Unit 3 Macro

add up all the income that resulted from selling all final goods and services produced in a given year

income approach

factor payments

labor earns wages, land earns rent, capital earns interest, entrepreneurship earns profit

purchases of final goods by private individuals

consumer spending

Deflation decrease..(2)

consumer spending, GDP

temporary unemployment or being between jobs; graduates; seasonal unemployment

frictional unemployment

school, tanks, but not transfer payments

government spending

the % increase in purchasing power that a borrower pays (adjusted for inflation)

real interest rates

wage adjusted for inflation

real wage

6 month period of decline in real GDP

recession

someone who wants more hours but cant get them is still considered employed

underemployed

workers that are actively looking for a job but aren't working

unemployment

% of people in the labor force who want a job but are not working

unemployment rate

GDP measured in current prices; doesn't account for inflation

Nominal GDP

CPI is a acronym for

Consumer Price Index

measures prices of only the goods and services bought by consumers

Consumer Price Index

Which of the following groups would most likely gain from unanticipated inflation? a- landlords who own apts in cities w/ rent ctrls b- indv. who have fxed retirement incomes c-indv. who earn high incomes d-indv. who have borrowed $ @ fxed interest rates e-banks that have loaned all excess reserves at a fixed interest rate

D

measures the prices of all goods produced

GDP Deflator

GDP expressed in constant, unchanging, dollars

Real GDP

Which of the following best illustrates an improvement in a country's standard of living? a- an increase in real per capita gross domestic product b-a increase in nominal per capita gross domestic product c-price stability d- a balanced budget e- an increase in the consumer price indec

a

Hyperinflation is typically caused by a-high tax rates that discourage work effort b-continuous expansion of the $ supply to finance gov't budget deficits c-trade surpluses that are cause by strong protectionist policies d-bad harvest that lead to widespread shortages e-a large decline in corporate profits that leads to a decrease in production

b

Which of the following will be counted as unemployed by the U.S. Bureau of Labor Stats? a-persons who quit their previous jobs to stat @ home to care for sicks parents b-persons who were laid off from their previous jobs and have not applied for a job in two years c-persons who were fired from their previous jobs and are actively applying for work d- persons who have given up looking for jobs after long searches e- persons who quit their previous jobs to start their own business

c

higher production cost increases prices

cost-push inflation

unemployment caused from a recession; due to economy/ gov't

cyclical unemployment

When an economy is in equilibrium at potential gross domestic product, the actual unemployment rate is a- equal to the cyclical rate b- greater than the natural rate c-less than the natural rate d-equal to the natural rate e-equal to zero

d

decrease in general prices or a negative inflation rate

deflation

too many dollars chasing too few goods

demand-pull inflation

prices increasing at slower rates

disinflation

The consumer price index (CPI) is designed to measure changes in the a- spending patterns of urban consumers only b- spending patterns of all consumers c-wholesale price of manufactured goods d-prices of all goods and services produced in an economy e- cost of a select market basket of goods and services

e

Which of the following household purchases will be counted as part of gross private investment in a country's gross domestic product? a- gov't bonds b-shares of company stock c- corporate bonds d- a new car for personal use e- a newly constructed home

e

add up all the spending on final goods and services produced in a given year

expenditures approach

rising general level of prices and it reduces the "purchasing power" of money

inflation

the % change in prices from year to year

inflation rate

goods inside the final goods don't count

intermediate goods

business spending tools and equipment

investment

Inflation decreases..(2)

investment, GDP

frictional + structural unemployment

natural rate of unemployment

the % increase in $ that the borrower pays not adjusting for inflation

nominal interest rates

wage measured by dollars rather than purchasing power

nominal wage

things made at home-household production

non-market and illegal activites

financial transactions (nothing produced0

nonproduction transactions

index #'s assigned to each year that show how prices have changed relative to a specific base year

price indices

changes in the labor force make some skills obsolete; job never come back; workers must learn new skills to get a job; technological unemployment

structural unemployment