ECON 0110 Study Guide - Final Guide: Discount Window, Excess Reserves, Inverse Relation

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Rational economic behavior: individual tries to maximize benefit with a given cost or minimize the expected cost of achieving a benefit. Positive (if this, than this: theory/statement about how economy works, factual. Normative (should be: value judgment, opinion-based. Fallacy of false cause: association does not imply causation. Fallacy of composition: false belief that what is true for individual must be true for whole. Ceteris paribus fallacy: all things being equal fallacy, economy is constantly changing, no constants in economics. Fiscal policy: using govn"t purchases, transfer payments, taxes & other borrowing to influence economy-wide variables, such as inflation, unemployment, & economic growth. Monetary policy: manipulation of interest rates, required reserve ratio, and money supply to influence economy-wide variables. Mandated federal govn"t to be promote: maximum employment, maximum production, maximum purchasing power. Price stability: low inflation, maintain purchasing power of u. s. $ Economic growth: increase output of goods & services, ^ output / capita, measured through gdp.