Econ Ch. 7

Largest consumer of energy

1. China 2. United States (in per capita terms, US energy consumption is about 4 times that of China)

Largest energy producer

1. China 2. United States

Two sources of hot air for financialization balloon

1. debt 2. Asset price inflation

The simplest way of understanding the financialization that has affected the US economy as well as other advanced economies

1. huge increases in debt throughout the economy 2. inflation in the price of assets, unconnected with any inflation in the price of real goods and services

peak of housing bubble

2006

Output sectors

A division of a macroeconomy based on what is being produced

Export of services

A service is "exported" if agents in the US provide a service used by an individual or organization based abroad ex: if someone from Argentina stays in a US hotel, this is considered an export of services (US produced accommodation services)

Import of services

A service is "imported" if agents in the United States provide a service used by individuals or organizations based in the United States Ex: if a US manufacturer ships its goods using freighters registered in Liberia it is said to import transportation services from Liberia

Graduates

About 20 % of graduate students in the US are foreign born

Overseas

American manufacturing jobs have shifted oversees (major source of imports of goods- China, Canada, Mexico, Japan, Germany

BEA

Bureau of Economic Analysis

Largest exporter of oil to the United States

Canada (3x as Saudi Arabia)

Greatest threat to jobs in the US

China (trading partner)

United States

Even though the United States has less than 5 percent of the world's population, it uses about 20 percent of the world's energy heavily dependent on fossil fuels petroleum is the singe most important energy source (provides nearly all the fuel for transportation) obtains a small share of its energy from renewable resources

What is meant by "financialization"? What data suggest the United States has become more financialized in recent years?

Financialization is a process in which the financial sector of the economy is increasingly able to generate and circulate profits that are not closely related to the real economy. The simplest way of understanding the financialization that has affected the U.S. economy is a combination of huge increases in debt throughout the economy and inflation in the price of assets, unconnected with any inflation in the price of real goods and services. For example, in 1980 credit card debt stood at $55 billion, but by 2005 it had increased to $802 billion.

graduate degrees

For the first time in 2009, women earned more graduate degrees than men in the United States

Summarize the state of health care in the United States.

Health care is one of the fastest-growing industries in the U.S. In 2013, about 13 percent of the country's workers were employed in the health-care sector. Health-care expenditures grew from 5 percent of GDP in 1960 to 17 percent in 2011. Private insurance and public costs have risen considerably. Health-care costs are expected to increase further and become an even greater share of GDP. A higher share of GDP is spent on health care in the United States than in any other developed country. Even so, the U.S. actually ranks lower than most other developed countries in quality of health care. Average life spans are shorter than in more other developed countries, and infant mortality rates are slightly above the norm. The U.S. does not have publicly funded universal health-care coverage. For those with adequate coverage through private insurance, most often provided by employers, the U.S. offers some of the highest-quality medical care in the world, but about 16% of Americans lacked any health insurance in 2011.

major difference between the US and other developed countries

Human services in the US are less likely to be provided by the public sector

Exports>Imports

In 2011, the US exported more in services than it imported - trade surplus has been expanding in the past several years (travel, financial, and educational services) (main- travel, telecommunications, and freight services)

IPO

Initial Public Offering- main opportunity for funds invested through the stock market to make a real difference in business activity

important source of foreign oil

Mexico, Venezuela, Russia

NIPA

National Income and Product Accounts

Does the declining share of the primary sector imply that it is becoming less important?

No, the sectors rely on each other. For example, the tertiary sector relies heavily on outputs from the other two sectors. A restaurant would not be able to provide food services without meat and vegetable products. The primary sector is still considered a major sector of the U.S. economy and is still important.

Oligopolistic

Retail industry is dominated by a small number of companies

ROI

Return On Investment

Contrast the recent history of the American textile and automobile industries.

Since the 1970s, the textile and apparel industry in the United States has been decimated- employment in the industry has declined about 90 percent, and the decline appears likely to continue in the future. In contrast, the automobile industry in the United States benefited from a number of factors during the twentieth century. This is a strong industry before most foreign competitors and the United States has a huge domestic market. It doesn't need to rely on exports, which is a huge cost advantage. Even so, the U.S. auto industry fell in the 2000s because of a significant decline in sales of fuel-inefficient vehicles due to higher gas prices and the global financial crisis.

Buying stocks `

Since the 1980s, corporations have actually spent more on buying back their own stock than they have taken in by selling newly issues stocks

NYSE

The New York stock exchange held stocks for 5 years in 1975, two years in 1991, but only 5 months in 2008 short term investing makes markets more vulnerable to "bubbles" when investors looking for a quick profit drive stock prices to excessive heights, leading to subsequent crash

Largest manufacturer

The US remains a major manufacturer

spending (education)

The US spends more per student than any other country on postsecondary education The performance of American student is mediocre by international standards

What is the largest source of energy in the United States?

The largest source of energy in the United States is petroleum at 36.8%.

Why does the number of new housing starts in the United States show a cyclical pattern?

The number of housing starts decline during recessionary periods but then recover after a recession is over.

Approximately what percentage of the U.S. GDP is produced in each of the three sectors? How was this allocation changed over time?

The percentage of the U.S. GDP that is produced in the primary sector is 3.1%. The secondary sector is 17%. Lastly, the tertiary sector is 64.3%. This allocation has changed over time, which could be due to us moving toward a "dematerialized" economy, more concerned with the production of services such as communication and education than manufactured goods.

Primary Sector

The primary sector is the sector of the economy that involves the harvesting and extraction of natural resources and simple processing of these raw materials into products that are generally sold to manufacturers as inputs. agriculture (4/5 of our country's water use) commercial fishing mining timber what we eat comes from the primary sector

Secondary Sector

The secondary sector involves converting the outputs of the primary sector into products suitable for use or consumption. It includes manufacturing, construction, and utilities. manufacturing industries automobile production chemical industry petroleum fishing pharmaceutical industry utilities (electricity)

Tertiary Sector

The tertiary sector involves the provision of services rather than tangible goods. transportation marketing retailing of physical goods consulting, education, technology, finance, administration, tourism

Summarize how agriculture in the United States has changed over the past century. About how much of each dollar spent on food currently goes to farmers?

There was a decline in the total farm population, a decrease in the total number of farms, and increase in average farm size, and an increase in agricultural productivity. Agricultural productivity has increased as human labor has been replaced by mechanization and as the use of modern agricultural technologies has spread. The impact of agriculture extends well into the secondary and tertiary sectors. Less than 12 cents of every dollar spent on food in the United States is paid to farmers.

How do "technological optimists" view the debate about natural resource constraints?

They view technology as a means to help natural resources. For example, through technology and redesign the average amount of water in a standard flush toilet fell from 6 gallons to 1.6.

Is the service sector synonymous with low-paying jobs?

This is not necessarily true because employment trends, wages, and other measures vary considerably across different service industries. For example, this is true for cashiers, but this is not the case for doctors and lawyers.

What are some of the potential future natural resource constraints on economic activity?

Water conservation methods have drastically decreased both the absolute and the per-person amount of fresh water used in the United States since their peak in 1980. Higher energy costs are resulting in energy conservation, as well as federal and state laws mandating efficiency in appliances. Farmers have also been increasingly relying on a variety of strategies to reduce water use.

Value of an asset

What you think others are willing to pay for it

Are some politicians correct when they say that American manufacturing jobs have been shifted overseas?

Yes, in 1992, American manufacturers met 73 percent of the domestic demand for goods. In 2012, they met only 51 percent. The decline in the absolute number of U.S. manufacturing jobs predates the dramatic increase in imports from China.

Financialization

a process in which the financial sector of the economy is increasingly able to generate and circulate profits that are not closely related to the real economy

Financial Assets

a variety of holdings in which wealth can be invested with an expectation of future return households, non financial businesses, and governments hold about half the country's financial assets the rest are held by financial institutions (banks, credit unions, pension, retirement funds, mutual funds, securities brokers, insurance companies) Include: stocks, bonds, foreign currencies, certificates of deposit and money market accounts)

Financial Markets

an increase in the price of an asset can spur people to borrow more which causes prices to rise further

Manufacturing productivity

an index of the value of the goods produced per hour of labor in the manufacturing sector

Financial Institution

any institution that collects money and holds it as financial assets bank tellers loan officers real estate agencies insurance agents divided by 2 parts: depository and nondepository

How banks make money

banks absorb savings, and redirect these funds back into the economy in the form of loans that pay higher rates of interest to cover the banks costs of operation and give them a profit

employment in manufacturing

declined (does not indicate declining demand for manufactured goods)

Retail Services

few manufacturers sell their products directly to consumers, they usually sell to retailers (retailers: walmart, target, home depot) clear trend toward the dominance of a small number of very large retailers large retailers- dominating the industry with large number of choices and low prices

Financial Sector

huge impact on the US economy in the past years

US Economy

largest in the world- $15.5 trillion in final goods and services- almost 22 percent of total global economic production as measured by GDP of all the world's countries

US is one of the world's major agricultural producers

less than 2 percent of the workforce is directly engaged in agriculture

workforce

more than 3/4 of the workforce is engaged in producing "services" of one kind or another 5 percent working in government 17 percent employed in manufacturing and construction

Health Care

one of the fastest-growing industries in the US (13%) national health care expenditures grew from 5 to 17 percent of GDP

Stock Market

plays a relatively small role in financing investment in the real world majority of transactions are investors transacting with other investors

Nuclear power

primarily used to generate electricity, providing about 20 percent of the country's electricity supply

student loans

student loans eat up 24 percent of household incomes for the lowest-income families

"Real economy"

the part of the economy that is concerned with actually producing goods and services as opposed to the financial side of the economy (paper economy) whose activites focus on buying and selling on the financial markets

production of energy (jobs)

the production of energy currently employs less than a million workers (.5 percent)

Leverage

using borrowed money to increase the investment power of one's own money

Collateral

valuable asset used as a basis for a loan