Unit 3 Vocab and Openers

vocab and openers.

What does G stand for in the GDP equation?

Government Spending

What does the I stand for in the GDP equation?

Business Investment

Net exports is broken down into Exports - Imports. What are exports and what are imports.

Exports = items we well to other countries ; Imports = items we buy from other countries

True or False: Every downturn in economy is considered a depression .

False

Fiscal Policy is when the government…..

Increases or decreases government spending; increases or decreased taxing.

Gross Domestic Product is a method for calculating how much a country produces by adding which four spending categories?

Consumption, Investment, Government, Net Exports.

Which of the following is NOT included in GDP?

1) Eggs that are bought by a bakery to be used in the production of pies

2) a new car

3) groceries bought by a family to be eaten at home.

Eggs that are bought by a bakery to be used in the production of pies

Macroeconomics

Study of economics that focuses on a country’s entire economy, measuring factors such as nation output (GDP), inflation, and unemployment rates

Economic Growth

having a steady increase in the value and production level of goods and service produced by an economy.

Gross Domestic Product (GDP) + calculation

The total market value of goods and services produced within a country in one year.

Calculation: C + I + G + (X - M)= GDP

Intermediate Goods

Products that are used within the creation of a final product. Does not count in GDP, because the final is good is counted in GDP already.

EX) windows, tires, steering wheel of a car being sold at the dealership.

Price stability

Having little to no change in the prices of general consumer goods.

Consumer Price Index (CPI)

The change in market value of a typical “market basket” of goods and services that consumer buy and is used to calculate inflation.

Calculation : (Cost of market basket in current year/ cost of market basket in base year) x 100.

Inflation

the decrease in value/purchasing power of money over time, meaning you would need more moeny to buy the same amount of Goods and Services.

Calculation : [(CPI new year - CPI old year) / CPI of old year] x 100

Nominal GDP

the original value added up across all spending sectors.

Real GDP

the value of current GDP adjusted for increases in price over time (inflation)

Calculation : Nominal GDP - Inflation Rate.

All of the following would be badly hurt by rapidly increasing inflation except ….

A) A person with money in a savings account

B) A bank that has lent money at a fixed rate

C) A worker with cost-of-living adjustments in his income

D) A person with a low-income job

C) A worker with cost-of-living adjustments in his income

A market basket is used for….

Comparing prices of standard goods over time to determine inflation

In Year 1, the cost of a market basket of goods was $720. In year 2, the cost of the same basket $780. What was the Consumer Price Index for year 2.

108

To calculate the unemployment rate an economist would need the total number of unemployed people and the total number of the….

people in the labor force

Which of the following people would NOT be included in the calculations of Unemployment Rate.

A) a 16 year old who just started their first job

B) a college graduate who is looking for an accounting job

C) a newly retired 75 year old

D) a 50 yr old who has been working at a restaurant manager for 20 yrs.

C) a newly retired 75 year old

Full Employment

Virtually everyone who is willing and able to work in an economy is working.

Unemployment Rate

the percentage of the labor force that is unemployed.

Calculation : [Unemployed(looking for job)/labor force(working/looking)] x 100

Labor Force

All people age 16 and older who are classified as employed or unemployed.

Unemployed

People who are available for work but do not have a job and have actively looked for work in the past 4 weeks.

Cyclical unemployment

joblessness that results from downturns in the economic business cycle, like recessions when overall demand for goods and services decreases, causing businesses to reduce production and lay off workers.

Ex. People losing their jobs due to a recession.

Frictional unemployment

temporary joblessness that occurs when individuals are transitioning between jobs, seeking opportunities, or entering the workforce for the first time.

ex. a 32 yr old who quit their job last week to find a new one

Structural/Technological unemployment

a long-term form of joblessness caused by a fundamental mismatch between the skills workers have and the skills employers demand.

ex. A person losing their job as a grocery store cashier due to the new self-checkout kiosks were added.

Seasonal unemployment

the temporary, predictable joblessness that occurs because the demand for labor in certain industries fluctuates with the seasons, weather, holidays, etc.

ex. a 16 yr old during winter who lifeguards in the summer.

Business Cycle

shows how economic activity fluctuates overtime, with alternating periods of growth, and decline. Real GDP goes up and down over time.

Peak

the highest point of real GDP growth in that current cycle, but alos the highest inflation rate.

Expansion

As real GDP increases, we experience economic growth, increasing price levels/inflation, and decreasing unemployment.

Contraction

As real GDP decreases, we experience decline in economic growth, decreasing price levels, and increasing unemployment economy is “cooling”.

Trough

the lowest point of real GDP decline in the current cycle, and highest unemployment rate.

Depression

If corrective action is not taken, and GDP drops severely, it is considered a depression

Recovery

Real GDP is increasing again after a period of decline, economy is back in expansion.

Recession

A contractionary period that continues for at least 6 months.