Unit 3 Study Guide-HNRS.ECON

What does GDP measure?

The total dollar value of all final goods and services produced within a country's borders in a given year.

What is GDP used for?

To measure the overall economic performance of a country.

How does GDP relate to economic growth?

A growing GDP indicates economic expansion, while a shrinking GDP suggests economic recession.

What is the GDP formula?

GDP = C + I + G + (X - M) where C = Consumer spending I = Business investments G = Government spending X-M = Net exports.

What is the difference between real and nominal GDP?

Nominal GDP is measured in current prices without adjusting for inflation; Real GDP adjusts for inflation, providing a clearer picture of economic growth.

What are four types of unemployment?

Frictional, Structural, Cyclical, Seasonal.

What is frictional unemployment?

Unemployment that occurs when workers are between jobs by choice.

What causes structural unemployment?

changes in technology, changes in consumer demand, globalization, government policies, lack of education or training.

Is unemployment always bad?

No, some level of unemployment is natural and can be beneficial, while high unemployment indicates economic problems.

How is inflation measured?

Using the Consumer Price Index (CPI), which tracks price changes of a basket of goods.

Who is hurt by unanticipated inflation?

People on fixed incomes, savers, and lenders.

Who benefits from unanticipated inflation?

Borrowers and businesses that can raise prices faster than costs increase.

What are the causes of inflation?

Demand-pull inflation, cost-push inflation, and hyperinflation.

What are the three main goals of Macroeconomics?

Economic growth, full employment, and price stability.

What describes the business cycle?

Natural fluctuations of the economy through stages: Expansion, Peak, Recession, Trough.

What is a recession?

A period of at least two consecutive quarters of GDP decline.

What is the Dual Mandate of the Federal Reserve?

To keep inflation low and stable and to maximize employment.