Term
| Why is the “price level” (rather than price) used on the vertical axis to measure aggregate demand and aggregate supply? |
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Definition
| Because it represents the average price level for the economy as a whole, not just the price for one specific product. |
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Term
| Why do we use real GDP to measure the quantity of output demanded and supplied in the economy? |
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Definition
| Because we want to know the total output of all goods and services in our economy, not just that of one specific product. |
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Term
| What segments of the economy make up the aggregate demand curve? |
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Definition
| The quantity of total output (GDP) demanded (purchased) at alternative average price levels. |
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Term
| Describe the macroeconomic equilibrium point. |
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Definition
| It is the point where the average price level meets the GDP. |
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Term
| Given a fixed AS curve, how will the price level and real GDP be affected when AD shifts to the right? ....shifts to the left? |
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Definition
| When AD shifts to the right, price level and real GDP go up. When AD shifts to the left, price level and real GDP go down. |
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Term
| Given a fixed AD curve, how will the price level and real GDP be affected when AS shifts to the right? ...to the left? |
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Definition
| When AS shifts to the right, price level and real GDP go down. When AS shifts left, price level and real GDP go up. |
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Term
| Discuss the Employment Act of 1946. How did that act change the role of the Federal Government in the economy? |
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Definition
It made it the responsibility of the federal government to reach three economic goals:
1. Full employment
2. Stable prices
3. Economic growth |
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Term
| What is discretionary fiscal policy? How would Congress perform contractionary fiscal policy? Expansionary fiscal policy? |
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Definition
Discretionary fiscal policy is the use of government spending and tax policy to shift the aggregate demand curve. Contractionary fiscal policy is performed by decrease of government spending, increase taxes, and decrease in income transfers. Expansionary fiscal policy is performed by increase of government spending, reduction in taxes, and an increase in income transfers.
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Term
| Describe the Federal Reserve system. |
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Definition
It is the central banking system of the US. It is led by the Federal Reserve Board of Governors made up of 7 people, whom are led by the chairman of the board. Beneath the board, there are 12 regional banks. Each bank has its own board of 9 directors.
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Term
| How are members of the Federal Reserve Board of Governors chosen? How long are their terms in office? |
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Definition
Members of the Federal Reserve Board of Governors are nominated by the president and approved by Congress. Their terms in office are 14 years.
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Term
| Are individuals on the Federal Reserve Board typically sensitive to political and public pressure? |
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Definition
| No, because once they're elected to the board, they cannot be removed from it. |
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Term
| Who is the current Chairman of the Board of Governors? |
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Definition
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Term
| What are the functions of the Federal Reserve? |
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Definition
1. Clearing house for checks and US Gov't securities
2. Supervise banking procedures
3. Bank for US Gov't
4. Banker's bank - "lender of the last resort"
5. Manage the money supply |
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Term
| Describe the relationship between the Fed, and the President, Congress, and the Public. |
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Definition
Members of the Fed are elected by the President, approved by Congress, and inflict monetary policy based on what the public needs.
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Term
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Definition
| Monetary policy is changing the money supply to shift aggreate supply. |
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Term
| What is the difference between the federal government's deficit and its debt? |
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Definition
The government deficit is the difference between government spend and tax revenue in a particular year. The government's debt is the total amount that the government owes.
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Term
| Approximately, how large is this federal debt? |
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Definition
| The federal debt is approximately $9,053,884,694,839.99. |
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Term
| Is the U.S. government currently running a deficit or a surplus? How large is this year's projected projected deficit/surplus? |
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Definition
| The government is currently running a deficit and is predicted to be $204,725. |
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Term
| How large are interest payments on the debt compared to the federal budget? |
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Definition
| Interest payments are 28% of the federal budget. |
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