Practice TestTake a test on your terms and definitions
Spaced RepetitionScientifically backed study method
Matching GameHow quick can you match all your cards?
FlashcardsStudy terms and definitions
1 / 70
There's no tags or description
Looks like no one added any tags here yet for you.
71 Terms
1
What is CPI?
Consumer price index
New cards
2
What does the CPI measure?
Changes overtime in cost of buying a "market basket" of goods and services.
New cards
3
How do the indexes work?
Used to determine inflation or deflation in an economy. An index number compares the value of a good or service in a particular year to its value in a base year, or reference year.
New cards
4
What does the CPI include?
Food, beverages, housing costs, furniture, clothing, transportation costs, etc.
New cards
5
What is GDP?
Total dollar value of all final goods produced in an economy in one year.
New cards
6
What is the formula for GDP?
Consumer spending + Investment + Government spending + Net exports
New cards
7
What is not included in GDP?
Intermediate goods, barter, illegal goods/services, under the table transactions(babysitting), used goods.
New cards
8
Nominal GDP
GDP measured in current prices so if prices increase over the years, economy grows - doesn't show inflation.
New cards
9
Real GDP
GDP expressed in constant or unchanging prices - accounts for inflation.
New cards
10
Intermediate goods/services
Goods/services used in the production of a final good.
New cards
11
Final goods/services
Goods/services ready for sell in the market.
New cards
12
What is consumer spending?
Most important component of GDP.
New cards
13
- Spending on durable goods: long lasting (TV, house, car),
New cards
14
- Non-durable goods (consumables): get used up quickly(gas, food, clothing), services: housing, utilities, health care, etc.
New cards
15
What is investment?
Money that businesses spend, capital- machinery, tools
New cards
16
What is gov. spending?
Federal spending- defense
New cards
17
State spending- education
New cards
18
Local spending- police services, libraries
New cards
19
What are net exports
The difference between a country's total value of exports and total value of imports.
New cards
20
Inflation
A general increase in prices throughout an economy.
New cards
21
Impact of inflation on the economy? Person?
Economy grows too fast and offsets rate of return on investments.
New cards
22
- Purchasing power is reduced (money buys less) and lower real income.
New cards
23
- Helps borrowers but hurts lenders because money paid back in the future is worth less.
New cards
24
How to calculate net exports?
Value of exports minus value of imports.
New cards
25
What does it mean if Nx is positive?
There's a favorable balance of trade.
New cards
26
What does it mean if Nx is negative?
Trade balance is unfavorable.
New cards
27
Deflation
Reduction in general level of prices.
New cards
28
What is the business cycle?
The national economy goes up and down like a roller coaster over time.
New cards
29
What is a recession?
2 Consecutive quarters of negative growth (6 months)
New cards
30
- when real GDP goes from peak to trough.
New cards
31
What is expansion?
When real GDP goes from trough to another peak.
New cards
32
Frictional unemployment
Temporary unemployment or being between jobs. Individuals are qualified workers with transferable skills.
New cards
33
Structural unemployment
Changes in labor force make some skills obsolete. These workers don't have transferable skills and these jobs will never come back. Workers must learn new skills to get a job.
New cards
34
Cyclical unemployment
Unemployment caused from a recession. As demand for goods and services falls, demand for labor falls and workers are fired.
New cards
35
Creative destruction
Permanent loss of jobs where skills were made obsolete because people created new things.
New cards
36
Example of frictional unemp.
- High school or college graduates looking for jobs
New cards
37
- people fired and looking for better job.
New cards
38
Example of structural unemp.
VCR repairman, milkman
New cards
39
Example of cyclical unemp.
- Steelworkers laid off during recession
New cards
40
- restaurant owners fire waiters after months of poor sales due to recession.
New cards
41
Effects of inflation on economy
- Banks can be hurt if inflation wasn't expected. Inflation can hurt lenders because they may be repaid with dollars with less value.
New cards
42
- Monetary/fiscal policy designed to slow inflation, results in lost output and increased unemployment in the short run.
New cards
43
Effects of unemployment on the economy
People have less money to spend which hurts the economy. Companies suffer from low consumer demand.
New cards
44
If the GDP is rising rapidly, what is probably happening to unemployment and inflation?
Unemployment is going down and inflation is going up.
New cards
45
Criticisms of the way we count unemployment
The unemployment rate that the government uses doesn't consider all the people who are unemployed. The rate only considers people who are unemployed and actively looking for a job. This also doesn't include people in school. It doesn't accurately count all the people who are unemployed, there are more unemployed people than the rate entails.
New cards
46
Limitations of GDP
Doesn't include non-market activities, Doesn't include underground economy, Does include negative externalities, Doesn't measure quality of life, Doesn't measure distribution of goods and services, Doesn't account for increasing quality of goods
New cards
47
Creeping inflation
When inflation remains relatively low (healthy)
New cards
48
- Avg. 1-3%
New cards
49
- Steady & predictable, no big problems
New cards
50
Chronic inflation
Inflation rate steadily increases month to month over a long period
New cards
51
Hyperinflation
-Out of control
New cards
52
-Over 50% a month
New cards
53
-Often leads to economic collapse
New cards
54
ex: Germany
New cards
55
Who is in the labor force?
- 16 years old or older
New cards
56
- Able & willing to work
New cards
57
- Not institutionalized (in jails or hospitals)
New cards
58
Unemployment
Workers that are actively looking for a job but aren't working
New cards
59
Unemployment rate
The % of people in labor force who want a job but aren't working
New cards
60
Natural rate of unemployment
- Fictional plus structural unemployment
New cards
61
- Amount of unemployment that exists when the economy is healthy and growing
New cards
62
- Full employment at 4-6 % unemployment
New cards
63
Seasonal unemployment
Specific type of frictional unemployment due to time of year and nature of job.
New cards
64
ex: Santa Claus who works at mall
New cards
65
It is possible to have inflation and experience a decrease in some prices. True or False
True
New cards
66
What is often measured by the consumer price index?
Inflation
New cards
67
Per Capita Real GDP
Real GDP divided by population.
New cards
68
- Considered the best measure of standard of living
New cards
69
Real GDP and Population
Real GDP should keep up with population growth.
New cards
70
Depression
Recession for 2+ years or 10%+ decline in real GDP
New cards
71
- Usually has very high unemployment, banking and lending crisis, greatly reduced trade
Studied by 0 people
Note 
Flashcard (106)