2021-01-08T14:06:05+03:00[Europe/Moscow] en true fiscal policy, G (fiscal policy), T (fiscal policy), TR (fiscal policy), fiscal policy actions that can end a recession, government spending multiplier formula, tax multiplier formula, transfer payments multiplier formula, how to calculate the fix for a recession, how to use two policies to fix a recession, example of a regressive tax, example of a progressive tax, main issue of a recession, unemployment rate definition, full employment rate of employment, situation if unemployment is equal to job vacancies, effect on model if unemployment is equal to job vacancies, frictional unemployment, structural unemployment, problems with unemployment, inflation, price index, C.P.I.—Consumer Price Index, P.P.I.—Producer Price Index, GDP deflator, problems with inflation, ideal inflation rate, one thing that resists price reductions, effect of wage raises not being given during inflation, automatic stabilizers, fiscal drag, deficit, debt, surplus, surplus equation, deficit equation, balanced budget equation, budget philosophies, annually balanced budget effect, full employment balanced budget effect, discretionary fiscal policy effect, investment multiplier formula, how to calculate an equilibrium output increase flashcards

Macroeconomics 142 Test 2 (from TinyCards)

This deck, custom-made for a class, contains material covered after Test 1 through Test 2. (V.5) (This deck used to be on an amazing spaced-learning service called Tinycards. You can see the original version in all its former glory if you click on it in this archived folder: https://web.archive.org/web/20200829090453mp_/https://tinycards.duolingo.com/collections/2QwH9YRN/macroeconomics-142 .)

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  • non-descriptive aggregate spending graph
  • recession on an aggregate spending graph
  • inflation on an aggregate spending graph
  • size of a recession on an aggregate spending graph
  • potential GDP (aggregate spending graph)
  • equilibrium (aggregate spending graph)
  • amount of goods being produced
  • amount of goods being consumed
  • decreasing inventory
  • increasing inventory
  • fiscal policy
    when the government changes spending, taxes, and/or transfer payments
  • G (fiscal policy)
    government spending
  • T (fiscal policy)
    taxes
  • TR (fiscal policy)
    transfer payments
  • fiscal policy actions that can end a recession
    increasing government spending, decreasing taxes, and increasing transfer payments
  • government spending multiplier formula
  • tax multiplier formula
  • transfer payments multiplier formula
  • how to calculate the fix for a recession
    Use one of the formulas to calculate the multiplier, then divide the monetary amount of the recession by the multiplier.
  • how to use two policies to fix a recession
    split the GDP distance so that half can be fixed with one policy and half can be fixed with the other, then proceed as normal
  • economic growth from fiscal policy
  • new equilibrium created by fiscal policy
  • example of a regressive tax
    sales tax
  • example of a progressive tax
    income tax
  • main issue of a recession
    unemployment
  • unemployment rate definition
    percentage of labor force (aged 16 or older) who want to work, but are without jobs
  • full employment rate of employment
    4%-5%, not 0%
  • situation if unemployment is equal to job vacancies
    the unemployment rate is still the amount of the labor force aged 16 and older who want to work but do not have jobs
  • effect on model if unemployment is equal to job vacancies
    the model is at full employment, so nothing needs to be done to stimulate the economy
  • frictional unemployment
    percentage of people in-between jobs
  • structural unemployment
    longer-term frictional unemployment due to having to move or train for the new job
  • problems with unemployment
    financial hurt of the unemployed, social ills with unemployment, in a recession, everyone’s income grows more slowly and lost production is permanent
  • inflation
    a general increase in prices
  • price index
    index used to measure inflation
  • C.P.I.—Consumer Price Index
    price index that measures the change in prices in goods and services that consumers consume
  • P.P.I.—Producer Price Index
    price index that measures the change in prices in goods and services that producers consume; also influences C.P.I.
  • GDP deflator
    used to calculate real GDP
  • problems with inflation
    fixed incomes’ purchasing power decreases, it destroys price information, and it affects lending and borrowing (making lending riskier)
  • ideal inflation rate
    1.5%-2%
  • one thing that resists price reductions
    wages
  • effect of wage raises not being given during inflation
    real wages decrease
  • automatic stabilizers
    unemployment compensation, graduated income tax, and spending rigidities
  • fiscal drag
    stabilizers when preventing the eradication of inflation or a recession by reducing the size of the multiplier
  • deficit
    this year’s debt or surplus number
  • debt
    total debt
  • surplus
    a negative deficit that makes debt decrease
  • surplus equation
    T>G+TR
  • deficit equation
    T<G+TR
  • balanced budget equation
    T=G+TR
  • budget philosophies
    annually balanced budget, full employment balanced budget, and discretionary fiscal policy
  • annually balanced budget effect
    causes destabilization by stimulating inflated economies and increases deficit
  • full employment balanced budget effect
    balances the economy only if it is at full employment and has a neutral impact on the economy
  • discretionary fiscal policy effect
    stabilizes the economy while making surpluses and deficits worse
  • investment multiplier formula
    same as the government spending multiplier
  • how to calculate an equilibrium output increase
    Use the investment multiplier formula to calculate the multiplier, then multiply the amount of the investment by the multiplier."