Macro Test 1 study guide

What is Aggregate Output? Output Growth?

Aggregate Output- the total level of new production of goods and services from an economy. Output growth- refers to increases in aggregate output from the previous period.

How do you go from GDP to GNP?

GNP=GDP + net factor income from the rest of the world

the expenditure approach to finding GDP. Exactly what are C, I, G, and NX?

sum of all spending on new goods and services by households, government, firms, and the rest of the world. C-private consumption I-gross private investment G- government spending NX- (exports - Imports) GDP= C+I+g

What are the three main concerns of Macroeconomics?

1.Inflation 2.Unemployment 3. Output growth

What event triggered the need for new theory in Macroeconomics? Who is the 'father' of macroeconomics? What was the pre-existing theory called?

1.The great depression. 2.John Maynard Keynes: The Neoclassical Economic theory

Who measures GDP?

Bureau of Economic Analysis (BEA.gov)

What is GDP?

Gross Domestic Production (boarders) total market value of country's output.

What is GNP?

Gross National Product—total value of goods and services produced by a country in 1 year

What is Macroeconomics? What is the difference in macro and micro?

Macroeconomics is the study of aggregate behavior including unemployment, inflation, recessions, and other economic wide phenomenon. While Micro is the study of individual decision making by firms and individuals.

What is NNP?

Net National Product- total production of new goods and services by a country's citizens minus depreciation on capital

What is the difference between Nominal GDP and real GDP?

Nominal GDP- measures with prices at current year levels Real GDP- measured in constant prices using a base year.

What are recessions and booms?

Recession- a period of temporary economic decline Boom- economic expansion

Use the slideshow in blackboard to answer basic questions about the 70's, 80's, 90's, 00's, and 2010's. The bullet points in the synopsis will be sufficient.

The US economy since 1970

What is the cause of short-run fluctuations in the economy, according to the Keynesian Theory?

Wages and some prices are "sticky" and not able to adjust in the short term. Thus there are different short-term forces not entirely explained by neoclassical economics.

With the classical model of economics, what is the cause of unemployment and how is it alleviated?

according to neoclassical theory, price and wages should adjust to the new equilibrium and unemployment should return to more normal market conditions

Who measures the unemployment rate and the official inflation rate?

bureau of labor statistics (BLS)

the income approach to finding GDP. Exactly what are National Income, Depreciation, Indirect Taxes and Subsidies, and Net Factor payments to the Rest of the World.

compensation of employees+profits+depreciation

What is double counting of GDP and how is it prevented?

counting materials cost that go into the final product. Only calculating final production cost.

What does GDP include and what does GDP not include?

includes: the total value of all new goods and services produced within a country's boundaries Does not include: crime, pollution, income distribution, income from citizens living abroad, used goods, financial assets (stocks and bonds)

Why does the Expenditure Approach equal the Income Approach?

income= expenditures