Free Economics Flashcards about Econ5


Study help for Econ Test 5

Question Answer
What term denotes the total dollar value of all final goods and services produced by a nation in one year? gross national product
DEFINITION: another name for gross private domestic investment (GPDI) business investment
DEFINITION: goods that have a life expectancy of more than one year consumer durables
DEFINITION: items that are expected to be worn out or used up within one year consumer nondurables
What accounted for nearly 46% of the 1943 GNP during World War II? government spending
DEFINITION: when foreign competitors sell their products at lower prices because their government taxes its citizens to pay the company. subsidy
DEFINITION: a condition in which governments do not impose trade legislation and people are free to buy and sell products regardless of the nation that produced them. free trade
DEFINITION: the gross national product adjusted for inflation real GNP
DEFINITION: a negative balance of trade experienced when a nation imports more than it exports trade deficit
DEFINITION: people who believe that trade deficits lead to a decrease in the number of domestic jobs and wish to protect those jobs through trade legislation protectionists
To which economist can we attribute the current emphasis on fiscal policy actions that has continued since the 1930s? John Maynard Keynes
How much out of every $5 in the GNP is spent by the government? $1
What was the largest category of federal government spending in 1989? income security
DEFINITION: a tax which all people, no matter how great or small their income, pay the same percentage of their earnings proportional tax
DEFINITION: a tax that takes a greater percentage of a person's income as his income increases progressive tax
DEFINITION: a tax that takes a smaller percentage of a person's income as his income rises regressive tax
What does this formula represent: 1/(1-MPC)? expenditure multiplier
DEFINITION: the belief that when the government borrows money to spend it, the economy will repay the debt when it begins expanding and prospering pump priming
Who developed the basic idea of modern fiscal policy in the book "The General Theory of Employment, Interest, and Money"? John Maynard Keynes
What was the peak amount of GNP paid in government purchases of goods and service during World War II? 46%
DEFINITION: the part of the business cycle in which the nation's GNP is on the rise, the number of available jobs is growing, the unemployment rate is falling, and the national income is expanding expansion phase
DEFINITION: that part of the business cycle in which consumer purchases decline and unemployment increases recessionary phase
Which legislation required the deduction of social security taxes from workers' paychecks? FICA
DEFINITION: the situation in which over-expansion of the nation's money supply leads to a sustained rise in the average price level inflation
Are people who borrow money hurt by inflation? no
DEFINITION: inflation believed to be triggered when a nation's businesses raise their prices, resulting in new demands by consumers for higher wages from their employers cost-push inflation
DEFINITION: a period of very rapid inflation hyperinflation
DEFINITION: adjustments of wages, payments, and other sums according to inflation levels COLA (cost of living adjustment)
DEFINITION: figures measuring changes in prices that household consumers pay for their purchases CPI (consumer price index)
What type of inflation is is most attractive to business firms and labor unions? cost-push inflation
DEFINITION: that part of the business cycle in which rapid expansion comes to a halt as shortages in natural resources, high wages, low unemployment, and rising interest rates combine to create higher prices for consumers peak phase
DEFINITION: that part of the business cycle in which the recessionary phase has bottomed out and the unemployment rate is high while prices and incomes are low trough phase

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