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macro quiz 3
| Term | Definition |
|---|---|
| GDP per capita | productivity Y/L (gdp/labor) |
| productivity | the quantity of goods and services being produced from each unit of labor |
| productivity function | Y=AF(L, N, H, K) |
| human resources | what skills/knowledge workers have |
| constant returns to scale | changing all inputs by the same percentage causes output to change by that percentage (ex 2Y=A*F(2L, 2N, 2H, 2K) |
| diminishing returns/diminishing marginal product of capital | as the stock of capital rises, the extra output produced from an additional unit of capital falls (if labor doesn't change while this is happening) |
| catch-up effect | effect of initial conditions on subsequent growth where a small amount of capital investment can substantially raise productivity in a struggling market (as opposed to only a little in a successful market) |
| how companies raise money for capital | stocks and bonds |
| bonds | certificate of indebtedness that specifies the obligations of the borrower to the buyer of the bond (get a set amount at the maturity date) |
| stock | partial ownership in a firm and is claim to some of the profits the firm makes (how much money investor gets is based on how well company is doing) |
| equity finance | sale of stock to raise money |
| debt finance | sale of bonds to raise money |
| financial intermediaries | financial institutions which savers can indirectly provide funds to borrowers (such as banks) |
| national saving | S=I=Y-C-G |
| private saving | the amount households have left after paying taxes and consumption (Y-T-C) |
| public savings | the amount of tax revenue that the gov has left after paying for its spending (T-G) |
| budget surplus | excess of tax revenue over government spending which can be used to repay some of the government debt (T-G>0) |
| budget deficit | excess of government spending over tax revenue which accumulates government debt (T-G<0) |
| balanced budget | government spending=tax revenue |
| market for lonabale funds | the market in which those who want to save supply funds and those who want to borrow to invest demand funds |
| saving | tje source of the supply of loanable funds which comes frmo households and public |
| interest rate | the price of funds (amount borrowers pay for loans and amount lenders receive on savings) |
| investment | the source of the demand for loanable funds from firms and households borrowing them |
| investment tax credit | gives a tax advantage to any firm building a new factory or buying a new piece of equipment (to increase demand for loanable funds leading to higher interest rates and savings) |
| debt-to-GDP-ratio | useful measure of gov's indebtedness relative to its ability to raise tax revenue (rises during war, falls during peace) |
| crowding out | a decrease in investment that results from government borriwing |
| budget deficit impact on market | raises interest rates and decreases investments |
| budget surplus impact on market | reduces interest rates and stimulates investment |
| employed | paid employees, self-employed, and unpaid workers in a family business both part time and full time |
| unemployed | people not working but are available for work and have looked for work during the previous 4 weeks |
| labor force | employed + unemployed |
| discouraged workers | people who aren't working and haven't looked for work in the past four weeks |
| unemployment rate | percentage of labor force that is unemployed 100(#unemployed/laborforce) |
| labor-force participation rate | percentage of adult population that is in labor force 100(laborforce/adultpopulation) |
| natural rate of unemployment | the normal rate of unemployment around which the unemployment rate fluctuates (there's always going to be unemployment present) |
| cyclical unemployment | goes with business cycle, the deviation of unemployment from its natural rate |
| frictional unemployment | short term unemployment that results from the job search process (occurs bc of sectoral shifts and unemployment insurance) |
| structural unemployment | occurs because the number of jobs avaible in the labor market is insufficient to provide desriable jobs to everyone (wages are stuck above equilibrium due to minimum wage, unions, and effciency wages) |
| unemployment insurance | offers workers partial protection against job loss which can provide an incentive not to work |
| sectoral shifts | changes in the composition of demand among industries and regions altering the labor market (steel industry leaving pittsburgh), increasing frictional unemployment |
| impact of binding minimum wage | increases structural unemployment since companies can't afford to keep all the workers so while some are getting a better wage, others will lose theirs jobs |
| impact unions | raises wages for union workers, bad for those seeking employment (go to non-union fields and get lowers pay) |
| efficiency wages | when firms voluntarily pay above equilibrium wages to boost worker productivity and increase firm profitability as a result of better health, worker turnover, worker quality, worker effort, and worker morale |
Created by:
allison_07