Module 2 macro
GDP
measure of aggregate output
trough
output and employment bottom out
expansion
real GDP, income, and employment rise
Business cycle
reoccurring increases and decreases in the level of economic activity over periods of years; consists of peak, recession, trough, and expansion phases
demand-pull inflation
resources are already fully employed and business sectors cannot respond to excess demand by expanding output
economic investment
spending for the production and accumulation of capital and additions to inventories
financial assets
stock, bond, fund
recession
a period of declining real GDP, accompanied by lower real income and higher unemployment
Net domestic products (NDP)
gross domestic product less the part of the years output that is needed to replace the capital goods worn out in producing the output
Net investment equation
gross investment - depreciation = net investment
real assets
house, land, or factory
multiple counting
wrongly including the value of intermediate goods in the GDP
unemployment
the state a person is in if they cannot get a job
real income
a measure of the amount of the goods and services nominal income can buy
In national Income accounting, government purchases include: A) purchases by federal, state, and local governments B) purchases by the federal government only c) government transfer payments D) purchases of goods for consumption, but not public capital goods.
A
In national income accounting, consumption expenditures include purchases of: A) both new and used consumer goods B) automobiles for personal use, but not houses C) consumer durable and nondurable goods, but not services D) consumer nondurable goods and services, but not consumer durable goods
B
rule of 70
a method for determining the number of years it will take for some measure to double, given its annual percentage increase
GDP equation
C+Ig+G+Xn
nominal GDP
GDP measured at the price level at the time of measurement
Net domestic product equation
GDP- consumption of fixed capital
real GDP
Nominal GDP / Price index (in hundredths)
as defined in national income accounting, investment includes: A) business expenditures on machinery and equipment B) all consumption C) imports, but not exports D) all nonfood items
a
net exports are negative when A) a nation's imports exceed its exports B) the economy's stock of capital goods is declining C) depreciation exceeds domestic investment D) a nation's exports exceed its imports
a
which of the following best describes disposable income? A) income received by households less personal taxes B) the before-tax income received by households C) all income earned by resource suppliers for their current contributions to production D) the market value of the annual output net of consumption of fixed capital
a
GDP gap
actual GDP - potential GDP
inflation
an increase in the overall level of prices
aggregate output
annual total output of goods and services
Personal income is most likely to exceed national income: A) when gross and net investment are equal B) during a period of recession or depression C) when gross investment exceeds net investment D) during a period of extended inflation
b
peak
business activity has reached a temporary maximum, near or at full employment, close to economy's capacity
Tom Atoe grows tomatoes for home consumption. This activity is: A) excluded from GDP in order to avoid double counting B) excluded from GDP because an intermediate good is involved C) production but is excluded from GDP because no market transaction occurs D) included in GDP because it reflects production
c
Which of the following do national income accountants consider to be investment? A) the purchase of an automobile for private, non business use B) the purchase of corporate bonds C) the purchase of a new house D) the purchase of gold coins
c
government purchases include government spending on: A) Government consumption goods only B) Public capital goods only C) government consumption goods and public capital goods D) government consumption goods, public capital goods, and transfer payments
c
the value of U.S. imports is A) added to exports from exports when calculating GDP because imports reflect spending by Americans B) subtracted from exports when calculating GDP because imports do not constitute spending by Americans C) subtracted from exports when calculating GDP because imports do not constitute production in the United States D) added when calculating GDP because imports do not constitute production in the United States
c
sticky prices
product prices that remain in place even though supply or demand has changed
An economy is enlarging its stock capital goods: A) when net investment exceeds gross investment B) when gross investment is positive C) When replacement investment exceeds gross investment D) when gross investment exceeds replacement investment
d
If the economy adds to its inventory of goods during some year: A) gross investment will exceed net investment by the amount of the inventory increase B) this amount should be ignored in calculating that year's GDP C) this amount should be subtracted in calculating that year's GDP D) this amount should be included in calculating that year's GDP
d
GDP Gap
difference between actual and potential GDP
Gross Private Domestic Investment
expenditures for newly produced capital goods and for additions to inventories EX) machinery, equipment, tools
personal income
includes all income received, whether earned or unearned
real GDP per capita
inflation-adjusted output per person
National income accounting
measures economy's overall performance
real GDP
measures the value of final goods and services produced within the borders of a country during a specific period of time
nominal income
number of dollars received as wages, rents, interests, or profit
frictional unemployment
one who has been laid off a job and is currently in-between jobs
structural unemployment
one who's skills are not demanded by employers, who lack sufficient skills to obtain employment, or who cannot easily move to locations where jobs are available
cost push inflation
output and employment declining causing prices to rise
labor force
people who are willing and able to work even if unemployed
Disposable income
personal income less personal taxes
private transfer payments
produce no output; they simply transfer funds from one private individual to another and consequently do not enter into GDP
final goods
products purchased by their end users (gasoline, sunglasses)
intermediate goods
products that are purchased for resale or further processing or manufacturing (steal beam, vegetables for salad )
depreciation
the amount allocated is an estimate of how much of the capital is being used up each year
personal consumption expenditures
the expenditures of households for durable and nondurable consumer goods and services
value added
the market value of a firm's output less the value of the inputs the firm has Brough from others
income approach
the method that adds all the income generated by the production of final goods and services to measure the GDP
nominal interest rate
the percentage increase in money that the borrower pays the lender
real interest rate
the percentage increase in purchasing power that the borrower pays the lend
financial investment
the purchase of financial asset or real asset or the building of such assets in the expectations of financial gain
public transfer payments
the social security payments, welfare payments, and veterans' payments that the government makes directly to households
national income
the total of all sources private income (employee compensation , rents, interest, proprietors income, and corporate profits) plus government revenue from taxes on production and imports
unemployment rate
unemployed/ labor force x 100
cyclical employment
unemployment that is caused by decline in total spending
demand shocks
unexpected changes in the demand for goods and services
supply shocks
unexpected changes in the supply of goods and services