Macro midterm

Employment to Population Ratio Formula

(Number of Employed) / (Working-Age Population) x 100

unemployment results in

-lost incomes and production -lost human capital

to be counted as unemployed must be one of the following

-w/o work but trying to find a job -waiting for a call back -waiting to start new job in 30 days

_____ unemployment is the result of changes in the business cycle

Cyclical

market vlaue

GDP is a market value - goods valued at their market prices

Martin purchases 500 shares of stock in ABC Company at a price of $10 per share. He pays his stock broker a commission of $50 for helping with the transaction. How much does GDP change as a result of Martin's commission payment?

GDP rises by $50.

Johnny is 17 and works in his father's bubble gum store 10 hours a week after school. His father pays him no money but buys video games for him. However, Johnny earns a spot on the high school football team and no longer works in his father's store. How is Johnny categorized in the unemployment figures?

Johnny is not part of the labor force.

percent increase formula

New Value - Original Value/ original value x 100

_____ unemployment is caused by changes in consumer demands or technology

Structural

working age population

The total number of people aged 16 years and over who are not in jail, hospital, or some other form of institutional care or in the U.S. Armed Forces.

natural unemployment rate changes because of

age distribution of population, scale of structural change, the real wage rate, unemployment benefits

Gross domestic product is a measure of:

an economy's total output

final good

an item that is bought by its final user during a specified time period

economic growth refers to

change of goods and services produced

Most trade is based on specialization according to:

comparative advantage

GDP equals

consumption + gross investment + government + (value of exports - value of imports) ( C+I+G+(X-M))

nominal GDP is another name for

current dollar GDP

income equals

expenditure

resources are provided to...

firms by households and in exchange households receive income and use that income to purchase firms output

Natural Unemployment

frictional unemployment + structural unemployment

potential GDP

is the quantity of real GDP produced at full employment. when firms are producing at capacity. corresponds to the capacity of the economy to produce output on a sustained basis.

labor force participation rate

labor force/working age population x 100

An increase in physical capital per worker will:

lead to more output per worker.

something is allocativley efficient when...

marginal benefit = marginal cost

we produce more if

marginal benefit is greater than marginal cost

The key to computing comparative advantage is:

measurement of opportunity cost.

in a problem trying to find nominal GDP, if 2006 is the base year then you...

multiply the non-base year/other year (2011) quantities by the base year (2006) prices

comparative advantage compares cost in terms of

outputs

transfer payment

payment by the government for which the government receives neither goods nor services in return

national product

produced anywhere in the world

Which phase of the business cycle occurs immediately before a trough?

recession

The "business cycle" refers to:

short-run fluctuations in macroeconomic activity.

labor force equals

sum of employed + unemployed

comparative advantage

the ability to produce a good at a lower opportunity cost than another producer

absolute advantage

the ability to produce a good using fewer inputs than another producer

marginal benefit

the additional benefit to a consumer from consuming an additional unit of a good or service

The capital-to-labor ratio measures:

the amount of economic capital per worker.

price level

the average level of prices and the value of money.

marginal cost

the cost of producing one more unit of a good. additional cost of LAST good produced

Cyclical unemployment occurs when

the economy slows down and workers are laid off.

output gap

the gap between real GDP and potential GDP. real GDP minus potential GDP

Gross Domestic Product (GDP)

the market value of all final goods and services produced within a country in a given period of time

If net exports are negative, then

the net flow of good and services is TO U.S. from the rest of the world

If net exports are positive, then

the net flow of goods and services is FROM U.S. firms to rest of the world

marginal cost equals

the opportunity cost of producing one more unit of output.

A business cycle is:

the periodic fluctuation of economic activity.

frictional unemployment

unemployment that occurs when people take time to find a job

structural unemployment

unemployment that occurs when workers' skills do not match the jobs that are available

cyclical unemployment

unemployment that rises during economic downturns and falls when the economy improves

net exports equal

value of exports (X) minus value of imports (M)

full employment

when the unemployment rate equals the natural unemployment rate

what two groups is population divided into?

working age population, people to young to work/in institutional care

in opportunity cost problems

you divide the set of numbers by the first number then multiply those numbers. by the recipricol fraction to get opportunity cost of a good, your answer is the number on the left side

GDP deflator

Nominal GDP/Real GDP x 100

deflation

a persistently falling price level

inflation

a persistently rising price level

marginally attached worker

a person who currently is neither working nor looking for work but has indicated that he or she wants and is available for a job and has looked for work sometime in the recent past

discouraged worker

a person who wants a job but has given up looking because repeated failure to find one

net

after subtracting the depreciation of capital

intermediate good

an item that is produced by one firm, bought by another firm, and used as a component of a final good or service

gross

before subtracting the depreciation of capital

Households are

buyers of products and sellers of production factors

The mortgage crisis caused a lot of consumers to stop spending money. The decrease in spending led to a decrease in production. Which type of unemployment resulted?

cyclical

Two countries will benefit from trade if:

each country has a lower opportunity cost of producing the traded good

depreciation equals

gross investment - net investment. decrease in value of a firms capital

net investment equals

gross investment minus depreciation

In the simple circular flow model:

income is equal to spending.

we produce less if

marginal cost is greater than marginal benefit

comsumer price index (CPI) equation

market basket in a given year/ market basket in base year x 100

Real GDP equation

nominal GDP/price level x 100

Tom is living with his parents. He looks at the help wanted ads but has not replied to any in the past four weeks. Tom is

not in the labor force

unemployment rate formula

number of unemployed/labor force x 100

how to calculate nominal GDP

price x quantity. multiply quantity of goods produced by prices (in a given year). then add it all up

domestic product

produced in a particular country

in order to obtain market value...

product has to be on the market

real GDP per person is

real GDP divided by the population

absolute advantage compares cost in terms of

resources

intermediate good example

rims on a new car. because adding new rims to an old car would increase the value of the old car which is not what an intermediate good is intended to do. intermediate goods help to create the final product such as using soy, milk, and whipped cream to create a final product of a soy latte.

If technology is held constant, an increase in capital concurrent with a decrease in labor input causes output to:

rise, fall, or stay the same.

Business firms are

sellers of products and buyers of production factors.

Improvements in production capacity will:

shift the PPF outward

A production function:

shows the output that is produced using different combinations of inputs combined with existing technology.

Since the invention of automatic teller machines, many bank tellers have lost their jobs. This is an example of _____ unemployment.

structural

Which of the following would promote long-run economic growth?

technological advancement

steeper the line on a graph...

the greater the slope and the greater the opportunity cost

real GDP

the value of final goods and services produced in a given year when valued at the prices of a reference base-year. accounts for the effects of inflation or deflation.

the value of households expenditure equals

the value of firms output

nominal GDP

the value of goods and services produced during a given year valued at the prices that prevailed in that same year

technology

the way inputs are combined in the production of output, allows us to produce more with level of existing resources, shifts PPF to the right, assume always produced on frontier

Total spending equals

total income.

During a typical economic recovery:

unemployment decreases

as GDP goes up

unemployment rates go down

as GDP goes down

unemployment rates go up

in comparative advantage problems

you divide the set of numbers by the first number to get the comparative advantage numbers then decide which country has comparative advantage in what based on the numbers you get

There are 15 million people living in Marketstan, of whom 9 million are working and 1 million are actively looking for work. What is the size of Marketstan's labor force?

10 million

There are 15 million people living in Marketstan, of whom 9 million are working and 1 million are actively looking for work. What is Marketstan's unemployment rate?

10%