Econ exam 2

Import quotas

meant to deter (discourage) free trade

In calculating GDP, governmental transfer payments, such as social security or unemploymentcompensation, are

not included

how to calculate GDP

private consumption + gross investment + government investment + government spending + (exports - imports)

Corporate bonds

promises by a corporation to repay money the bondholder has loaned to the corporation

Government may lessen income inequality by all of the following means

providing transfer payments to the poor. directly modifying market prices as, for example, by establishing a legal minimum wage. using the tax system to tax the wealthy relatively more heavily than the poor.

partnership is formed when

two or more individuals own and operate an unincorporated business under a partnership agreement

The aggregate cost of unemploymentcan be measured by the amount by which

Potential GDP exceeds actual GDP

Corporation

a legal entity in and of itself and is distinct from its individual owners (stockholders)

Net exports are negative when:

a nation's imports exceed its exports.

Gross Domestic Product (GDP)

the dollar value of the total output produced within the borders of that nation, in a given year

If the costs associated with negative externalities are not internalized by the producer

the equilibrium output will exceed the most efficient output

sole proprietorship

A business owned by one person

vertically integrated firm

A group of plants that is owned and operated by a single firm and that consists of oil fields, refineries, and gasoline stations

recently emerged as one of the world's top trading nations in terms of total trade volume

China

The number of years required for real GDP to double can be found by

Dividing 70 by the annual growth rate

cost-push inflation

Inflation initiated by increases in wages or other resource prices

exchange rate

The equilibrium price in a foreign exchange market

the world's leading trading nation

US BABY

The United States' economy is considered to be at full employmentwhen

about 4-5 percent of the labor force is unemployed (at the natural rate of unemployment)

limited liability

corporate creditors have no legal claim on the personal assets of a corporate stockholder

The corporate form of business enterprise has promoted the development of large-scale business operations because

corporations have been able to marshal large amounts of financial capital through the sale of stocks and bonds

An economy's production capacity is expanding when

domestic investment exceeds depreciation

Kimberly voluntarily quit her job as an insurance agent to return to school full-time to earn an MBA degree. With degree in hand she is now searching for a position in management. Kimberly presently is

frictionally unemployed

industry

group of firms that produce identical or similar products

World Trade Organization (WTO)

hears and rules on trade disputes between nations

consumption expenditures

include consumer durable goods, consumer nondurable goods, and services

Real GDP

refers to GDP data that have been adjusted for changes in the price level

market externality

refers to economic costs and benefits of market activities that go to those who are not directly involved in the market transaction

Stocks

shares of ownership of a corporation

investment includes

such things as business expenditures on machinery and equipment

Exchange rates are particularly important because

they link the price levels of various nations to one another

Demand-pull inflation occurs when

total spending exceeds the economy's ability to provide output at the existing price level