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| ((Q2 - Q1)/((Q2 + Q1)/2))/(p2 - P1)/((P2 + P1)/2)) |
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| What does a perfect inelastic line look like? |
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| If you're at point B and raise your price, then you're gonna decrease your revenue |
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| If you're at point D and increase your price, then your revenue will be the same as before |
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| If you're at point E and raise your price, you're going to increase revenue |
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| A tax will make the supply curve shift to the (right/left). Why? |
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| left because now its more expensive to produce |
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| How much of the govt revenue are producers going to pay? |
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| How much of the govt revenue are consumers going to pay? |
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| Above Pwithouttax and below Pwihttax |
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| How does elasticity affect who is going to pay more tax? |
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| If the demand curve is more inelastic, consumers will pay a higher share of the gov't revenue |
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| When the government labels a fair price and buys the excess supply |
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| When producers sell at market prices and pays the producer S per unit sold |
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| What determines the best form of policy between subsidy or price support? |
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| It depends on the demand curve, which is indicative of how much the government is going to spend. The least expensive one is the best policy |
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| As income increases, the percent of income spent on food decreases, even if expenditure on food increases |
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| market value of all final goods and services produced within a country ina given period of time |
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| measured in terms of current market prices(not adjusted for inflation) |
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| GDP adjusted for changes in the price level |
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| A measure of the price level calculated as the ration of nominal GDP to real gdp times 100. |
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| What does the GDP deflator tell us? |
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| The rise in nominal GDP that is attributable to a rise in prices rather than a rise in the quantities produced |
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| Nominal GDP/GDP deflator x 100 |
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| the process by which the monetary authority (the Federal reserve for the United States) of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. |
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| the use of government revenue collection (taxation) and expenditure (spending) to influence the economy. |
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| the process by which the monetary authority (the Federal reserve for the United States) of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. |
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| the use of government revenue collection (taxation) and expenditure (spending) to influence the economy. |
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| Consumer Price Index: Measures the cost of goods and services. Calculated monthly by Bureau of Labor Statistics |
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| Who loses from inflation? |
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| Landlords, creditors, those on fixed incomes, and savers |
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| Who benefits from inflation? |
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| Some inflationary distortions are |
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| Decreases savings, leads to unproductive investments, negative real interest rate, illusory profit (depreciation) |
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| MV = PQ, Inflationary gap, Gov't budget deficit financed by FED, Downward stickiness of prices, Phillips curve, Service sector inflation (increase produciton), Inertial inflation (contract were indexed by prices) |
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| A market in which currencies of different nations are bought and sold. |
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| The number of units of foreign currency that can be purchased with one unit of domestic currency. |
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| increase in the price of a currency measured [example: appreciation of the dollar is when the price of 1 dollar increases from 90 to 100 yens] |
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| decrease in the price of a currency [example: depreciation of the dollar is when the price of 1 dollar decreases from 120 to 115 yens] |
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| Changes in Demand and Supply of a curreny |
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| Changes in taste, income and interest rate |
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| the highest-valued opportunity necessarily forsaken. |
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| caused by anything else besides price changes. |
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| measure how sensitive is the demand (supply) to price changes. |
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| 1) Taxes, government regulation, and government spending are the three tools of supply-side economic policy. Supply-siders believe that lower tax rates, less government regulation, and less government spending would stimulate economic growth. As well, lower tax rates would provide stronger incentives to work and produce, by increasing after-tax wages and profits. Less government regulation would reduce production costs, spurring profits and production. They also believe that government spending crowds out private sector investment by driving up the interest rate and by providing private investors with more competition in the securities market. |
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| prices keep increasing because wage contracts are indexed by inflation. That way, when price increase so wages must also increase, but then the cost to produce increase and prices increase again. Since the wages will increase, the process is going to repeat all over again infinitely. |
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| If nominal interest rate is lower than inflation, there will be negative interest rate (nominal interest = real interest + inflation) |
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| When costs are underestimated (like depreciation) due to inflation, the profit is actually lower than what company thought it would be. |
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| the ability of producing one good with less cost of opportunity than others |
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| occurs when a country can produce one good with fewer resources (or can produce more goods with the same amount of resources) than others. |
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| David Ricardo advocates that one country should be specialized in the production of the good it has the comparative advantage and even when one country has the absolute advantage in the production of all goods there’s still space for trade. |
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