ec205 test 1
Hyperinflation
50% per month
flexible prices
product prices that freely move upward or downward when product demand or supply changes
Real GDP per capita
real GDP/population
If the frictional rate of unemployment is 1.45%, the structural rate of unemployment is 2.3%, and the total unemployment rate is 6%, then we can conclude that the:
economy is experiencing an economic downturn.
contractionary policy
fiscal: greater taxes, less spending; monetary: higher interest; decreases GDP
expansionary policy
fiscal: more spending, less taxes; monetary: lower interest; increases GDP
According to the Playposit video on macroeconomic growth, which institution below is NOT included in the list of institutions economists agree are important to spur economic growth?
market power for firms
How to find Real GDP
nominal GDP/(price index/100)
Percent change
(CPI new-CPI old/CPI old) x 100
unemployment rate
(number of unemployed/labor force) x 100
Calculating CPI
(total expenditure in year x/total expenditure in base year) x 100
People not included in the labor force
- retirees - homemakers - full-time students - those on active military service - those in prison - those in hospitals - people who have looked in last 12 months, but not last 4 weeks (could be do to transportation or childcare issues) - discouraged workers
big 3 indicators
1. GDP 2. Inflation rate 3. Unemployment
How to keep an economy steady
1. Keep economy growing over time 2. Limit unemployment 3. Keep prices stable
3 Goals of FED's monetary policy
1. Price stability 2. Maximum employment 3. Economic growth
Lags
1. Recognition 2. Implementation 3. Impact
how to keep economy steady
1. keep economy growing over time 2. limit unemployment 3. keep prices stable
What does CPI mean
100= base year, <100, decreased, >100 increased
Inflation
A general and progressive increase in prices
Core Index
CPI minus food and energy because they are volatile
contractionary monetary policy
FED controls interest rates
Which of following people can be classified as structurally unemployed?
Florrie, who has decided that she wants to start a new career as a train driver but does not have the skills needed to do so.
Business Cycle
Fluctuations in economic activity, such as employment and production
Professor Drew has published a best-selling book on inflation. In the book he talks about measuring inflation over time using a basket of goods comprised of all the components of GDP. Which measure is he talking about?
GDP deflator
A nation's prosperity is sometimes measured in terms of
GDP per capita
Resources
Natural resources, labor, human capital, physical capital, tech, institutions, property rights
Deflation
a decrease in the general level of prices
CPI
a measure of the overall cost of the goods and services bought by a typical consumer
GDP deflator
a measure of the price level calculated as the ratio of nominal GDP to real GDP times 100
Disinflation
a reduction in the rate of inflation
During the Great Recession, the United States Congress increased the length of time that unemployment benefits could be received from 52 weeks to 99 weeks. This change caused:
an increase in the costs for the government.
Which of the following factors contribute to economic growth?
an increase in the proportion of the population that is college educated
monetary policy
controlled by federal reserve
money supply
the quantity of money available in the economy
Macroeconomics
the study of economy-wide phenomena, including inflation, unemployment, and economic growth
seasonal unemployment
unemployment linked to seasonal work
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 (tech advancement)
cyclical unemployment
unemployment that rises during economic downturns and falls when the economy improves
full employment
when the unemployment rate is equal to the natural rate of unemployment (frictional + structural)
_______ is based more on what a country's citizens and firms produce anywhere, wherever they are located, and _______ is based on what happens within a certain country's geographic boundaries.
GNP;GDP
GDP
Gross Domestic Product- the total market value of all final goods and services produced annually in an economy
Frictional unemployment is unemployment:
due to the time it takes for employers to search for workers and for workers to search for jobs.
expansionary fiscal policy
An increase in government purchases of goods and services, a decrease in net taxes, or some combination of the two for the purpose of increasing aggregate demand and expanding real output
fiscal policy
Congress controls it, govt spending and taxes
What does GDP include
Consumption + Investment + Government + (Exports-Imports)
expenditure multiplier
Keynesian concept that asserts that a change in autonomous spending by govt causes a more than proportionate change in real GDP
Incentives for an economy
Political stability, competitive and open markets,
sticky prices
Prices that do not always adjust rapidly to maintain equality between quantity supplied and quantity demanded.
