Economics Unit 4 Review

Front 1

GDP

Back 1

total dollar value of all final goods and services produces in a nation in a single year

Front 2

inflation

Back 2

prolonged rise in the general price level of goods and services

Front 3

aggregate supply

Back 3

real domestic output of producers based on the rise and fall of the price level

Front 4

trough

Back 4

lowest part of the business cycle in which the downward spiral of the economy levels off

Front 5

economic indicators

Back 5

statistics that measure variables in the economy

Front 6

commodity money

Back 6

a medium of exchange such as cattle or gems that has value as a commodity or good aside from its value as money

Front 7

M1

Back 7

narrowest definition of the money supply, consists of moneys that can be spent immediately and against which checks can be written

Front 8

Fed

Back 8

The Federal Reserve System created by Congress in 1913 as the nation's central banking organization

Front 9

Tight Money Policy

Back 9

monetary policy that makes credit expensive and in short supply in an effort to slow the economy

Front 10

Prime Rate

Back 10

rate of interest that bans charge on loans to their best business customers

Front 11

Income Redistribution

Back 11

government activity that takes income from some people through taxation and uses it to help citizens in need

Front 12

Medicaid

Back 12

state and federal public-assistance program that helps pay health costs for low-income and disabled persons

Front 13

budget deficit

Back 13

situation when the amount of government spending exceeds its receipts during the fiscal year

Front 14

Proportional tax

Back 14

tax that takes the same percentage of all incomes; as income rises the amount of tax paid also rises

Front 15

regressive tax

Back 15

tax that takes a larger percentage of low incomes than higher incomes

Front 16

What 5 sources make up national income?

Back 16

wages and salaries, income of self employed individuals, rental income, corporate profits and interest on savings, and other investments.

Front 17

What is the difference between inflation and deflation?

Back 17

Inflation is the rise in the general price level of final goods and services while deflation is the decline.

Front 18

What are the phases of a typical business cycle?

Back 18

Expansion- GDP increasing at an increasing rate Peak- GDP increase constant Contraction (recession)- GDP decrease at an increasing rate Trough- GDP decrease constant

Front 19

What are three major categories of economic indicators?

Back 19

Leading indicators, coincident indicators, lagging indicators

Front 20

What are three functions of money?

Back 20

Medium of exchange, unit of accounting, store value

Front 21

What is the type of money used by the United States?

Back 21

Fiat money

Front 22

What are government's main functions?

Back 22

Providing public goods, general welfare, regulation and economic stability

Front 23

Give 5 examples of public goods.

Back 23

insurance, health, communication, transportation, military

Front 24

What are the five largest federal expenses?

Back 24

health and human services, department of defense, treasury department, department of agriculture, and department of education.

Front 25

What are the two principles of taxation?

Back 25

The benefits-received principle and the ability to pay principle.

Front 26

When was the most serious banking panic of the twentieth century?

Back 26

the banking panic of 1907 was the most severe banking panic in the United States for 6 short years later the federal reserve was created.

Front 27

Which agency of the federal government is responsible for printing and maintaining paper currency?

Back 27

The Fed

Front 28

What are the two basic types of monetary policies?

Back 28

1. Central Bank Policy 2. Money Supply Policy

Front 29

What are two measurements of government growth?

Back 29

How man public programs are implemented and how much taxes have been raised.

Front 30

What are government's main functions?

Back 30

Providing public goods, promoting the general welfare, regulation economic stability

Front 31

What are the four categories of economic activity are used to measure GDP?

Back 31

consumer sector (goods brought directly by consumers), investment sector (business purchase items for other goods), government sector (good and services bought), net exports (dif between exports and imports)

Front 32

What is the relationship between the purchasing power of money and the rate of inflation?

Back 32

When inflation occurs, the purchasing power of a dollar goes down.

Front 33

What are commonly used price indexes?

Back 33

food, housing, transportation, clothing, education, recreation, medical care, and personal care

Front 34

What causes the aggregate supply curve to slow upward?

Back 34

Lower taxes or interest rates or lower prices for foreign oil.

Front 35

What is determined at the intersection of the aggregate supply and aggregate demand?

Back 35

the equilibrium price level is determined where the aggregate demand curve crosses the aggregate supply curve, or at a GDP price deflator of 140.

Front 36

What two aspects of government activity affect business cycles?

Back 36

through its policies on taxing and spending and through its control over the supply of money available in the economy

Front 37

What are the six services offered by banks and savings institutions?

Back 37

checking accounts, interest on certain types of checking accounts, automatic deposit and payment, storage of valuables, transfer of money from 1 to another and overdraft checking.

Front 38

M2

Back 38

broader def of the money supply, including all of the M1, plus such near moneys as savings deposits, small denomination time deposits, money market deposit accounts, and retail money market mutuals fund balances.

Front 39

What is the purpose of fractional reserve banking>

Back 39

Also, its just in case customers want to withdraw large amounts of and in cash from their checking accounts.

Front 40

What are some of the difficulties of carrying our monetary policy?

Back 40

Time lag between the implementation o the policy and detectable effects in the economy and inflationary effects driven by influences demand

Front 41

What percent of GDP accounts for government purchases?

Back 41

19%

Front 42

Compare and Contrast Merit Goods

Back 42

merit is one that is deemed socially desirable by government leaders, museums, ballets. demirt are goods in which government officials have deemed socially undesirable such as tobacco, alcohol, and gambling.