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Marcoeconomics
Study
| Question | Answer |
|---|---|
| Income method of adding up GDP | Sum the incomes= wages/salaries + rents + interests + divendends + profit |
| investment spending | includes business spending on plamt + equipment plus change in bussiness invetories plus software Household spending: residential construction |
| purchasing power | money gives command over goods and services and other peoples labor |
| structural unemployment | change in the economy makes certain skills obscelete, leaving people unemployed for long periods of times |
| cyclical unemployment | business downturn decreases the demand for labor producing mass short term unemployement 5m jobs - 5m jobseekers 3mjobs - 10m jobseekers |
| frictional unemployment | unemployment due to the difficulty of matching jobs with jobs sectors |
| the trough | lower turning point in the business cycle where the reccesion ends and an expansion begins |
| the peak | upper turning point in the business cycle where expansion ends and recession begins |
| m1 and m2 | M1 is a narrow measure of money that includes transactions balances M1= held by nonbank public and checkable bank deposits M2 - broad measure of money M2 = transaction(M1) and liqiud savings account balances |
| unit of account | money serves to denominate prices and contracts |
| store of value | money serves as a convienant way to transport purchasing power over time and space |
| open market operations | federal reserve buys and sells bonds on the open bond market to expand and contract the money and credit supply |
| liqiudity problems | depositors and creditors wish to withdraw more funds then a bank has in its reserve |
| insolvency problem | bad loans or bad trades create losses for banks/financial instutions that exceed their capitol |
| lender of last resort | federal reserve makes an emergency loan to failing financial institutions to prevent a financial panic |
| required reserves | reserves a bank must hold againist deposits either as vault cash or as a deposit in a local/regional fed bank |
| borrowed funds | funds that large banks borrow from other banks, large corparations, and the international market to make loans |
| term structure if interest rate | how interest rates vary by the term of the loan (usually longer the loan the higher the interest rate) |
| commodity money | money that has dual value Value as money value as commodity |
| open market purchase | when federal reserve buys bonds on the open market to expand money and credit supply |
| federal open market committee | main policy making committee in the federal reserve which consists of the 7 board or govenonors and the 12 presidents of the regional/federal banks and this committee meets eight times a year to discuss and vote on monetary policy |
| open market sale | the federal reserve sells bonds on the open market to contract money and credit supply |
| risk structue of interest rates | interest rates vary by the default risk of borrowers - higher risk , higher rate borrower pays |
| medium of exchange | another function of money where money serves as a go between in exchange and thereby facilitates trade labor for money > money > car |
| excess reserves | funds banks are free to loan out |
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