AGEC 217

Suppose in 2018 the United States had consumption worth $13 trillion, investment worth $5 trillion, and government spending worth $3 trillion, with $2 trillion in exports and $3 trillion imports. What was its GDP per capita, assuming there were 400 million residents?

$50,000

Real GDP formula

(Nominal GDP/Price Index) x 100

patent

(n.) exclusive rights over an invention; copyright; (v.) to arrange or obtain such rights; (adj.) plain, open to view; copyrighted

unemployment rate formula

(unemployed persons / labor force) x 100 - discouraged workers are not included in unemployed

Macroeconomic indicators

1. GDP 2. Unemployment 3. Inflation

output per worker formula

A * (L/L + K/L + H/L + N/L)

Business Cycle

Alternating periods of economic expansion and economic recession

PPF allows us to answer: A. how much can be produced B. what will it cost to change the production mix

B. what will it cost to change the production mix

GDP equation

C + I + G + (X-M) = GDP - Consumer - Investments - Government - X-M: net exports = exports minus imports

Consumer Surplus Equation

CS = Willing To Pay - Price

How will a recession affect a country's PPF? A. the country's PPF will shift inward B. the country's PPF will shift outward C. the country will produce at a point above an unchanged PPF D. the country will produce at a point below an unchanged PPF E. a recession does not change a country's position on the PPF

D. the country will produce at a point below an unchanged PPF

labor

Human effort directed toward producing goods and services - NASA - laborer in construction

Payment to Capital

Interest

Which of these statements is WRONG about market efficiency?

It occurs when total surplus increases after markets deviate from equilibrium.

Which of these countries would have the LOWEST GDP per capita and the LOWEST growth rates?

a country categorized as mostly unfree by the Index of Economic Freedom

a discouraged worker

a person who wants a job but has given up looking

The figure shows the market for portable DVD players. Assume the government sets a price floor at $55. This price floor will:

cause a surplus

structural unemployment

caused by changes in the structure of consumer demands or technology - extended periods of time

Realistic PPF Curve Equation

change in Y / X

Suppose the equilibrium price for bicycle tires is $42 but the market price rises to $67. Jerry is a seller in this market. Madison buys new tires at the higher price because she would have been willing to pay $75. Marcus no longer buys new tires because the price is too high. What has happened to consumer surplus in this market?

consumer surplus decreases

deflation

decline in overall prices throughout the economy

Kelly is an adjunct professor of economics at a junior college. She recently landed a tenure-track position at a four-year college beginning next fall. She plans not to teach any classes over the summer. This period of unemployment during the summer is considered to be _____ unemployment.

frictional unemployment

___ is the measure of increase in cost of living

inflation

hyperinflation

inflation that is out of control

Production Possibilities Frontier (PPF)

model that shows a combination of two goods a society can produce at full employment

A Japanese automaker produces $1 million worth of automobiles in Japan and $2 million worth of automobiles in the United States. How much of that is added into the GNP of the United States?

none

GDP is a measure of a economy's total:

output

labor productivity formula

output / labor hours used

Jerry and Anat each own a bicycle tire shop and sell bicycle tires. Suppose the equilibrium price for bicycle tires is $42 but the market price falls to $37. Neither is able to earn a profit at the lower price, and both go out of business. If there are no other sellers in this market, what effect does this have on producer surplus?

producer surplus decreases to zero

cyclical unemployment

result of changes in the business cycle - business investment or consumer spending declines - difference between current unemployment rate and full unemployment rate

frictional unemployment

short term duration of unemployment caused by workers switching jobs for a variety of reasons

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

Opportunity Cost

the cost of foods that can be produced

personal consumption expenditures

the expenditures of households for durable and nondurable consumer goods and services

physical capital

the human-made objects used to create other goods and services - railway networks - airlines

long-run growth

the increase in a nation's productive capacity and average standard of living that occurs over a long period of time - labor - technology - physical capital

disinflation

the reduction in the rate of inflation

human capital

the skills and knowledge gained by a worker through education and experience - GI Bill

points outside PPF line

unattainable

Price Ceiling

A legal maximum on the price at which a good can be sold

Price Floor

A legal minimum on the price at which a good can be sold

Suppose the equilibrium price for bicycle tires is $42 but the market price falls to $37. Jerry is still able to make a profit at this lower price, so he stays in business. Anat, who was able to make a small profit by selling tires at $42, goes out of business as prices fall. Madison bought the tires at the higher price from Anat and is delighted to buy them at a lower price from Jerry. Marcus, who previously did not purchase tires, is willing to pay the lower price, so he buys new tires from Jerry. Which individual's situation contributes to a reduction in total surplus?

Anat's

The difference between what a consumer is willing to pay and what he or she actually pays for a good or service is known as:

Consumer Surplus

total consumer surplus equation

Consumer Surplus = Willingness-to-pay − Price.

GDP per capita formula

GDP per capita = (GDP) / (population)

GNP

Gross National Product - the sum of all goods and services produced in a nation in a year.

The GDP Deflator

Nominal GDP/Real GDP x 100

PPF & Economic Growth

PPF shifts outwards to the right as the economy grows - expanding resources - technology

What does a consumer price index of 130 mean?

Prices have increased by 30% from the base year to the current year.

Payment to Ideas

Profit

Payment to Land

Rent

short-term growth

The annual potential percentage change in real national output

technology

The application of scientific knowledge for practical purposes - Foundations - Grants

The annualized percentage change in real GDP is 3.2%. What is the quarter-to-quarter percentage change in real GDP upon which this annualized rate was calculated?

The quarterly change in real GDP is 3.2%/4 = 0.8%.

If there are 3,000 in the population; 930 are employed; 70 are unemployed; and 100 are discouraged workers, what is the unemployment rate?

The unemployment rate is defined as the number of unemployed divided by the total labor force. The total labor force is equal to the number of unemployed plus the number of employed. Thus, the equation is unemployment rate = 70/1,000 = 7%.

basic economic questions

What to produce? How to produce? For whom to produce?

copyright

a document granting exclusive right to publish and sell literary or musical or artistic work

durable good

a good that lasts for at least three years when used regularly - car - refrigerator

Consumer Price Index (CPI)

a measure of the overall cost of the goods and services bought by a typical consumer

asymmetric information

a situation in which one side of the market has more reliable information than the other side

price level

absolute level of a price index

efficiency wage

an above-market wage that a firm pays to increase workers' productivity

producer price index

an average of the prices received by producers of goods and services at all stages of the production process

Index of Economic Freedom

assesses the rule of law, trade barriers, regulations, and other criteria

points under PPF

attainable but inefficient

marginally attached workers

available for work and have actively looked for work in the past year but not in the past four weeks

PPF & Economic Contracting

economy effected by: - disease - war

Payment to Labor

wages

underemployed

working at jobs that require less education than they have