Help
Options
Didn't know it?
click below
click below
Knew it?
click below
click below
Don't Know
Remaining cards (0)
Know
retry
shuffle
restart
0:00
Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page.
Normal Size Small Size show me how
Normal Size Small Size show me how
AP Macro: Unit 2
| Term | Definition |
|---|---|
| Business Cycle: peak | low unemployment, spending confidence is high |
| Business Cycle: trough/recession | GDP contracts, unemployment goes up, spending falls |
| Business Cycle: negative output gap | unemployment high, sluggish economy (recessionary gap- below the trend line) |
| Business Cycle: positive output gap | spending is high, inflation is high, economy is expanding rapidly |
| Business Cycle: recession | the downward sloping portion (contraction) occurs when GDP falls for 6+ months |
| Sahm Rule | focuses solely on unemployment, recession will occur when the national unemployment rate goes above 0.5% or more in relativity to the low during the previous 12 months |
| GDP (acronym meaning) | gross domestic product |
| GDP (defintion) | the dollar value of all final goods and services produced within a country in one year |
| Intermediate goods | the tomato's put on the pizza, the bed in a furnished house |
| 3 ways to measure the GDP | 1, expenditure approach, 2, income approach, 3, value added approach |
| Expenditure approach (only one tested on) | all the purchases made on goods and services produced in the US in 1 year |
| Expenditure approach equation | C+I+G+(X-M) |
| Letter meaning: C+I+G+(X-M) | consumption, investment, government spending, exports, imports |
| Things that don't count towards GDP | Intermediate goods, used goods, financial transactions, transfer payments, illegal sales, non-market work, investments |
| Intermediate goods and used goods (WHY) | will be contributed in final product, and already have contributed (if included cause mass inflation) |
| Financial transactions and transfer payments (WHY) | have already been accounted for (simply moving money, not making more) |
| Illegal sales and non-market work (WHY) | too hard to track |
| Investments (stocks+bonds) (WHY) | nothing new was created as a profit |
| Circular flow model (flow) | spending/money goes right while goods and services go left |
| Circular flow model (4 portions) | Business, household, resource market (orchard), product market (mall) (sometimes government is included with taxing, subsidies, and welfare) |
| 4 factors of production | land (rent), capital (interest), labor (wages), entrepreneurship (profit) |
| Inflation | purchasing power of the dollar, dollar has lost value |
| Unemployment equation | #unemployed/#in labor force x 100 |
| Labor force | # of people looking for a job or have a job |
| Labor force participation rate (equation) | #people in labor force/working age population x 100 |
| Part time workers: fully employed? | Yes |
| Discouraged workers | people who have given up on searching (not considered unemployed because they left the labor force, unemployment rate to drop) |
| Frictional unemployment | temporary unemployment, switching jobs, 1st time entering the labor force, includes seasonal unemployment |
| Structural unemployment | long term unemployment because workers don't have the right skills (AI, automation) |
| Natural rate of unemployment | Made up of frictional and structural unemployment (exists even when the economy is doing great, 4%-6%) |
| Cyclical unemployment | happens when there is a downturn in the economy, workers lose jobs because of a recession |
| Hyperinflation | prices of goods go up at an extreme rate (ex. Zimbabwe 4.5 trillion% increase) |
| 2 Causes of inflation | 1, Cost-push inflation, supply left, price up, 2, demand pull inflation: demand right, price up |
| Demand pull inflation | too much money chasing too few goods |
| 2 Ways GDP goes up | 1, prices can increase (# goes up, inflation), 2, produce more/better valuable goods+services (real increase in GDP) |
| When comparing changes in prices what is the control | measures in 2009 $ value |
| When real GDP dips... | unemployment rates spike |
| Exceptions to the labor force: | retired people, disabled people, military members (active duty), stay at home parent, incarsirated people, students. |
| CPI (acronym meaning) | Consumer price index (how much consumers spend) |
| CPI (equations) | CY/BY x 100 |
| CY | Current year value, closer to now |
| BY | Base year value, furthest from now |
| The number calculated from CPI... | is not the rate of inflation (don't make that mistake) it is we have paid the entire BY value and the added percentage calculated |
| % of Inflation (equation) | CY-BY/BY x 100 |
| How to use the inflation equation... | have to find the CPI of CY and BY, then plug those values into the equation |
| Is deflation good? | The $ gains more power (seems good) but it causes unemployment, everyone receives less money, and recession and lowered GDP can arise |
| Limitation of the GDP | PIES (population, inequality, enviornmental, shadow economy) |
| Population (PIES) | GDP doesn't show the economic distribution, GDP per capita makes up for this limitation (individual wealth) |
| Inequality | Also means distribution to an extent, it is the slice of pie each household/person gets |
| Environment | GDP doesn't factor in pollution from production |
| Shadow Economy | work and earning money under the radar (babysitting) |
| GDP delflator (definition) | a key price index used to measure inflation by tracking the average change in prices for all domestically produced final goods and services in an economy |
| GDP deflator (equation) | (nominal GDP/ real GDP)x100 |
| Real GDP equation | (nominal GDP/ GDP deflator)x100 |
| Inflation rate equation | (deflator year 2- deflator year 1/ deflator year 1)x100 |
| Nominal GDP equation | real GDP x GDP deflator/ 100 |
| If BY isn't given... | assume its 100 because nominal and real are = |
| Deflator vs. CPI | CPI measures the price changes of a fixed basket of goods and services purchased by urban households, GDP Deflator measures the price changes of all final goods and services produced domestically across consumers, businesses, and government |
| Interpretation of CPI | we have paid the entire value and add % calculated (ex. 102 100+2%) |
| Interpretation of GDP deflator | 100, BY, 125, prices have increased 25% since BY, 85 economy has experienced a 15% deflation since BY |
Created by:
ayayui101772