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Macroeconomics
Part 2
| Question | Answer |
|---|---|
| Gross domestic product | The total market value of all final goods and services produced by an economy in a given year |
| Two ways GDP can be calculated | Expenditure Approach and Income Approach |
| Expenditure Approach | A calculation of GDP that totals all that the economy spends on final goods and services in one year Formula: Y = C + I + G + (X -M) |
| Income Approach | A calculation of GDP that total all the incomes earned by the different factors of production in producing all final goods and derived in one year |
| recession = | (two quarters in a row) Recession is two consecutive quarters where the economy contracts (Negative GDP) |
| Components of GDP Y = C + I + G + (X -M) | C: Consumption I: Investment Spendings G: Government spending X: Export M: Import |
| Economic growth | An increase in an economy's total production of goods and services |
| Standard of Living | The quantity and quality of goods and services that people are able to obtain to accommodate their needs and wants |
| GDP growth rate equation | (real GDP year 2 - Real GDP year 1) ----------------------------------------------- x 100 Real GDP year 1 |
| Why is Economic Growth a Goal? | In Canada, successful economic growth is generally considered to occur when real GDP increases between 2 and 4 percent annually |
| Factors for Limitations of GDP (measure of OUTPUT) | Population size: population may change significantly over the yrs Inflation: Nominal GDP vs. Real GDP Non-market Production: output that has no dollar value attached to it (volunteer work) Underground Economy: transactions where no “paper trail” exists |
| Nominal GDP vs. Real GDP | Nominal GDP: The total value of GDP before it is adjusted for price increases Real GDP: The total value of all goods and services produced in a country in a given year, adjusted for price changes |
| Factors for Limitations of GDP (measure of WELL-BEING) | Types of goods produced: The inclusion of all types of goods and services produced weakens GDP Environmental degradation: negative environmental effects of our economic production Leisure: Distribution of Income: |
| The Unemployment Rate | The percentage of the labor force that is not working at any given time. Calculated once per month number unemployed ------------------------- x 100 Labor force |
| Categories for Population | - those not legally eligible for the workplace (under 15 years old, or institutionalized) - Those eligible to be part of the workforce but have chosen not to participate - The Labour Force: employed people, ones willing to work or seeking employment |
| Types of Unemployment: (SSCCGF) | Structural unemployment: (Technological and Replacement unemployment) -Geographical unemployment -Frictional unemployment -Cyclical unemployment -Seasonal unemployment -Classical unemployment |
| Why is Full employment a goal? | -helps to maximize the efficient use of the productive input of labor -High unemployment makes government spend on programs like EI. - Unemployment leads to social costs |
| Social costs associated with unemployment | - loss of self-esteem - loss of job skills - increase in family tension - Periods of social unrest - Higher crime rates - Poorer physical and mental health - Political upheaval |
| Rate when is full employment in Canada considered by many | Full employment in Canada is considered by many to be when the unemployment rate is in the range of 6-7% |
| Okun’s Law | States that for every percentage point that the actual unemployment rate exceeds the natural rate, a GDP gap of 2% occurs |
| GDP gap | The difference between the actual GDP produced by the economy and the potential GDP that could have been produced if the unemployment rate was not higher than the natural rate |
| What happens if an economy's resources are not used to its full potential due to unemployment: | We would find ourselves inside the production possibilities curve |
| Employed vs Unemployed | Emp: Persons who are employed full-time or part-time during a specified payroll period Temporary employees and those on leave are included Unemp: Persons who are not working, are available for work, and are actively seeking employment |
| Limitations of unemployment | part-time jobs are partially employed, but unemployment rate makes them counted as if they were fully employed,making rates inaccurate,discouraged workers, Indigenous people living on reserves are not counted in the labor force(hard to collect their data) |
| What are discouraged workers | workers who have been looking for a job for so long that they have just “given up” believing that no suitable work is available for them |
Created by:
chanelm15
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