Economics Unit 3 (Macroeconomics)

By examining certain economic indicators, you get help in

- Measuring how much the economy can produce. (through looking at the nations GDP or Gross Domestic Product) - Tracking how much of the labor force is employed. (by looking at the Unemployment rate)

Macroeconomics is the study of the economic interactions of larger groups, such as:

- National economies. - Regional economies. - International Organizations.

Examples of leakage factors include:

- Savings. - Taxes. - Imports.

Economic growth is limited by lack of capacity because of:

- Shortage of workers with the right skills. - Lack of infrastructure or technology. - Lack of industrial capacity

Supply

- Supply is the amount of a good or service that a producer provides to a consumers. - Quantity supplied is affected by price and production cost.

Studying macroeconomics helps people understand, predict, and anticipate:

- economic actions taken by the government. - political debates regarding government actions. - major economic events, such as periods of high unemployment or inflation.

Economic Models can:

- identify patterns. - predict changes.

The circular flow model demonstrates interactions within the economy, including:

- interactions between households and firms. - interactions between different sectors of the economy.

Macroeconomics studies the challenges that entire economies face, such as:

- keeping workers employed. - keeping prices stable.

Things that impact demand are:

- number of consumers. - price of related goods. - disposable income. - taste. - preferences. - expectations.

Things that impact supply are:

- the number of sellers. - import cost. - government action. - technology - price of related goods. - expectations.

Macroeconomics studies supply and demand in the aggregate, which means:

- the total amount of supply. - the total amount of demand.

What does gross national product (GNP) include?

Domestically owned businesses outside a country.

Sector

A subdivision within an economy.

Aggregate

A total amount.

What is also known as total output?

Aggregate Supply

What reacts very specifically to economic changes?

Aggregate Supply

The 4 key areas of macroeconomics study include:

Economic Indicators Economic Challenges Money Economic Models

What can measuring unemployment help us understand?

Economic output.

When does structural unemployment cause?

An individual's skills to become outdated.

What does international trade help?

Economies grow.

Indicators

Data used to evaluate the current and future health of an economy.

What does microeconomics focus on?

Direct interactions between producers and consumers.

In microeconomics, the point at which supply and demand meet is called the ________________________ price.

Equilibrium

Factors of production also include:

Factor Market Income

In the circular flow model what do the households provide to the firms?

Factors of Production

What are the 3 sectors included in the circular flow models demonstrated interactions?

Financial Sector Government Sector Foreign Sector

What does decreased demand for goods and services result in?

Firms producing less.

What does gross national product (GNP) exclude?

Foreign-owned businesses inside a country.

In the circular flow model what do the firms provide to the households?

Goods and Services

What can technology help a nation create?

Goods that are in demand around the world.

Which body or group is most able to use money to influence the economy?

Government

Offset

Something that balances or makes up for something else.

What are producers willing to do?

Supply a good for a specific price.

In macroeconomics, to study the aggregate means to study

total supply and demand.

What can a country do in order to help encourage growth and offset problems?

A country can invest in its resources.

What is cyclical unemployment caused by?

A decrease in demand in the economy.

What does GDP per capita measure?

A nation's GDP per person.

When economic productivity is high then the cyclical unemployment rate will be what?

Low

What is economic growth measured by?

(GDP) Gross Domestic Product

Demand

- Demand is the amount of a good or service that consumers are willing and able to purchase. - Quantity demanded is affected by price and the need for the good.

Which statement best describes why a government's actions are important in macroeconomics? Check all that apply.

- Government controls industry through policy. - Government is both a consumer and a producer. - Government can use policy to influence the economy.

What are some questions to ask when dealing with macroeconomics studies on how money functions within the economy?

- How is money used? - How does an economy as a unit make money? - How do governments use money to influence economic activity?

The main goals of macroeconomics are to study:

- How the economy is behaving. - Which factors are causing the economy to grow or shrink.

Examples of Injector Factors include:

- Investment spending - Government spending - Consumer spending - Net exports

Economic growth is limited by low demand because of:

- Low demand for a nation's exports. - Low domestic demand. - Inability of citizens to purchase goods.

When does increased unemployment happen?

As output decreases, lowering the GDP.

GDP per capita determined by?

By dividing the total GDP by the number of citizens.

How can economists measure the health of an economy?

By examining certain economic indicators.

The use of technology helps economies to do what?

Helps economies to grow and compete internationally.

When economic productivity is low then the cyclical unemployment rate will be what?

High

Growth

Increase or enlargement.

Economic interactions involving which of the following would most likely be studied in macroeconomics?

International Monetary Fund policy

Aggregate Demand

Is the total demand for all goods and services in an economy.

In a shrinking economy what is their less of?

Less Hiring

Aggregate supply can change as a result of what?

Many factors, such as changes in corporate taxes, regulations, and technology.

What does gross national product (GNP) measure?

Measures the output of a nation's citizens.

The interaction of supply and demand between individual producers and consumers is studied within

Microeconomics

Which best describes the purpose served by economic models within an economic system?

Models identify patterns.

In a growing economy what is their more of?

More hiring

Per Capita

Per person.

Goods and services also include:

Product Market Expenditures

What do leakage factors do?

Pull money out of an economic system.

What are consumers willing and able to do?

Purchase the good at the same price.

In microeconomics, price helps determine both quantity supplied and quantity demanded. Which other factors can impact each by causing a shift to occur?

Quantity supplied is determined by production costs, and quantity demanded is determined by desire for the product.

Shrinking Economy

Real GDP declining (negative growth rate) - Unemployment rising.

Growing Economy

Real GDP rising (positive growth rate) - Unemployment falling.

What does having new technology mean?

That a country can produce high-tech products.

The aim of the study of macroeconomics is to examine

The behavior of factors affecting the economy.

When real GDP increases, what is the economy doing?

The economy is growing.

When real GDP decreases, what is the economy doing?

The economy is shrinking.

Which best describes what occurs in the product market?

The exchange of goods and services for money.

Output

The goods and services produced by an economy.

When does structural unemployment occur with?

The introduction of new technology.

Why are imports, which bring goods into a country, considered a leakage factor?

The money paid to producers of imports leaves the country.

What does GDP measure?

The output of a given economy in a year.

What does the GDP per capita help compare?

The performance of nations.

Unemployment

The situation of not having a paid job, or the number of workers without jobs.

A long-run equilibrium occurs when long-run aggregate supply and aggregate demand meet. What does having long-run equilibrium indicate about a society?

The society is using all of its resources efficiently.

Macroeconomics

The study of economics with a focus on large groups or units, such as nations.

Aggregate Supply

The total supply of all goods and services produced in an economy at various price levels.

What is gross domestic product (GDP)?

The total value of all final goods and services produced in a country in a given year.

Gross Domestic Product

The value of all goods and services produced during a specific period of time.

What do economists create models to do?

Understand how the economy works.

What happens when more jobs are created?

Unemployment declines and output increases.

What is the formula for unemployment rate?

Unemployment rate equals unemployed workers divided by Number of workers in the labor force.

What does declining production cause?

Unemployment to rise.

What are injector factors?

Ways that different sectors bring money into an economic system.

When does equilibrium occur?

When a society is using its resources efficiently.

When is macroeconomic equilibrium achieved?

When aggregate supply and aggregate demand meet.

When does economic growth occur?

When an economy is able to produce more goods and services.

When does unemployment occur?

When an individual is actively looking for a job but is unable to find work.

When are prices set?

When interactions between producers and consumers reach equilibrium.

When does frictional unemployment also occur?

When workers and employers are seeking a better fit.

When does structural unemployment occur?

When workers are unemployed because the makeup of the economy is changing.

When does frictional unemployment occur?

When workers are unemployed by choice.

Where does frictional unemployment exist?

Within an economy.

Do producers need time to respond to economic changes?

Yes