycle Expansionary Discretionary Pres1dent Fiscal Policy Favors Prov1d1ng Soc1al Capltal What we used in recess10ns A Recessions Increase in Government Taxes go down so we can spend more Spendmg In ations Taxes go up Govemment Spending goes up MOVCS AD to the ght Thinks Government is too big Recessions Taxes go down Tools In ations Government spends less my yr At the end of the year if our taxes are bigger than ZWhat we used in in atiens government spendmg TaxesgtGovemment Spending T0015 this is a Budget Surplus Taxes go up so we spend less At the end of the year if our taxes are less than I Government spending gees down government spendingTaxesltGovemment Spending zMeves AD to the left th1s 1s a Budget De c1t 18 trillion in Debt to anyone owning a government Lurks Final Review Ch 32 Functions of Money 1 Medium of Exchange 2 Unit of Account 3 Store of Value Savings Accounts Role of Fed Issue Currency Set Reserve Ration Lend to Banks Collect Checks Supervise Banks Control the money supply Implement Monetary Policy Commercial Bank Federal Open Market Committee ALL Multiple choice Questions Board of Governors 7 people 12 Federal Reserve Banks President of New York Federal Reserve Bank and 4 other Presidents om the other FRB Thrift Institutions Savings and Loans Associations Mutual Savings Banks Credit Unions The Public Households and businesses Ch 33 Discount Rate Fed to a Bank Federal Funds Rate Bank to a Bank Banks can lend excess reserves 1 Required Reserves Deposits X Ration Reserves 2 Excess Reserves Actual Reserves Required Reserves Making Loans creates money Repaying Loans destroys money Ch 24 Tools of Monetary Policy 1 Open Market Operations buying and selling of bonds government securities 2 Discount Rate 3 Reserve Ratio Problem Recession Feds will use the Expansionary Monetary Policy Which will buy bonds reduce reserve ration and the discount rates will lower Banks are given more reserves which allows lending to increase and federal funds rate goes down cheaper to borrow from other banks because they all have more money This increases the money supply and interest rates go down Banks and consumer spending goes up as does the aggregate Demand Eventually causing in ation ll iiogieasJ Watt Problem In ation gt I O 14 390 0 Quantity ni V Iiny i Feds will use Restricted Monetary Policy They will cell bonds increasing the reserve ration and discount rate The feds are getting money so banks excess reserves decrease which reduces lending abilities This makes it more expensive to borrow from other banks and the money supply shrinks Interest rates gets more expensive for consumersbusinesses to borrow and spending becomes reduced as does aggregated demand Eventually we fix in ation but have no jobs


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