Econ exam 2
Import quotas
meant to deter (discourage) free trade
In calculating GDP, governmental transfer payments, such as social security or unemploymentcompensation, are
not included
how to calculate GDP
private consumption + gross investment + government investment + government spending + (exports - imports)
Corporate bonds
promises by a corporation to repay money the bondholder has loaned to the corporation
Government may lessen income inequality by all of the following means
providing transfer payments to the poor. directly modifying market prices as, for example, by establishing a legal minimum wage. using the tax system to tax the wealthy relatively more heavily than the poor.
partnership is formed when
two or more individuals own and operate an unincorporated business under a partnership agreement
The aggregate cost of unemploymentcan be measured by the amount by which
Potential GDP exceeds actual GDP
Corporation
a legal entity in and of itself and is distinct from its individual owners (stockholders)
Net exports are negative when:
a nation's imports exceed its exports.
Gross Domestic Product (GDP)
the dollar value of the total output produced within the borders of that nation, in a given year
If the costs associated with negative externalities are not internalized by the producer
the equilibrium output will exceed the most efficient output
sole proprietorship
A business owned by one person
vertically integrated firm
A group of plants that is owned and operated by a single firm and that consists of oil fields, refineries, and gasoline stations
recently emerged as one of the world's top trading nations in terms of total trade volume
China
The number of years required for real GDP to double can be found by
Dividing 70 by the annual growth rate
cost-push inflation
Inflation initiated by increases in wages or other resource prices
exchange rate
The equilibrium price in a foreign exchange market
the world's leading trading nation
US BABY
The United States' economy is considered to be at full employmentwhen
about 4-5 percent of the labor force is unemployed (at the natural rate of unemployment)
limited liability
corporate creditors have no legal claim on the personal assets of a corporate stockholder
The corporate form of business enterprise has promoted the development of large-scale business operations because
corporations have been able to marshal large amounts of financial capital through the sale of stocks and bonds
An economy's production capacity is expanding when
domestic investment exceeds depreciation
Kimberly voluntarily quit her job as an insurance agent to return to school full-time to earn an MBA degree. With degree in hand she is now searching for a position in management. Kimberly presently is
frictionally unemployed
industry
group of firms that produce identical or similar products
World Trade Organization (WTO)
hears and rules on trade disputes between nations
consumption expenditures
include consumer durable goods, consumer nondurable goods, and services
Real GDP
refers to GDP data that have been adjusted for changes in the price level
market externality
refers to economic costs and benefits of market activities that go to those who are not directly involved in the market transaction
Stocks
shares of ownership of a corporation
investment includes
such things as business expenditures on machinery and equipment
Exchange rates are particularly important because
they link the price levels of various nations to one another
Demand-pull inflation occurs when
total spending exceeds the economy's ability to provide output at the existing price level