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ECON Final Flashcard

Econ final

What was unusual about the 2001 Recession? 1) GDP never went negative 2) We didn't come out strong like we usually do
What 3 things make a multiplier larger? 1) Saving less 2) Spending less on imports 3) Tax cuts
Worker Productivity Amt a worker produces within an hour * price
What's wrong with how we measure GDP/Growth? 1) Says nothing about unemployment 2) The more we produce, the more we pollute. 3) Doesn't say what was produced.
3 Policies that shift the A.D. curve to the right 1) Gov. Spending 2) Tax Cuts 3) Lowering the int. rates
How long do recessions and expansions last? Recessions: 11 Months Expansions: 5 years
Formula for real interest rates r=i-p (Real = nominal - inflation)
Real GDP Formula Real GDP = (nominal GDP)/(price index or GDP deflator)
Wealth Effect People spend more because on paper they look wealthier than they are because of their assets. Assume they can sell their assets later to pay for what they spend now.
Demand-Pull Inflation Low unemployment rate, high demand for goods and services. Ex.: Vietnam war. demand high since unemployment was low, then the war further increased the demand for goods.
Cost-Push Inflation Energy Prices go up, takes more $ to produce goods, prices go up to make up for the higher costs. Ex.: OPEC cutting production of oil
Stagflation High unemployment coupled with high inflation
When is inflation a problem? When you can't predict it! Prices go up, but wages stay the same.
Unemployment Formula Unem= (# of people unem.) / (Labor force (unem. + employed))
Frictional Unemployment Good for the economy. It's voluntary. Looking for a better job, in school, paternity/maternity leave.
Cyclical Jobs lost and gained through business cycles. Theoretically, you get your job back when the demand his high again. TEMPORARY.
Structural BAD. Skill set doesn't match the job demand. Your job never comes back.
Nairu Theory Natural Rate of Unemployment.
Created by: jersakn