Econ 114 Mixed Bag

Define Crowding-Out Effect

Fiscal Policy Causes: Increased demand ---> Increased Interest Rate ---> Decreased Investment
Political Business Cycle

Politicians will manipulate the economy to increase their chances of being re-elected
What is a major reason why public debt cannot bankrupt the Federal govermnent?

Public debt can be easily refinanced.
A tax reduction of a specific amount will be more expansionary,

The smaller the country's MPC
Banks create money when they:

Allow loans to mature
Granting a bank loan creates money; repaying a bank loan destroys money

Granting a bank loan creates money; repaying a bank loan destroys money
What is one significant characteristic of frictional reserve banking?

Banks can create money through lending their reserves
What is considered a strength of monetary policy compared to fiscal policy?

The ability to increase the velocity of money
The Net Export Effect:

Strengthens the stimulative effect of expansionary monetary policy.
The Shape of the aggregate demand curve is determined by:

The real balances effect, interest rate effect and foreign trade effect
What will not cause the consumption schedule to shift?

A change in consumer incomes
Okun's Law:

Measures the tradeoff between rate of inflation and rate of unemployment
GDP Inclues:

Final, but not intermediate, goods
If depreciateion exceeds investment,

the economy's stock of capital is shrinking
Opportunity cost is defined as:

The value of the best forgone alternative

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Econ 114 Mixed Bag

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Econ 114 Mixed Bag

Updated

2012-04-08T21:15:24Z