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MacroeconomicsGDP

AP MACRO UNIT 2

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Macroeconomics

GDP

33 Terms

1
Circular Flow
the pattern in which goods, services and resources flow in the marketplace
the pattern in which goods, services and resources flow in the marketplace
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2
GDP
the total market value of all final NEW goods and services produced annually in an economy
the total market value of all final NEW goods and services produced annually in an economy
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3
Nominal GDP
GDP measured in current prices
GDP measured in current prices
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4
Limitations of GDP

  • Nonmarket Activities

  • Underground Economy

  • Negative externalities

  • Quality of life

<ul><li><p>Nonmarket Activities</p></li><li><p>Underground Economy</p></li><li><p>Negative externalities</p></li><li><p>Quality of life</p></li></ul>
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5
Labor Force
the total number of workers, including both the employed and the unemployed
the total number of workers, including both the employed and the unemployed
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6
Unemployment Rate
the percentage of the labor force that is unemployed
the percentage of the labor force that is unemployed
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7
Labor Force Participation Rate
the percentage of the adult population that is in the labor force
the percentage of the adult population that is in the labor force
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8
Types of Unemployment
frictional
structural
cyclical
frictional structural cyclical
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9
Frictional Unemployment
*A type of unemployment caused by workers voluntarily changing jobs and temporary layoffs
*unemployed workers between jobs.
*A type of unemployment caused by workers voluntarily changing jobs and temporary layoffs *unemployed workers between jobs.
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10
Structural Unemployment
*unemployment resulting from industrial reorganization, *typically caused by technological change
*unemployment resulting from industrial reorganization, *typically caused by technological change
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11
limitations of unemployment rate
does not give a good indication of how many people are discouraged(not looking for work) or underemployed.
does not give a good indication of how many people are discouraged(not looking for work) or underemployed.
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12
Natural Rate of Unemployment
frictional plus structural unemployment
*typically 5- 7%
frictional plus structural unemployment *typically 5- 7%
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13
Calculate Unemployment Rate
unemployed/labor force x 100
unemployed/labor force x 100
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14
Calculate Labor Force
employed + unemployed
employed + unemployed
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15
Calculate Labor Force Participation Rate
labor force/adult population x 100
labor force/adult population x 100
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16
CPI (Consumer Price Index)
a measure of the overall cost of the goods and services bought by a typical consumer
a measure of the overall cost of the goods and services bought by a typical consumer
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17
Inflation
A general increase in prices
A general increase in prices
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18
Deflation
A situation in which prices are declining
A situation in which prices are declining
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19
Disinflation
a reduction in the rate of inflation
a reduction in the rate of inflation
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20
Real Variables
variables measured in physical units
variables measured in physical units
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21
Calculate Inflation Rate
CPI this year - CPI last year / CPI last year x 100
CPI this year - CPI last year / CPI last year x 100
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22
Limitations of CPI as a measure of inflation
*Does not factor in change in quality or substitutes
*Does not factor in change in quality or substitutes
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23
Calculate CPI
(cost of basket in current year/cost of basket in base year) x 100
(cost of basket in current year/cost of basket in base year) x 100
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24
Real GDP formula
Nominal GDP/GDP Deflator x 100
Nominal GDP/GDP Deflator x 100
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25
GDP formula
C+I+G+(X-M)
C+I+G+(X-M)
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26
GDP deflator formula
Nominal GDP/Real GDP x 100
Nominal GDP/Real GDP x 100
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27
Not included in GDP

  1. Intermediate goods

  2. Household production

  3. Non-market (illegal) activities

  4. Used goods and services

<ol><li><p>Intermediate goods</p></li><li><p>Household production</p></li><li><p>Non-market (illegal) activities</p></li><li><p>Used goods and services</p></li></ol>
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28
Real GDP per capita
real GDP divided by the total population
real GDP divided by the total population
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29
circular flow leakages
1)Savings
2)Imports
1)Savings 2)Imports
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30
Phases of the business cycle
expansion-> peak-> contraction-> trough->recovery
expansion-> peak-> contraction-> trough->recovery
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31
Business Cycle Graph
a period of macroeconomic expansion followed by a period of contraction
a period of macroeconomic expansion followed by a period of contraction
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32
recessionary gap
when aggregate output is below potential output
when aggregate output is below potential output
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33
inflationary gap
when aggregate output is above potential output
when aggregate output is above potential output
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