What is the largest component of spending in the united states?
Inflation Rate Formula
(Current year CPI ) - (Earlier Year CPI) / (Earlier Year CPI) x100
4 categories of income
1. wages 2. interest 3. rent 4. profit
CPI formula
Current basket/base basket X100
GDP is not a perfect measure of well-being; for example,
GDP fails to account for the quality of the environment
the measure of production that values production using the current prices is called
Nominal GDP
GDP deflator
Nominal GDP/Real GDP x 100
what are the three main factors affecting labor productivity?
Property rights, Capital, Technological change
To examine how the total production of an economy has changed over time, it would be better to examine
Real GDP
Labor unions cause unemployment because the union contract wage is set
above the market wage, causing a surplus of labor.
Minimum wage laws cause unemployment because the legal minimum wage is set
above the market wage, causing labor demand to be less than labor supply
which of the following is not a financial intermediate
airlines
Natural Rate of Employment (NRU)
amount of unemployment that the economy normally experiences equals frictional plus structural
Real GDP formula
base year prices x current year quantities
consumption spending
consumption spending
4 major categories of expenditure
consumption, investment, government purchases, and net exports
which of the following terms refers to a flow of funds from savers to firms through financial markets?
direct finance
the informal sector can be a significant drags on the economies of developing countries because the firms in the informal sector
do not pay taxes to the government
Gross Domestic Product (GDP) is measured by
dollar value of all final goods and services produced in the economy
which of the following would decrease the unemployment rate
government aid to retrain unemployed workers
During the great depression, cyclical unemployment increased as the recession continued. This increase in cyclical unemployment
had no effect on the natural rate of unemployment
Legalizing all forms of illegal activities
increases GDP and reduces the size of the underground economy.
the perfect increase in the CPI from one year to the next is a measure of the
inflation rate
which of the following is not directly counted in GDP
intermediate goods
LFPR (Labor Force Participation Rate)
labor force/working age population x 100
i'm a CLOSED economy, which of the following components of GDP is not included
net exports
if a minimum wage is set at 5$ per hour which of the following will occur
none of the above
long-run economic growth requires all of the following expect
political instability
Rate of increase equation
present -past/past
how do we calculate real GDP per capita?
real GDP divided by the population
the producer price index measures the prices that firms
revive for goods and services they use at all stages of production
structural unemployment is the result of
technological change or foreign competition
the most widely used measure of inflation is based on which of the following price indicted
the consumer price index
what is potential GDP
the level of real GDP attained when all firms are producing at capacity
we say the economy is at full employment if the unemployment rate is equal to
the natural rate of unemployment
labor productivity refers to
the quantity of goods and services that can be produced by one worker or by one hour of work
Gross Domestic Product is calculated by summing up
the total market value of final goods and services produced in the economy during a period of time
Economist consider full employment to occur when
the unemployment rate consists of only frictional and structural unemployment
When the labor is at full employment
there is no cyclical unemployment in the economy
unemployment rate
unemployed/labor force x 100
real GPD is GPD in a given year
valued in the prices of the base year
