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Macro Exam 2
| Question | Answer |
|---|---|
| GDP Deflator | Nominal GDP ________________ x 10 Real GDP |
| Inflation Rate in Year 2 | GDP Deflator in year 2 - GDP Deflator in year 1 ______________________________________________________ x 100 GDP Deflator in year 1 |
| Y = C + I + G + Nx | Consumption + Investment + Government Expenditure + Net Exports |
| Nominal GDP | GDP That doesn't account for inflation |
| Real GDP | GDP That accounts for inflation |
| Nominal GDP Formula | Price of current year x quantity of current year |
| Real GDP Formula | Price of base year x multiplied by quantity of current year |
| CPI | a measure of the overall cost of goods and services bought by a typical consumer |
| CPI Formula | Baskets cost in current year - CPI in year 1 ______________________________________________ x 100 Baskets cost in base year |
| Inflation Rate w CPI | CPI in yr 2 - CPI in yr1 _________________________ x 100 CPI in yr 1 |
| Problems with CPI | Substitution Bias Introduction of New Goods Problems w CPI |
| What does GDP Deflator have that CPI Doesn't | - Ratio of nominal GDP to real GDP - Reflects prices of all goods & services produced domestically -Compares price of currently produced goods and services to price of the same goods and services in the base year |
| What does CPI have that GDP Deflator Doesn't | - Reflects prices of goods & services bought by consumers -Compares price of a fixed basket of goods and services to price of the basket in the base year |
| How to find dollar figures from different times | Price Level Today Amount in year t dollars x ____________________ Price Level in year T |
| Nominal interest rate | Interest rate as usually reported without a correction for the effects of inflation |
| Real interest rate | Interest rate corrected for the effects of inflation |
| Real interest rate Forumula | Nominal interest rate - Inflation rate |
| Employed | Full time, Part Time , Self Employed |
| Unemployed | people not working; looking for jobs & have looked for work in previous 4 weeks |
| Who is not in Labor Force | full time students and retirees |
| What is labor force | employed + Unemployed |
| Unemployment Rate | # of unemployed ___________________ x 100 Labor Force |
| Labor Force Participation | Labor Force 100 x ______________ Adult Population |
| Adult Population | Employed + Unemployed + Not in Labor Force |
| Natural Rate of Unemployment | Normal Rate of unemployment around which the unemployment rate fluctuates |
| What are the types of unemployment | Frictional, Structural, and cyclical unemployment |
| Cyclical Unemployment | type of Unemployment that occurs where there is downturn in the economy |
| Structural Unemployment | Occurs because the number of jobs available in some labor markets is insufficient to provide jobs for everyone who wants it ; due to wage higher than equilibrium wage |
| Frictional Unemployment | Unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills ; short term for most workers |
| Discouraged Workers | Individuals who would like to work but have given up looking for a job |
| Unemployment Rate's flaws | Discouraged workers, Full vs Part time workers, Misreporting |
| Union | worker association that bargains with employees our wages, benefits, and working conditions; good for insiders not outsiders |
| Efficiency Wages | above equilibrium wages paid by firms to increase worker productivity |
| Unemployment insurance | A government program that partially protects the incomes of workers who become unemployed |
| What kind of unemployment does minimum wage cause | structural unemployment |
| Recession | Period of declining real incomes and rising unemploymen |
| Depression | Severe recession |
| Aggregate demand | curve that shows the quantity of goods and services that households, firms, and government buy at each price level |
| Why is Aggregate demand downward sloping | because as the overall price level in an economy decreases, the quantity of goods and services demanded increases |
| What are the demand shifters for aggregate demand curve | when people are optimistic, when economy is booming, government spending, global economic growth |
| Shifters of SRAS | input prices, productivity, government policies |
| Stagflation | Unemployment is up and prices are up at the same time |
| Physical Capital | The stock of equipment and structures that are used to produce goods and services |
| Human Capital | Knowledge and skills that workers acquire through education, training, and experience |
| Natural Resources | the inputs into production of goods and services that are provided by nature such as land, rivers, and mined deposits |
| technology | society understanding of the best ways to produce goods and services |
| Catch-up effect | The property whereby countries that start off poor tend to grow more rapidly than countries that start off rich |
| (True/ False) If the GDP Deflator in 2016 was 150 and the GDP Deflator in 2017 was 175, then the inflation rate in 2017 was 25% | false |
| During a presidential campaign, the incumbent claims he deserves reelection because nominal GDP grew 12% in 4 years. You know population grew 4% and the GDP deflator rose 6% during that time. You should conclude that real GDP per person. | grew, but by less than 12 percent |
| The introduction of the video cassette recorder in the 1970s exemplified a problem in measuring the cost of living; that problem is the problem of | introduction of new goods. |
| Country Y had a population of 1,100, of whom 275 worked an average of 8 hours a day and had a productivity of 58. Country Z had a population of 2,000, of whom 800 worked 6 hours a day and had productivity of 80. | Country Z had the higher level of real GDP and real GDP per person |
| Productivity is defined as the quantity of | goods and services produced from each unit of labor input. |
| If a production function has constant returns to scale, then if all inputs double so does production (True/False) | True |
| The natural rate of unemployment includes | both frictional and structural unemployment |
| Tim and Bev are both out of work. Tim stopped looking due to job cuts and low chances of finding work. Bev wants a job and has looked before but isn’t currently searching. The Bureau of Labor Statistics considers. | both Tim and Bev to be marginally attached workers. |
| Which of the following is an example of an efficiency wage | A higher wage paid to a more experienced worker |
| Unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills is called | frictional unemployment. |
| The initial impact of an increase in an investment tax credit is to shift aggregate | demand right |
| Other things the same, as the price level decreases it induces greater spending on | both net exports and investment. |
| Why is the LRAS curve vertical? | Prices have nothing to do with long-term output. |
Created by:
Orrin_Douglas