Macroeconomics Chapters 1-6

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externalities

3rd party not involved in transaction but are affected (pollution, noise)

structural

a job is replaced and goes away permanently usually due to technology leading to unemployment

economics

a science that studies scarcity; concerned with market outcomes (price and quantity)

inflation

a sustained increase in price level

omitted variable

a variable that impacts both correlations and misleading/bias

negative price ceiling effects

black market, underinvestment, opportunity cost

nominal gdp

calculated by using the value of output at current prices

real gdp

calculated by valuing outputs of different years at common prices

inflation rate

change in PL (price level)

negative price floor effects

disposal problem (gov. has to buy goods), over investment, unwanted discounts

comparative advantage

do what you are best at; you specialize in the thing you give up less to do; focus on things you are comparatively better at

seasonal

employment only during one season resulting in unemployment during other seasons

rent control

forcing a market to lower a price (apartment rate) which in the end makes it go away (landlord pulls apartment out)

united states

largest economy in the world; mostly privately owned economy; large population and productive

volume of transactions

lower number of quantity demanded and quantity supplied

price ceiling

maximum price that one is allowed to sell at, typically mandated by law; rent control, tickets, agriculture

supply

plots relation between price and quantity supplied all other things being equal

demand

plots the relation between price and quantity demanded all other things equal

factors that shift demand

population, prices of related goods, preferences, future expected prices

price index

price in initial year/ price in new year

real interest rate

r

role of government

referee-enforce laws; regulator-monopolies and banking systems; expenditures-purchases products and supplies products; taxing; redistributor- welfare,food stamps,medicare,medicaid

macroeconomics

studies the economic aggregates, price overall (inflation), unemployment rates, total production of the economy (GDP)

microeconomics

studies the prices of goods, employment of individual, production of a good or firm

factors that shift supply

technology, industry size, price of inputs, price of related outputs

frictional

temporary unemployment; in between jobs or a normal job turning; a new job is expected soon

price level

the average of all prices of all final goods and services produced in an economy in a given year

scarcity

the situation in which we want more than there is

gross domestic product

the value of all final goods and services produced in a country in a given amount of time

opportunity cost

the value of the most highly valued alternative when a choice is made

cyclical

unemployment related to the recession

leftward

when demand decreases, the curve shifts..?

rightward

when demand increases, the curve shifts...?

increase

when inflation increase, wages tend to__________ since wages are a price

equilibrium

when quantity demanded and quantity supplied are equal

shortage

when quantity demanded is larger than quantity supplied

surplus

when quantity supplied is larger than quantity demanded

leftward

when supply decreases, the curve shifts..?

rightward

when supply increases, the curve shifts...?

inputs

labor, land and capital

nominal interest rate

i

real interest rate

i-change in PL (nominal interest rate-change in price level)

inferior good

if income decreases and quantity demanded increases

normal good

if income increases and quantity demanded increases

borrowers

if inflation is higher than expected who benefits?

demand decreases

if price decreases and quantity decreases what happens to demand?

supply increases

if price decreases and quantity increases, what happens to supply?

demand increases

if price increases and quantity increases, what happens to demand?

supply decreases

if price increases, and quantity decreases, what happens to supply?

inflation

increases in the price level; it does not tend to erode real wages

determinants of real wage

independent of inflation based on data; productivity; unemployment rate

price floor

minimum price that one is allowed to sell at, typically mandated by law; minimum wage, airline tickets, agriculture

full employment

no cyclicial; normal amounts of frictional, seasonal and structural employment

real wage

nominal wage/ price index

minimum wage

people want more money but in the end less jobs because employees want to spend less

discouraged workers

people who have given up looking for a job


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