All Flashcards
What is the impact of increased government spending on GDP?
Generally increases GDP, especially during a recession, by boosting aggregate demand.
What is the impact of lower interest rates on investment spending?
Encourages investment spending, as borrowing becomes cheaper.
How does a tax cut affect consumer spending?
Tends to increase consumer spending by increasing disposable income.
What is the impact of trade tariffs on net exports?
Can decrease net exports if other countries retaliate with their own tariffs.
How does expansionary monetary policy affect inflation?
Can lead to higher inflation if the money supply grows too quickly.
How does increased regulation affect business investment?
Can decrease business investment due to increased costs and compliance burdens.
What is the effect of subsidies on domestic industries?
Subsidies can help domestic industries compete in global markets but may also lead to inefficiencies.
How does a minimum wage increase affect unemployment?
May lead to increased unemployment if businesses reduce staff to offset higher labor costs.
What is the impact of quantitative easing on the money supply?
Increases the money supply by injecting liquidity into financial markets.
How do unemployment benefits affect the labor force participation rate?
May decrease the labor force participation rate if they reduce the incentive to seek employment.
What are the differences between nominal and real GDP?
Nominal GDP is measured in current prices, while real GDP is adjusted for inflation. Real GDP gives a more accurate picture of economic growth.
What are the differences between frictional and structural unemployment?
Frictional unemployment is temporary, while structural unemployment is due to a mismatch of skills.
What are the differences between CPI and GDP deflator?
CPI measures the price changes of a basket of consumer goods/services, while the GDP deflator measures the price changes of all goods/services produced in an economy.
What are the differences between a recession and a depression?
A recession is a significant decline in economic activity, while a depression is a severe and prolonged recession.
What are the differences between inflation and deflation?
Inflation is a general increase in prices, while deflation is a general decrease in prices.
What are the differences between leading and lagging economic indicators?
Leading indicators predict future economic activity, while lagging indicators confirm past trends.
What are the differences between fiscal and monetary policy?
Fiscal policy involves government spending and taxation, while monetary policy involves managing the money supply and interest rates.
What are the differences between absolute and comparative advantage?
Absolute advantage is the ability to produce more of a good/service, while comparative advantage is the ability to produce at a lower opportunity cost.
What are the differences between microeconomics and macroeconomics?
Microeconomics studies individual markets and decisions, while macroeconomics studies the economy as a whole.
What are the differences between a budget deficit and the national debt?
A budget deficit is when government spending exceeds revenue in a year, while the national debt is the accumulation of past deficits.
How does an increase in consumer spending affect GDP?
Increases GDP because 'C' (consumer spending) is a component of the GDP calculation (C + I + G + Nx).
How does a recession affect cyclical unemployment?
Increases cyclical unemployment because businesses lay off workers due to decreased demand.
How does automation affect structural unemployment?
Increases structural unemployment by creating a mismatch between workers' skills and available jobs.
If a country exports more than it imports, how does this affect its GDP?
Increases GDP because net exports (Nx) are positive, contributing to the overall GDP calculation.
How does inflation affect the purchasing power of consumers?
Decreases purchasing power because each dollar buys fewer goods and services.
How does increased government spending impact the economy during a recession?
Increased government spending can stimulate demand and help the economy recover from a recession.
How does a rise in oil prices affect the CPI?
It increases the CPI because transportation costs and the prices of related goods and services rise.
How does a surge in housing construction affect GDP?
Increases GDP because investment spending ('I') includes residential construction.
If many workers quit their jobs to seek better opportunities, what type of unemployment increases?
Frictional unemployment increases as more people are temporarily between jobs.
How does increased investment in education and training affect structural unemployment?
It can reduce structural unemployment by better aligning workers' skills with employer needs.