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ECON-B252 Final
Barnette
| Question | Answer |
|---|---|
| Unemployment | individuals over the age of 16 who are willing and able to work but do not have a job |
| Labor force formula | LF= Employed + Unemployed |
| Marginally attached | Adults who are available to work but have not been looking in the last 4 weeks |
| Underemployed formula | Unemployed + Involuntary Part time+ Marginally attached |
| Discouraged workers | individuals who would like to work but have given up looking for a job |
| Unemployment rate | % of LF that is unemployed Unemp rate = Unemployed/ LF X 100 |
| Underemployment rate | Underemployed/ Employed + Underemployed x 100 |
| labor force participation rate | LFPR= LF/ CNA popiulation x 100 |
| CNA population? | Civilian noninstitutional adult |
| Employment population ratio | Employed/ CNA population |
| 4 types of unemployment | frictional, structural, cyclical, seasonal |
| Frictional unemp: | Unemployed ppl looking for work between jobs |
| Seasonal unemp | Unemployed ppl due to seasonal changes in particular jobs or industries |
| Structural unemp | Unemployed ppl who do not have the skills for a particular job |
| Cyclical unemp | Economy wide unemployment due to downturn in business cycle |
| Inflation | Upward movement in average level of prices |
| Deflation | Downward movement in the average level of prices |
| Purchasing power | Value of $$ for buying goods and services Varies with prices and income |
| Price Index | The cost of today's market basket of goods expressed as a percentage of the cost of the same market basket during a base year. |
| Price Index formula | price index = basket price/basket price in base year x 100 |
| Inflation rate | Rate of change in price index between two time periods |
| Inflation rate = | (Price index in year 2 - price index in year 1)/(Price index in year 1) x 100 |
| CPI | Consumer price index - average price of goods bought by the typical consumer |
| PPI | Producer price index- Average price received by producers |
| GDP deflator | Measures the average price of all final goods and services |
| Nominal value | the economic statistic actually announced at that time, not adjusted for inflation; contrast with real value.... price expressed in todays dollar |
| Real value | an economic statistic after it has been adjusted for inflation; contrast with nominal value....value expressed in purchasing power |
| Real interest rate (i) = | Nominal i - expected i |
| RVy= | (NPx/CPIx) * CPIy |
| price of basket is calculated by | price x quantity |
| CPI = | Price of basket in given year/ price of basket in base year |
| Business fluctuation | ups and downs in an economy |
| Types of business fluctuations | Expansion and contraction |
| Circular flow | Goods and services flow in 1 direction and money payments in another direction |
| GDP | the total market value of all final goods and services produced annually in an economy |
| NOT included in Gdp | 1. intermediate goods 2. Non-production transactions 3. Non-market (illegal) activities 4. Transfer payments |
| Expenditure Approach | Computes national income by adding up the dollar value at current market price of all final goods and services |
| Expenditure approach formula | GDP=C+I+G+ NX c- consumption I- gross private domestic investment G- govt expenditures NX- Net exports (total exports- total imports) |
| Income approach | measures national income by adding up all income received by all factors of production. |
| Income approach formula | GDP= wages + rent + interest + profit + depreciation + indirect business taxes |
| Depreciation and net domestic product is | NDP |
| NDP= | GDP - depreciation |
| Real GDP | Nominal GDP/GDP Deflator (price index) x 100 |
| GDP growth rate | GDP Year 2 - GDP Year 1/ GDP Year 1 x100 |
| GDP per capita | GDP/population |
| New real GDP | New real gdp= old real GDP( 1+ growth rate)^n |
| Rule of 70 | Doubling time (in years) = 70/(percentage growth rate). |
| Factors of production | Productivity, capital, human cap, labor |
| 5 keys to economic growth | Increase number of resources, increase productivity, Saving, new growth theory, importance of human capital |
| Economic stages of development | -agricultural stage -manufacturing stage -services stage |
| Free rider | someone who consumes resources without working or contributing |
| Y= | A * F (K, L, H, N ) OR Output. time period= some function of capital, labor, human cap, & natural resources inputs |
| LRAS curve | An amount of real GDP at full employment |
| LRAS curve shifts | outward= growth which is caused by - growth of LFPR -Capital accumulation - improvements in technology |
| Aggregate supply | the total of all planned production in the economy |
| Aggregate demand | the total of all planned expenditures in the economy |
| AD curve | shows planned purchase rates for all goods and services in the economy at various price levels, all other things held constant |
| AD formula | C+I+G+NX |
| For ad curve as price level rises... | real GDP demand declines |
| Shifting the AD curve | - any non price level change that increases aggregate spending shifts AD to the right - any price level change that decreases spending shifts AD to the Left |
| Factors increasing AD | - drop in foreign value of a dollar - increased security about jobs and future income -improvements in economic conditions in other countries - reduction in real interest rates - tax decreases |
| when does long run equilibrium occur | Intersection between LRAS and AD |
| Secular deflation | Increase in LRAS results in decrease in price level, all else being equal |
| Factors that effect LRAS | - Labor -physical capital -human cap - total factor productivity -techonology |
| Incerase in demand causes movement _____ the demand curve | UP |
| Factors that effect AD | - Imports -exports - investments -govt ourchases consump |
| SPENT | savings, productivity, education, number of resources, technology..... increase in ANY of these shifts LRAS to the RIGHT |
| LRAS represents | real potential GDP |
| AD represents | total planned spending or expenditures in the economy ... C + I + G + NX (increase in these shifts curve) |
| Keynesian model | - sticky prices - short run - AD determines output |
| Classical model | -flexible prices - Long run - LRAS determines output |
| Any factor that affects long run | affects the short run |
| affects short but not long | input prices and inflationary expectations |
| affects both lras and sras - | - productivity - education - # of resources -competition -tech -govt regulation |
| Recessionary Gap | Actual real GDP is less than potential GDP |
| Inflationary Gap | Actual real GDP is more than potential real GDP |
| Price and GDP fall = | AD decrease |
| Price and GDP rise= | AD increase |
| Price rise GDP fall | SRAS decrease |
| Aggregate short run is | horizontal with fixed prices |
| Disposable income | Personal income after taxes GDP= DI |
| Consumption | Spending on new goods and services |
| Consump formula | y= m(x) +b OR C= M(yd) + b OR (MPC)*(Yd) + constant |
| Spending formula | slope*(disposable income) +constant |
| Average Propensity to Consume (APC) | consumption/disposable income |
| Average Propensity to Save (APS) | Saving/ real disposable income |
| MPC (marginal propensity to consume) | change in consumption/change in real DI |
| MPS (marginal propensity to save) | change in savings/change in disposable income |
| APS + APC and MPS+ MPC should aways equal | 1 |
| DI | C+S= Yd |
| another way to write consump | MPC(yd) + autonomous consumption |
| another way to write savings | MPS(yd) - autonomous consumption |
| Actual investment | AI= planned investment + unplanned investment |
| determinants of consumption and saving | wealth, expectations, household debt, taxes |
| as real interest rate increases the real gdp | decreases |
| What causes planned investment to shift | expectations on future profitability, productive technology, business taxes, cash flow |
| When C+I+G+NX = GDP | equilibrium |
| When C+I+G+NX > GDP | Unplanned drop in inventories |
| When C+I+G+NX < GDP | rise in inventories |
| Equilibrium | Aggregate expenditure equals aggregate production |
Created by:
msaranda