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Macroeconomics
practice round 2
| Term | Definition |
|---|---|
| Income approach (to calculate GDP) | Y=W+I+R+P Y= GDP W= Wages I=Interest R=Rents P=Profits |
| Expenditures approach (to calculate GDP) | Y=C+I+G+X-M Y=GDP C=Consumption I= Investment G= Government Spending X= Exports M= Imports |
| GDP Deflator Equation | GDP Deflator=(NGDP/RGDP)x100 |
| NGDP Equation | NGDP= RGDP x GDP Deflator |
| RGDP Equation | NGDP/GDP Deflator |
| Money Multiplier Equation | MM=1/Reserve Requirement |
| Change in Money Supply= | Change in Reserves X MM |
| National Debt | the total amount of money that a country's government has borrowed |
| Flexible wages | Wages are said to be flexible when they respond to changes in supply and demand. Any change in supply and demand for labour will lead to a change in the wage rate. |
| Autonomous Consumption | the unavoidable consumption expenditure of an entity that cannot easily cut down based on a decline in income (Like food and water) |
| Real Interest Rate | An interest rate that has been adjusted to remove the effects of inflation. |
| Floating Exchange rates | an exchange rate system where a country’s currency price is determined by the relative supply and demand of other currencies. |
| Demand-pull inflation | a type of inflation that is caused when there is an increase in consumer demand for goods and services. |
| Budget deficit | When expenditures exceed revenue |
| (Government Spending) When there is a high budget deficit... What will happen to inflation, taxes, and interest rates. | Inflation will rise, Tax rates will rise, and interest rates will rise. |
| Higher Government spending causes GDP to... | Rise in the long-run if in the recession If the economy is at full-employment, it will cause crowing out, no rise in GDP. |
| Draw a Production Possibilities Curve | X axes: Capital Goods Y axes: Consumer Goods |
| Draw a Supply and Demand Graph | X axes: Quantity Y axes: Price |
| Draw a AD/AS (Full-Employment) Model | X axes: Real GDP Y axes: Price Level |
| Draw a Money Market Graph | X axes: Quantity Y axes: Nominal Interest Rates |
| Draw a Loanable Funds Graph | X axes: Quantity of Loans Y axes: Real Interest Rates |
| Draw a Phillips Curve | X axes: Unemployment Y axes: Inflation |
| Draw a Foreign Exchange Graph | X axes: Quantity Y axes: Exchange Rate |
| An increase in the reserve requirement... | raises the reserve ratio, lowers the money multiplier, and decreases the money supply. |
| A decrease in the reserve requirement... | Lowers the reserve ratio, raises the money multiplier, and increases the money supply. |
| Result of increased value of a county's currency in the foreign exchange market: | A higher-valued currency makes a country's imports less expensive and its exports more expensive in foreign markets. |
| Real per capita income | the mean income computed for every man, woman, and child in a particular group including those living in group quarters. |
| Main Criticism of GDP as a measure of a nation's well-being: | Because GDP uses market prices to value goods and services, it excludes the value of almost all activity that takes place outside markets. |
Created by:
watsonfamily
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