Studied by 17 people
What two things cause shifts in the demand for labor?
Changes in price of output and productivity
When real wage INCREASES, what shifts left?
Demand of labor
When real wage DECREASES, what shifts left?
Supply of labor
What two things cause shifts in the supply of labor?
Changes in the working age population and change in working age population willing to work
Name the three types of unemployment
Structural frictional and cyclical
Formula for Saving
Current income minus spending on current needs
Formula for saving rate
saving over income
Formula for wealth
assets minus liabilities
Is saving a stock or flow value?
Flow
Is wealth a stock or flow value?
Stock
Formula for change in wealth
Saving plus capital gains minus capital losses
What are the three reasons for household saving?
Life cycle saving Precautionary saving Bequest saving
As real interest rate goes up, how does saving change?
Saving increases
National saving formula
S = Y-C-G
Private saving formula
Sprivate = Y-T-C
Public saving formula
Spublic = T-G
Saving is the sum of what?
Private and public saving
The variable T means what?
Net taxes
Net taxes formula
Total taxes minus transfer payments minus government interest payments
Private saving is the sum of what?
Household and business saving
The surplus of the government budget surplus is what?
Public saving
What two factors affect investment decisions?
Costs and benefits
What is costs of investment?
Price of new capital goods Real interest rate
Does real interest rate shift the supply and demand curves in SAVING AND INVESTMENT?
No
What is money?
Asset used to make purchases
What are the three functions of money?
Medium of exchange Unit of account Store of value
What is M1?
What causes cyclical unemployment?
Business cycle
What equals natural unemployment?
structural plus frictional
What is u*?
Natural rate of unemployment
What is u?
Rate of unemployment
The formula for cyclical unemployment is?
Unemployment minus natural unemployment
Okun’s Law
What causes slowdowns or speed ups in REAL GDP growth?
Potential output growth Output gaps develop
Do prices change immediately with a change in demand?
No
How do firms meet demand in the SHORT run?
Preset prices
How do firms meet demands in the LONG run?
Total spending analysis
What is the equilibrium of an open economy?
SK + I = I
What does unemployment do during recessions?
Rise
Which type of unemployment is associated with recessions?
Cyclical
Which industries are most affected during recessions?
Durable goods
How do recessions affect the rate of inflation?
It declines
What does Y* mean?
Potential output
Output gap formula
Note 
Flashcard (102)