econ test 5

GDP

the market value of all final goods and services produced within a country during a given period of time

nominal GDP

the output of an economy valued at today’s prices

measured in current dollars

real GDP

the output of an economy valued in constant dollars

measured in constant dollars fixed at a rate current in a specified base year

per capita GDP

a measurement of GDP per person

measured by dividing a nations GDP by its population

frictional unemployment

people who are changing jobs or seeking new ones

structural unemployment

people who lose their jobs because technological advances reduce demand for people with their skills

seasonal unemployment

people who are unemployed because their jobs depend on the season

cyclical unemployment

people who lose their jobs during periods of economic decline

what are the 4 types of unemployment?

cyclical, seasonal, frictional, structural

which types of unemployment can exist even in a growing economy?

frictional, structural, seasonal

what type of unemployment emerges during an economic downturn?

cyclical

how do you calculate GDP?

C+I+G+NX

what does C stand for in the GDP equation?

household consumption

what does I stand for in the GDP equation?

business investment

what does G stand for in the GDP equation?

government purchases

what does NX stand for in the GDP equation?

net exports

how do you calculate net exports?

exports-imports

what are the main causes of inflation?

an increase in money supply, cost-push inflation, and demand pull inflation

demand pull inflation

increase in demand as the four sectors of the economy (households, businesses, government, and foreign buyers) try to purchase more goods and services than the economy can produce

cost-push inflation

increase in the costs of production; higher production costs reduce an exonomy’s ability to supply the same output at the same price level

what are the 3 types of inflation?

hyperinflation, deflation, creeping inflation

creeping inflation

small amount of inflation each year (considered normal)

hyperinflation

runaway inflation (causes people to lose confidence in their currency or government)

deflation

negative inflation rate, when prices go down over time (can lead to business slowdowns and lower wages)

expansion

period of economic growth when economic activity increases from month to month

peak

point at which expansion ends as economic activity reaches its highest level

contraction

period of general economic decline that lasts at least one quarter

trough

point at which contractions end as economic activity reaches its lowest level

what happens to the real GDP, unemployment rate, and inflation rate in an expansion?

real GDP increases

unemployment rate generally decreases

inflation rate generally increases

what happens to the real GDP, unemployment rate, and inflation rate in a contraction?

real GDP decreases

unemployment rate increases

inflation rate decreases

what is the difference between real and nominal GDP?

real GDP is adjusted for inflation

why is the unemployment rate above 0 when the economy reaches full employment?

there are always people in transition between jobs

discouraged workers

workers that aren’t employed but also not looking for work

underemployed workers

people who work part-time jobs and want full-time ones, or workers overqualified for their jobs