Econ Exam 2 (good set)
Call Kai
Learn
Practice Test
Spaced Repetition
Match
Flashcards
Knowt Play1/100
There's no tags or description
Looks like no tags are added yet.
Name | Mastery | Learn | Test | Matching | Spaced | Call with Kai | Chat |
|---|
No analytics yet
Send a link to your students to track their progress
101 Terms
What does GDP stand for?
Gross Domestic Product
What is GDP?
The market value of all final goods and services produced within a country in a year
What does the market value part of GDP mean?
Goods and services are valued using market prices
What goods are counted in GDP?
Final goods and services
What are final goods and services?
Goods and services purchased by the final consumer
What are intermediate goods and services?
Goods and services used to produce other goods
Why are intermediate goods excluded from GDP?
To avoid double counting
Are used goods included in GDP?
No
Why are used goods excluded from GDP?
They were counted when first produced
Does GDP include services?
Yes
Does GDP include goods?
Yes
What does domestic mean in GDP?
Produced within a country's borders
Are goods made in the US by foreign companies included in US GDP?
Yes
Are goods made overseas by US companies included in US GDP?
No
What period of time does GDP measure?
One year
What are the four components of GDP?
Consumption Investment Government Purchases and Net Exports
What is the GDP formula?
GDP = C + I + G + NX
What does C stand for?
Consumption
What does I stand for?
Investment
What does G stand for?
Government Purchases
What does NX stand for?
Net Exports
What is consumption?
Household spending on goods and services
What is investment?
Spending on capital goods inventories and new homes
Does buying stock count as investment in GDP?
No
What are government purchases?
Government spending on goods and services
What are exports?
Goods and services produced domestically and sold abroad
What are imports?
Goods and services produced abroad and purchased domestically
How are net exports calculated?
Exports minus imports
Do exports increase GDP?
Yes
Do imports increase GDP?
No
What are the three ways to measure GDP?
Spending output and income
What measures GDP as spending?
GDP = C + I + G + NX
What measures GDP as output?
Value Added
What measures GDP as income?
Gross Domestic Income
What is Gross Domestic Income?
Total wages plus total profits
What is value added?
Total sales minus the cost of intermediate inputs
How is value added calculated?
Total sales minus intermediate input costs
Why can GDP measurements differ in real life?
Different imperfect data sources are used
What is nominal GDP?
GDP measured using current prices
What is real GDP?
GDP adjusted for price changes
Why is real GDP important?
It measures actual changes in output
What affects nominal GDP?
Changes in output and prices
What affects real GDP?
Changes in output only
How do you estimate real GDP growth?
Nominal GDP growth minus inflation
What is GDP per person?
GDP divided by population
Why is GDP per person useful?
It measures average living standards
What is one limitation of GDP?
Prices are not values
What is another limitation of GDP?
Nonmarket activities are excluded
What is another limitation of GDP?
The shadow economy is excluded
What is another limitation of GDP?
Environmental degradation is not counted
What is another limitation of GDP?
Leisure is not counted
What is another limitation of GDP?
GDP ignores income distribution
What are nonmarket activities?
Activities not bought or sold in markets
What is the shadow economy?
Economic activity not reported to the government
Does GDP measure happiness?
No
Does GDP measure income inequality?
No
Does GDP include unpaid household work?
No
What is the Rule of 70?
A method for estimating doubling time
What is the Rule of 70 formula?
Years to double = 70 divided by annual growth rate
At 2 percent growth how many years to double?
35 years
At 5 percent growth how many years to double?
14 years
At 10 percent growth how many years to double?
7 years
What is labor input?
The number of workers in an economy
Why is labor input important?
Workers transform resources into goods and services
What is human capital?
The skills knowledge and education of workers
How does human capital affect growth?
It makes workers more productive
What is physical capital?
Tools machinery and structures used in production
What is capital stock?
The total amount of physical capital in an economy
How does physical capital affect growth?
It increases worker productivity
What is technological progress?
New ways of using resources to produce more output
Why is technological progress important?
It increases productivity
What are the four ingredients of economic growth?
Labor input human capital physical capital and technological progress
What is a production function?
The relationship between inputs and outputs
What are inputs in a production function?
Labor input human capital and physical capital
What are outputs in a production function?
Goods and services
What does constant returns to scale mean?
Doubling all inputs doubles output
What is the law of diminishing returns?
Additional inputs eventually produce smaller increases in output
When does diminishing returns occur?
When one input is fixed and other inputs increase
What happens to gains from additional capital over time?
They become smaller
What is depreciation?
The wearing out of physical capital over time
Why is physical capital a limited source of growth?
Because of diminishing returns and depreciation
What is catch-up growth?
Rapid growth by poorer countries investing in capital
Why do poorer countries often experience catch-up growth?
They start with low levels of capital
Why do low-capital countries gain more from investment?
Diminishing returns are weaker at low capital levels
What happens to GDP per worker when capital per worker rises?
GDP per worker rises
What shifts GDP per worker upward at every level of capital?
Technological progress
Why can technological progress support long-run growth?
Ideas continually improve production
Why are ideas powerful for growth?
They can be shared freely
Why else are ideas powerful for growth?
They do not depreciate with use
Why else are ideas powerful for growth?
They can generate new ideas
What are property rights?
Legal protection of ownership
Why are property rights important?
They encourage investment and innovation
How do weak property rights affect growth?
They discourage investment
How does government stability affect economic growth?
It encourages investment and innovation
How does political instability affect economic growth?
It discourages investment
How does corruption affect economic growth?
It discourages investment and innovation
How can excessive regulation affect growth?
It makes investing and innovating more difficult
How can government increase the benefits of innovation?
Through intellectual property laws
How can government reduce the cost of innovation?
By subsidizing research and development
What is labor productivity?
Output produced per worker