ECON Final Review - Summary Principles Of Macroeconomics PDF

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Section 1 1. Microeconomics- The economic standpoint of an individual, business, or household. Macroeconomics- Economics of a whole nation 2. Surplus- make more than consuming 3. Capitalism-trade and industry is owned by private. Produced for market. Feudalism- used only for individual use 4. Corporation- owned by more than one person, diversified ownership, reward owners. Public works for short use, temporary (Railroads, dams, etc.) 5. Say’s law- supply creates own demand. No problems with unemployment because all will supply and all will demand. Business cycle will not have expansion and contractions. Problem people save money. 6. Money subvert Say’s law7. Subprime crisis/ Great Depression- bad lending, mortgage back security, interest rates low. Affordable for people to get loans Section 2 1. Business cycles- expansion, peak, contraction (grows and stagnates) Causes2. Involuntary unemployment- want and looking- at a decent wage rate- not participating if not looking 3. Unemployment- being out of work 4. Problems with definition of unemployment- drop out of labor force 5. Unemployment rate vs. labor force participation rate- unemployment out of work but looking for work. Labor force participation: in labor force over eligible population 6. Phillips curve represent- unemployment and inflation. High rate of unemployment- deflation. Low unemployment- inflation. Trade off. Maintain stable prices. 7. Non-accelerating Inflation rate of unemployment- some point of low unemployment- stuck at inflation 8. Classical/traditional- minimum wage affect employment- classical- decrease employment if minimum wage is apparent. Rate of unemployment can go up if minimum wage is increased 9. Classical- minimum wage in reality: Did not believe in minimum wage 10. GDP- gross domestic product. Consumption, Investment, Government expenditures, exportsimports (net exports) 11. Shortcomings of GDP- rebuilding does count 12. Supply and demand graph- Price and Quantity, Equilibrium 13. Supply and demand changes- up and down equilibriums 14. Aggregate demand & Supply 15. Three main aggregate markets- goods and services, money, employment 16. “price” of money 17. Unemployment impossible in neoclassical model- level of unemployment is at equilibrium. Less demand- lower wage. 18. Keynes Z-D model- more people you employ, more risk. Incomes go up – propensity to consumespend more, less percentage. 19. Expectations affect output and employment

Section 3 1. Consumption and Average Propensity to Consume vary over business cycle- during a contraction- people will keep spending, but spend less of it. 2. Investment vary over business cycle- fluctuates more than consumption. Tends to go along with business cycle except it doesn’t pick up until after trough. 3. 2 things do decision to invest require- expect a profit, have money or funding 4. Three sources of funds available to corporations for investment- retained earns, loans & investors, sell equity 5. Multiplier- government gives money to people, people spend money- money circulates on economy- increases income 6. Accelerator- incomes go up, investment goes up, if income goes up there is x amount of investment. 7. Traditional economists – business cycle- outside shock 8. Traditional- government intervention- no9. Progressive economist & business cycle- government can help. 10. Say’s law relates to investment, demand, & business cycle- save money will stop economy 11. Traditional economists- two ways to increase rate of economic growth- more investment/ production. More productive/ technological advancements 12. Military spending affect growth- short term- government spending- political feasible. Long terminhibit growth. Unproductive. Section 4 1. Fiscal policy- taxing and spending 2. Deficit- government is spending more & Surplus- government is taxing more 3. Automatic- it is taken out automatically (social security, welfare etc.) & discretionary spending- is spend rarely (construction) one time purchases 4. Progressive- increase tax for higher income rates & regressive taxes- lower income have higher tax rate (sales tax) 5. Keynesian policy formula- increase spending and lowering taxes- inflation- increase taxes and lower spending 6. Bank panic- everyone goes to bank to pull out money, but no money actually there 7. Availability of credit affect economic stability- only spending what you make- go bankruptdoesn’t affect anyone but you. 8. Money multiplier- keep 10% in bank lend out 90% out 1/Required reserve ratio. 9. Fractional reserve banking- keep certain amount in reserve. 10. Bank create money- make loans 11. Prime rate-best rate for most credit worth customers 12. Inflation – price of goods going up, calculate inflation- increase in general price level (CPI – consumer price index) 13. Monetary policy- adjusting the flow of money and credit with the aim of managing the rate of growth, unemployment, and inflation 14. Federal fund rate- rate the fed sets 15. Fed lower interest rate during recession- to increase spending – money, credit, investing 16. Fed adjust interest rate- buying and selling of bonds

17. 18. 19. 20.

Currency user- user of money vs. currency issuer- make the money U.S- issuer vs. Greece- user Commodity money before credit money- credit money came first Banks reserve constrained- no- because if need more reserve they can go to open market or reserve

Section 5 1. Trade deficit- import more than export trade surplus- export more than import 2. Imports- exports- demand 3. International trade- comes from around world finance- building real goods in other country investment- give loans to other country 4. Traditional perspective about global financial capital- positive 5. Progressive perspective about global financial capital –negative more economic instability 6. Free trade- no obstacles in trade 7. U.S and others develop using free trade- no, we would trade using subsidies to make more money 8. Comparative advantage- better at making goods than another country, better at making something else (production goes up) 9. Everyone benefits- country does benefit, but people will end up losing jobs. 10. Neoliberalism- conservative economic views on free trade- ideology- free trade, lack of government intervention is good. 11. Neocolonialism- government takes over a country: control over economics 12. Surplus relate to development- more investment more development...