ECON TEST 3

Nominal GDP

State GDP in Current Value

Real GDP

State GDP after being adjust for inflation

Personal Income

income received by a country's people from all sources in a given time period (personal taxes)

Disposable Personal Income

personal income-minus personal income taxes

Expansion

increase in real GDP Peak; point at which real GDP is the highest

Recession

lasting more than 2 quarters (1 quarter=3 months)

Stagflation

an increase in prices in the contraction phase

1. Business Decisions
2. Changes in interest rates
3. Consumer Sentiment
4. Eternal Issues

What are the reasons for business cycles?

Unemployment Rate

the percentage of labor force that is jobless and looking for work

Underemployed

part time workers who want to work full-time or people working below their skill level

4% to 6%

A _______ to ________ unemployment rate = full employment rate

Frictional

temporary unemployment of people changing jobs

Seasonal

unemployment linked to seasonal work

Cyclical

caused by a part of the business cycle with decreased economic activity

Inflation

sustained rise in general price level or a fall in the purchasing power of money

consumer price index

a measure of changes in the prices of goods and services commonly purchased by consumers

cost push

when increases in the cost of production push up prices

1. decreasing value of the dollar
2. increasing interest rates
3. decreasing real returns or savings

What are the three impacts of inflation?

15%

What is the poverty rate?

$27,000

What is the poverty threshold line for a family of four in 2022?

education, discrimination, demographic trends, changes in labor force

What factors affect poverty?

welfare, low-income household programs, general programs, other programs

What are the anti-poverty programs?

Welfare

government economic and social programs that provide assistance to the needy

Low-income household programs

food stamps, medicaid, earned income tax credit

general programs

social security, unemployment insurance

other programs

empowerment zone, workfare

CPI (Consumer Price Index)

What is commonly used for measuring inflation?

inflation

what is it called when CPI goes down?

earned income-income taxes

What is the formula for disposable income?

1. Consumption
2. Investment
3. Government
4. Net Exports

What makes up GDP?

Consumption

all spending by households

Investment

business spending (new construction, machines, inventory)

government

defense, highways, education

net exports

exports-imports