Test #2 Marco

Market failures can be of two types:

1) Demand Side market failures, 2) Supply Side market failures

What is the formula for growth rate per real GDP?

real GDP of ending or current year - real GDP of beginning or previous year / real GDP of beginning or previous year X 100

the business cycle depicts:

short-run fluctuations in output and employment

1. The two topics of primary concern in macroeconomics are:

short-run fluctuations in output and employment, and long-run economic growth.

Free Rider

someone who would not choose to pay for a certain good or service, but who would get the benefits of it anyway if it were provided as a public good

Real GDP measures the:

value of final goods and services produced within the borders of a country, corrected for price changes. btw inflation is taken into account

Shocks occur:

when expectations are unmet.

GDP can be caluclated by summing

consumption, investment, government purchases, and net exports

Transfer payments are:

excluded when calculating GDP because they do not reflect current production.

higher rates of unemployment are linked with:

higher crime rates as the unemployed seek to replace lost income

Percentage of college education in 2012

31%

Define economic growth.

An increase in real GDP occurring over some time period. or An increase in real GDP per capita occurring over some period of time.

Public Good

Ex. Non-congested, non-toll road; fireworks display Not rival and not excludable

Private Good

Ex. Potato Chips, Tea Rival and excludable

Which transactions are excluded/included in determining GDP

Excluded: Financial transactions, transfer of secondhand goods, other excluded transactions. Included: Consumption expenditure (C), Gross private domestic investment (I), Government expenditures (G), Net exports (X)

economic investment includes investment and bond?

False

What is the formula per GDP per capital

GDP per capita of ending or current year - GDP per capita of beginning or current year / GDP per capital of beginning or current year

Why are high rates of unemployment of concern to economists?

Higher rates of unemployment are linked to higher crime rates and other social problems., A larger fraction of the nation's labor resource is going unutilized., There is lost output that could have been produced if the unemployed had been working.

Why are economists concerned about inflation?

Inflation lowers the standard of living for people whose income does not increase as fast as the price level.

Which one of the following transactions would be included in GDP?

Ms. Bartolini pays $500 to fix the front end of her car damaged in a recent accident.

Market Failures

Occurs when competitive markets do not allocate the scarce resources to their most valued or best use.

List the 4 phases of the business cycle:

Peak, recession, trough, expansion

The largest expenditure component of GDP is:

Personal consumption expenditures

macroeconomics focuses on 3 key economic statistics

Real GDP, unemployment, inflation

what is the real GDP per capita (per person) formula?

Real GDP/ population

Supply Side market failures

Results from a situation where a business firm does not have to pay the full cost of producing a product -For example, a firm may not have to fully pay for the emissions it produces into the atmosphere.

Macroeconomics focuses on the performance of

The overall economy or economy as a whole.

Free trade

Trade that takes place between countries without any barriers (such as tariffs, quotas, or subsidies) put in place by governments or international organizations. Goods and services are allowed to move freely between countries

Business Cycle

a period of macroeconomic expansion followed by a period of contraction

Macroeconomic indicators

are statistics that indicate the current status of the economy of a state depending on a particular area of the economy (industry, labor market, trade, etc.). They are published regularly at a certain time by governmental agencies and the private sector.

why are economist concerned about inflation?

inflation lowers the standard of living for people whose income doesn't increase as fast as the price level.

Competative Market System

is one in which a large numbers of producers compete with each other to satisfy the wants and needs of a large number of consumers. In a competitive market no single producer, or group of producers, and no single consumer, or group of consumers, can dictate how the market operates. Nor can they individually determine the price of goods and services, and how much will be exchanged. Competitive markets will form under certain conditions.

macroeconomics studies what two things?

long run economic growth and short run economic growth

If depreciation (consumption of fixed capital) exceeds gross domestic investment, we can conclude that:

net investment is negative.

National income accountants can avoid multiple counting by:

only counting final goods.

Which of the following is not economic investment?

the purchase of 100 shares of AT&T by a retired business executive

Gross Domestic Product (GDP)

the total value of all final goods and services produced in a particular economy

If the economy adds to its inventory of goods during some year:

this amount should be included in calculating that year's GDP.