ECON 101 Final Review

The inverse relation between price and the quantity demanded

The direct relation between the price and the quantity supplied

The negotiation between demand & supply that sets equilibrium in free markets.

A place where buyers & sellers meet, negotiate and exchange.

Overproduction, due to the price being too high relative to the equilibrium price

A system based on private property, free enterprise & competition

Another name for the "division of labor"

The author of the "Wealth of Nations"

The curve which indicates all the full production points for a nation

Underproduction, due to the price being set below the equilibrium price

The point of agreement between demand & supply in markets.

A decline in the purchasing power of the dollar

A reduction of real output for a half year or more

A price index which best reflects an average family's cost of living.

Policy which reduces the fluctuations of the economy

The year in which nominal GDP equals real GDP

The lowest sustainable, non-inflationary rate of unemployment

Indicated whenever Net Exports are negative

A specific labor skill or resource shortage

Reflects the nation's average capacity to produce over time

The natural rate of unemployment

A price index which best reflects costs of production

The irregular fluctuation of economic activity over time

Equals the difference between exports and imports

Inversely related to the price level

A rise in the average price level due to an increase in total spending.

Rise in the average price level due to supply shocks

A reduction in a nation's real GDP for 1/2 year or more

Wrote "The General Theory"

States that a government should balance its budget cyclically by running surpluses in good years and deficits in bad years

states that "supply creates its own demand"

Occurs when a government's net tax revenues equals its spending in one fiscal year

The negotiation between savors and investors in the market for loanable funds

Two reasons why balancing the budget yearly is not optimal

Occurs when a government's net tax revenues are less than its spending in one fiscal year

An economic ideology emphasizing taking measures to increase the capacity of a nation to produce

A standard of money based on faith

The ease with which an asset can be cashed or used as cash

The rate that banks charge their best corporate customers

The rate that the Central Bank charges banks for loans

The rate which is most sensitive to the Central Bank's buying or selling of government securities

The rate of change in the money supply due to a change in base money

The rate that banks charge each other for overnight loans

Nominal interest rates - inflation premium

The Central Bank of the United States

The most important financial intermediaries

The liquid assets that banks hold beyond the required amount

Liquid assets inside banks + currency held outside banks

Liquid assets that the banks must hold

The largest component of M1

The study of how we allocate our resources to satisfy our unlimited wants

Scare resources and unlimited wants

Labor (L) Capital (K) Land (N)

This curve shows the combination of output that a nation can produce given its resources and technology

Once all factors of production are at maximum output and efficiency, producing more will cost more than average

Exchange of goods that does not involve the use of money

Movement along the demand curve caused by a change in price

Self interest leads to an increased standard of living in a nation

A shift in the entire curve, either left or right

Movement along the supply curve caused by a change in price

A shift in the entire curve, either left or right

The total value of all final goods and services produced within a nation in a year.

Values the production of goods and services at constant prices.  It is essentially the nominal GDP adjuster for an inflation/deflation

Goods that contribute value to a finished good

Goods that were already counted the year they were produced

Goods produced and sold illicity

Goods  produced and consumed at home but never enter the marketplace

sales, excise, tariffs

The income that household and noncorporate businesses have left over after satisfying all their obligations to the government

A statistic that measures the average level of prices

Measures the average price of all final goods and services

A rise in the average (or general) price level over time

A severe recession

Temporary unemployment caused by things like seasonality, looking for first jobs, people voluntarily between jobs

Unemployment for a longer duration and caused by a change in the patterns of demand for labor like new skills displacing old ones, people need to relocation, settle into other work or get re-education

Unemployment due to insufficient aggregate demand  People are not buying goods so employers are not hiring

Friction + Structural = Lowest sustainable noninflationary rate of unemployment

Potential GDP - Actual GDP.  It measures the lost output (or income) due to this excess of wasted resources

Policy which reduces the fluctuations of the economy

1800s-1930s includes Say's law and interest mechanism

Occurs when a government's net tax revenue is more than its spending

Accepted as payment for goods and services (and debts)

The gold standard

Currency + checkable deposits + Traveler's checks

M1 + small time and savings deposits

Sets the reserve ratio

Tells banks the percentage of their deposits that they cannot lend or invest

Required reserves / deposits

Liquid assets held by banks (mostly in the form of cash)

Liquid assets that banks must hold

Reserve ration x deposits

When a bank has loaned or invested all its excess reserves and has nothing left to lend

liquid assets inside banks and currency held outside banks