Macroeconomics Exam 2

Front 1

Union

Back 1

A worker's association that bargains with employers over wages, benefits & working conditions.

Front 2

Strike

Back 2

The organized withdrawal of labor from a firm by a union.

Front 3

Collective Bargaining

Back 3

The process by which Unions & Firms agree on terms of unemployment

Front 4

The Problems of Unemployment are usefully divided into what 2 categories?

Back 4

Cyclical Unemployment & Natural Unemployment

Front 5

Natural Rate of Unemployment

Back 5

Refers to the amount of unemployment that the economy normally experiences.

Front 6

Cyclical Unemployment

Back 6

refers to the year to year fluctuations in unemployment around its natural rate.

Front 7

Who measures unemployment?

Back 7

Bureau of Labor Statistics (BLS)

Front 8

Employed

Back 8

This category includes those who work as paid employees, worked in own business's, or as unpaid workers. (Counts both Part Time & Full Time)

Front 9

Unemployed

Back 9

This category includes those who weren't employed, were available for work, had tried to find employment, people who were laid off, people waiting to hear back from potential employers, and people who have looked for Jobs in the last 4 weeks

Front 10

Not in Labor force

Back 10

This categorizes those who are either a full-time student, homemaker, or retiree, or someone who doesn't fit the other 2 categories (Employed or Unemployed).

Front 11

Calculating Unemployment Rate

Back 11

Labor force=
# of employed + # of Unemployed
______________________________________ x 100
Labor force

Front 12

Labor Force

Back 12

The Number of workers. Counting Employed & Unemployed

Front 13

Unemployment Rate

Back 13

Percentage of Labor Force that's Unemployed

Front 14

Labor Force Participation Rate Calculation

Back 14

Labor force Labor force
Participation rate= _______________ X 100
Adult population

Front 15

Unemployment Insurance

Back 15

A Government Insurance program that partially protects worker Incomes when they become Unemployed

Front 16

What are some flaws of the Unemployment Rate?

Back 16

Its hard to distinguish Between a person who's looking for a Job & someone who's not.

Front 17

Discouraged Workers

Back 17

Individuals who would like to work but have given up looking for a job.

Front 18

Frictional Unemployment

Back 18

Unemployment that results because it takes time for workers to search for the job that best suit their tastes and skills

Front 19

Efficiency wages

Back 19

Above Equilibrium wages paid by firms to increase worker productivity

Front 20

Structural Unemployment

Back 20

Unemployment that results because the Number of Jobs available in some labor markets is insufficient to provide a Job for everyone who wants one.

Front 21

Job search

Back 21

The Process by which workers find appropriate jobs given their tastes & skills

Front 22

What does NCO stand for

Back 22

Net Capital Outflow

Front 23

Net Capital Outflow

Back 23

is the net flow of funds being invested abroad by a country during a certain period of time
NCO=
Purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners

Front 24

Closed Economy

Back 24

An economy that doesn't interact with other countries

Front 25

Open Economy

Back 25

An economy that interacts freely with other economies around the world
-Buys & sells Capital assets such as stocks & Bonds
-It Buys & Sells goods & Services in World Product Markets

Front 26

What are Exports

Back 26

Goods that are produced domestically & Sold abroad

Front 27

Imports

Back 27

Goods & Services produced abroad that are sold domestically

Front 28

Net Exports

Back 28

The Value of a Nations exports minus the value of its imports, also called (The Trade Balance).

Front 29

Trade Surplus

Back 29

An Excess of exports over imports

Front 30

Balanced Trade

Back 30

A situation in which exports equal imports

Front 31

Who's policies have also been a factor in increasing International Trade

Back 31

The government's

Front 32

What causes NCO to be positive

Back 32

When domestic residents are buying more foreign assets, than foreigners are buying domestic assets

Front 33

NCO measures the Balance of what?

Back 33

A country's imports & Exports

Front 34

Saving=

Back 34

Y-C-G
GDP-Consumption-Government Purchase

Front 35

Internationally , Saving=

Back 35

Domestic Investment +Net Capital Outflow (NCO)

Front 36

In economy's with a Trade Deficit

Back 36

Imports exceed exports, Net Exports is less than 0

Front 37

In economy's with a Balanced Trade

Back 37

Exports=Imports

NX=0
saving=Investment
NCO=0

Front 38

In economies with a trade surplus,

Back 38

exports are greater than imports
NX>0
Net exports are greater than 0

Front 39

Nominal Exchange Rate

Back 39

The rate at which a person can trade the currency of one country for the currency Of another

Front 40

Appreciation

Back 40

An Increase in the value of a currency as measured by the amount of foreign currency it can buy

Front 41

Depreciation

Back 41

A Decrease in Value of a currency as measured by the Amount of foreign currency It can Buy.

Front 42

Real Exchange Rate

Back 42

The Rate at which a person can trade the goods & services of one country's for anothers

Front 43

Real Exchange Rate=

Back 43

Nominal Exchange Rate X Domestic Price
______________________________________________
Foreign Price

Front 44

Purchasing power Parity

Back 44

A theory of Exchange Rates whereby a Unit of any given currency should be able to Buy the same quantity of goods in all countries.

Front 45

Arbitrage

Back 45

Taking advantage of Price Differences for the Same item in different Markets

Front 46

Market for Loanable funds

Back 46

This market is the money market. It is where companies go to borrow the money for investment, and where consumers go to put their savings away. The equilibrium in this market depend on the supply of money (from savings) and the demand for money (from investment)

Front 47

Market for Foreign Currency Exchange

Back 47

Coordinates people who want to exchange domestic currency for the currency of other country's

Front 48

What does a higher interest rate cause?

Back 48

It encourages people to save & therefore raises the quantity of loanable funds supplied

Front 49

Government Budget Deficit

Back 49

Occurs when a government's spending exceed Government revenue, Because a Government budget deficit represents negative public saving, it reduces national saving. Thus it reduces the supply of Loanable Funds, Drives up the Interest Rate, & Crowds Out investment.

Front 50

Federal Open Market committee

Back 50

The Group at the Federal Reserve that sets the Monetary Policy

Front 51

The Wealth Effect

Back 51

A lower Price Level raises the real value of households money holding, which are part of their wealth.

Front 52

The interest rate effect

Back 52

A lower price level reduces the amount of money people that want to hold. As people try to lend out their excess of money holdings, The interest Rate falls. The Lower Interest rate stimulates investment spending, and thus increases the quantity of goods & Services demanded.

Front 53

Trade Policy

Back 53

A government policy that directly influences the Quantity of goods & services that a Country imports or exports.

Front 54

Tariff

Back 54

A tax on foreign goods

Front 55

Capital Flight

Back 55

A Large & Sudden reduction in the demand for assets located in a country

Front 56

Sticky Wage Theory

Back 56

An economic hypothesis that the pay of employed workers tends to respond slowly to the changes in a company's or the broader economy's performance. When unemployment rises, the wages of those workers that remain employed tend to stay the same or grow at a slower rate than before rather than falling with the decrease in demand for labor. Specifically, wages are said to be "sticky-down" since they can move up easily but move down only with difficulty.

Front 57

Misperceptions theory

Back 57

An Unexpectedly low price level leaves some suppliers to think their relative Prices have Fallen, Which Includes a fall in Production.

Front 58

What causes the short-run aggregate supply curve to shift

Back 58

Changes in Labor, Natural resources, Capital, Technology

Front 59

Stagflation

Back 59

A period of falling output & rising prices

Front 60

Depression

Back 60

A Severe recession

Front 61

recession

Back 61

A period of declining income & rising unemployment.

Front 62

Natural Rate of Output

Back 62

The Productions of Goods & services that an economy achieves in the Long run when unemployments at Its normal rate.

Front 63

Theory of Liquidity Preference

Back 63

The Theory that the Interest Rate adjusts to bring money supply & Money demand into Balance.

Front 64

Multiplier

Back 64

The additional shifts in aggregate demand that result when expansionary fiscal Policy increases income and thereby increases consumer spending

Front 65

Crowding Out Effect

Back 65

The offset in aggregate Demand that results when expansionary Fiscal policy, raises the interest rate & thereby reduces Investment Spending

Front 66

Automatic Stabilizers

Back 66

Changes in Fiscal Policy that Stimulate aggregate Demand when the economy goes into a recession w/o police makers having to take any deliberate action

Front 67

aggregate supply

Back 67

is the total supply of goods and services that firms in a national economy plan on selling during a specific time period. It is the total amount of goods and services that firms are willing to sell at a given price level in an economy.

Front 68

Short run aggregate supply

Back 68

During the short-run, firms possess one fixed factor of production (usually capital). This does not however prevent outward shifts in the SRAS curve, which will result in increased output/real GDP at a given price. Therefore, a positive correlation between price level and output is shown by the SRAS curve.

Front 69

Long run aggregate supply (LRAS)

Back 69

Over the long run, only capital, labour, and technology affect the LRAS in the macroeconomic model because at this point everything in the economy is assumed to be used optimally. In most situations, the LRAS is viewed as static because it shifts the slowest of the three. The LRAS is shown as perfectly vertical, reflecting economists' belief that changes in aggregate demand (AD) have an only temporary change on the economy's total output.

Front 70

Medium run aggregate supply (MRAS)

Back 70

As an interim between SRAS and LRAS, the MRAS form slopes upward and reflects when capital as well as labor can change. More specifically, the Medium run aggregate supply is like this for three theoretical reasons, namely the Sticky-Wage Theory, the Sticky-Price Theory and the Misperception Theory. When graphing an aggregate supply and demand model, the MRAS is generally graphed after aggregate demand (AD), SRAS, and LRAS have been graphed, and then placed so that the equilibria occur at the same point. The MRAS curve is affected by capital, labor, technology, and wage rate.