Econ 201 Exam 3: Key Terms and Concepts for Economics Students - Prof. George Spiva | Study notes Economics

Econ 201 Exam 3: Key Terms

Note: This is a list of terms that you should know for the test. The definitions come from

Dr. Spiva’s lecture notes, the labs, and the textbook. This is NOT a fully comprehensive

list, meaning stuff that’s not on here is still fair game for questions, but it does contain

most of the key terms. If you don’t recognize some of these from lab, check the textbook

and the lecture notes for their definition. I promise you, each of them is in one or more of

the three.

Absolute Advantage AD Curve Aggregate Demand Aggregate Supply Arbitrage

AS Curve Automatic Stabilizers Balanced Budget Budget Deficit Budget Surplus Bundle

(Of Goods) Commodity Money Comparative Advantage Consumer Price Index

Consumption Consumption Possibilities Frontier (CPF) Contractionary (Recessionary)

Gap Contractionary Fiscal Policy Cost Push Inflation Crowding out Currency

Appreciation Currency Depreciation Cyclical Unemployment Decision-Making

(Program) Lag Deflation Demand for Money Demanders in a Foreign Exchange Market

Demand-Pull Inflation Discount Rate Discouraged-Worker Effect Discretionary Fiscal

Policy Effectiveness (Impact) Lag Exchange Rate Expansionary (Inflationary) Gap

Expansionary Fiscal Policy Expectational Inflation Federal Open Market Committee

Federal Reserve (Fed)

Fiat Money Fiscal Policy Fixed Exchange Rate Flexible Exchange Rate Frictional

Unemployment Full Employment GDP Deflator Gold Standard Government Spending

Hyperinflation Implementation Lag Inflation Inflation Rate International Specialization

Investment Labor Force Labor Force Participation Rate Long-run AS Curve Long-run

Equilibrium M1 M2 Managed Float System Marginal Propensity to Consume (MPC)

Marginal Propensity to Save (MPS) Misery Index Monetary Policy Money as a Medium

of Exchange Money as a Store of Value Money as a Unit of Account Money Market

Mutual FundMoney Supply Net Exports Nominal GDP Nominal Interest Rate Nominal

Wage Non-discretionary Fiscal Policy Open Market Operations Opportunity Cost

Potential Output Price Index Production Possibilities Frontier (PPF) Purchasing Power

Parity Theory Quantity Theory of Money Real GDP Real Interest Rate Real Wage

Recognition Lag Representative Money Required Reserve Ratio Reserves and Reserve

Requirements

Savings Seasonal Unemployment Short-run AS Curve Short-run Equilibrium Simple

Money Multiplier Simple Spending Multiplier Simple Tax Multiplier Social Capital

Speculation Structural Unemployment Suppliers in a Foreign Exchange Market Supply

Shocks (Beneficial and Adverse) Tariff Terms of Trade (Trade Rate) Time Deposits

(CDs) Unemployment Unemployment Rate Velocity of Money World Price

Exam 3: Key Exercises to Know (THE LABS AND VIDEO SHOULD HELP WITH

THESE! Really though, I literally just



went through each lab, just like you can do to answer them.)

Changes in Price Level oHow we measure Inflation oHow to calculate a price index

using a bundle of goods and their prices oCalculating inflation using the Percentage

Change Formula: (New-Old)/Old oKnow the issues associated with using a price

index

 Unemployment oKnow the relevant definitions oBe able to identify if an

economy is at full employment oGiven the appropriate numbers, be able to identify the

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Econ 201 Exam 3: Key Terms Note: This is a list of terms that you should know for the test. The definitions come from Dr. Spiva’s lecture notes, the labs, and the textbook. This is NOT a fully comprehensive list, meaning stuff that’s not on here is still fair game for questions, but it does contain most of the key terms. If you don’t recognize some of these from lab, check the textbook and the lecture notes for their definition. I promise you, each of them is in one or more of the three. Absolute Advantage AD Curve Aggregate Demand Aggregate Supply Arbitrage AS Curve Automatic Stabilizers Balanced Budget Budget Deficit Budget Surplus Bundle (Of Goods) Commodity Money Comparative Advantage Consumer Price Index Consumption Consumption Possibilities Frontier (CPF) Contractionary (Recessionary) Gap Contractionary Fiscal Policy Cost Push Inflation Crowding out Currency Appreciation Currency Depreciation Cyclical Unemployment Decision-Making (Program) Lag Deflation Demand for Money Demanders in a Foreign Exchange Market Demand-Pull Inflation Discount Rate Discouraged-Worker Effect Discretionary Fiscal Policy Effectiveness (Impact) Lag Exchange Rate Expansionary (Inflationary) Gap Expansionary Fiscal Policy Expectational Inflation Federal Open Market Committee Federal Reserve (Fed) Fiat Money Fiscal Policy Fixed Exchange Rate Flexible Exchange Rate Frictional Unemployment Full Employment GDP Deflator Gold Standard Government Spending Hyperinflation Implementation Lag Inflation Inflation Rate International Specialization Investment Labor Force Labor Force Participation Rate Long-run AS Curve Long-run Equilibrium M1 M2 Managed Float System Marginal Propensity to Consume (MPC) Marginal Propensity to Save (MPS) Misery Index Monetary Policy Money as a Medium of Exchange Money as a Store of Value Money as a Unit of Account Money Market Mutual FundMoney Supply Net Exports Nominal GDP Nominal Interest Rate Nominal Wage Non-discretionary Fiscal Policy Open Market Operations Opportunity Cost Potential Output Price Index Production Possibilities Frontier (PPF) Purchasing Power Parity Theory Quantity Theory of Money Real GDP Real Interest Rate Real Wage Recognition Lag Representative Money Required Reserve Ratio Reserves and Reserve Requirements Savings Seasonal Unemployment Short-run AS Curve Short-run Equilibrium Simple Money Multiplier Simple Spending Multiplier Simple Tax Multiplier Social Capital Speculation Structural Unemployment Suppliers in a Foreign Exchange Market Supply Shocks (Beneficial and Adverse) Tariff Terms of Trade (Trade Rate) Time Deposits (CDs) Unemployment Unemployment Rate Velocity of Money World Price Exam 3: Key Exercises to Know (THE LABS AND VIDEO SHOULD HELP WITH THESE! Really though, I literally just  went through each lab, just like you can do to answer them.) Changes in Price Level o How we measure Inflation o How to calculate a price index using a bundle of goods and their prices o Calculating inflation using the Percentage Change Formula: (New-Old)/Old o Know the issues associated with using a price index  Unemployment o Know the relevant definitions o Be able to identify if an economy is at full employment o Given the appropriate numbers, be able to identify the

following:  o Given the appropriate numbers, be able to calculate:  Unemployment Rate  Labor Force Participation Rate Real and Nominal GDP  Labor Force  Employed  Unemployed     Structurally Unemployed Frictionally Unemployed Cyclically Unemployed Seasonally Unemployed o o Given prices and quantities for multiple years, be able to do the following:  Calculate each year’s Nominal GDP  Calculate each year’s Real GDP  Calculate the GDP Deflator  Calculate the Inflation Rate Given a Nominal GDP and a Real GDP, be able to find the GDP Deflator  Aggregate Demand o Know the Components o Know what the AD Curve shows and why it’s slopes downward o Be able to appropriately shift the AD curve for a given change in a component  Know what changes increase AD and what changes decrease AD Be able to define and calculate the Marginal Propensity to Consume (MPC) and the Marginal Propensity to Save (MPS) o Know the minimum and maximum number they can each be and their sum  Simple Spending Multiplier o Definition o How to Calculate it o Find the total impact on the economy (money created) from an initial amount of new spending for a given MPC  Aggregate Supply o Determinants o What the AS Curve shows o Difference between Short-Run and Long-Run AS and their curves  Why each is shaped the way it is  Contractionary and Expansionary Gaps o Definitions and Graphically be able to identify them o Problems with each  Fiscal Policy o Distinguish between non-discretionary and discretionary fiscal policies  Define and give examples of each  Explain the concept of Automatic Stabilizers o Explain and provide examples of Expansionary and Contractionary Fiscal Policy as well as identify when each is appropriate (i.e. for which gap in the economy) o Problems with Fiscal Policy:  Lags  Crowding Out  Which component of AD does it affect and why o Be able to Calculate the Simple Tax Multiplier and use it to find the effect on output from a given flat increase or decrease in taxes  Money o Explain the definition and importance of each characteristic of money:  Medium of Exchange  Unit of Account  Store of Value o Define the following types of money and give an example of each:  Fiat Money  Commodity Money  Representative Money o Components of M1 and M  Federal Reserve o What it is

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