macro final

what must happen to produce more? (shift up the PPF)

* increase amount of capital
* increase quality of capital
* increase quality of labor
* invent and innovate

the types of government securities are

treasury bills and government bonds

treasury bills are

short-term debt securities issued by the government of a country to raise funds, mature in less than a year

\
* low-risk investment because the U.S. government has a long history of paying its debts on time

government bonds are

mature in over a year

are government outlays counted in GDP

no, government outlays are not counted in GDP

the business cycle is

a graphical representation of the short-term ups and downs the economy experiences in contrast to a potential line of production

a contraction of the business cycle includes

* decrease in production/output
* increase in unemployment
* decrease in wages
* decrease in consumer spending

an expansion of the business cycle includes

* increase in production/output 
* decrease in unemployment 
* increase in wages 
* increase in consumer spending

on the curve of the business cycle graph, where is that point on the PPF?

inside the PPF

\

above the potential line on the business cycle graph, where is that point on the PPF? 

outside the PPF

at an intersection of the curve and potential line on the business cycle graph, where is that point on the PPF? 

on the PPF

inflation is

an overall price increase

hyperinflation is

periods of very rapid price increase

deflation is

an overall price decrease

stagflation is

* high inflation
* high unemployment
* slow/negative production

a depression is

a deep and prolonged recession

investment is

the process of using resources to produce capitalin

investment is the process of using ______ to produce ____

resources; capital

consumer goods are

goods produced for present consumption

intermediate goods are

transformed or passed on in production

capital goods are

* used in producing other goods


* in their final form

economic growth is when the potential of the economy

grows

how does the PPF change when there is economic growth?

the whole PPF shifts outward

economic expansion is when

the economy is producing more

economic expansion is when the economy is _____ more

producing

economic growth is when the economy is _____ of more

potenital

economic contraction is when the economy is _____ of more

less capable

how does the PPF change when there is an economic contraction?

the PPF shifts inwards

how does the PPF change when there is economic expansion?

the POINT ON THE PPF moves

how does the PPF change when there is economic recession?

the point moves

what economic events cause the PPF as a whole to shift?

economic growth and contraction periods

what economic events cause the point on the PPF to shift?

economic expansions and recessions

in the goods and services market, ____ and ____ purchase goods and services from ______

households and governments ; each other

in the labor market, ____ and ____ purchase goods and labor from ______ 

firms and governments ; households

in the money (financial) market, ___ purchase stocks and bonds from ___

households ; firms

what is purchased on the money market and by whom?

households purchase

* treasury bills
* treasury bonds
* treasury notes
* corporate bonds

transfer payments are

payments from the government to households for which the households dont earn

transfer payments ___ counted in GDP

are NOT

GDP =

C + I + G + NX

\
(NX = EX - IM)

the expenditure approach

sum the value of the goods and services each entity is buying

personal consumption (C) includes

* durable goods
* nondurable goods
* services

gross private domestic investment (I) is and includes

the total investment made by the private sector

\
includes:

* nonresidential investment
* residential investment
* changes in business inventories (different between beginning and ending inventories)

government consumption and gross investment is part of 

GDP

government consumption and gross investment (G) is

expenditures made by the government for final goods and services

net exports (NX) is

exports (US produced goods) - imports (US purchased, foreign goods)

net investment is

in macroeconomics, refers to the amount of money that an economy invests in capital goods such as buildings, machinery, and equipment after accounting for any depreciation or sales of those assets.

i

It is an important measure of an economy's ability to increase its productive capacity and generate future economic growth

if net investment is positive, it means

that the economy is increasing its capital stock and is likely to experience higher levels of productivity and output in the future

if net investment is negative, it means 

the economy is reducing its capital stock and may face slower growth or even decline in the future

net investment =

gross investment - depreciation

GDP - depreciation =

net domestic product net

net domestic product =

GDP - depreciation 

net domestic product is

1. a measure of the value of all final goods and services
2. produced __***within a country's borders***__
3. during a given period of time
4. minus the value of any **depreciation** of capital assets used to produce those goods and services

national income is

the total income earned by all individuals and businesses __***within a country's borders***__ during a given period of time

personal income is

money flowing into households

personal income includes

* wages and salaries received from employment


* government transfer payments such as Social Security benefits and unemployment insurance
* income from self-employment, income from investments such as dividends and interest, rental income

the personal savings rate is

the percentage of disposable income saved instead of spent by households

GDP +/- receipts of factor income from the rest of the world +/- payments of factor income to the rest of the world = GNP

\+receipts, -payments

GNP +/- receipts of factor income from the rest of the world +/- payments of factor income to the rest of the world = GDP

\-receipts, +payments 

the GDP growth rate =

(nominal GDP 2 - nominal GDP 1)/ nominal GDP 1

the value added approach is

a method of calculating GD which adds the value of goods and services by stages of its production

the _____ calculated the GDP

Bureau of Economic Analysis (BEA)

the factor income approach is

a method of calculating GPD which sums all income earned

\
because production → = income generated

gross national product (GNP) =

national income + depreciation

national income + deprecation =

gross national product (GNP)

gross national product (GNP) does/does not include income earned by citizens outside of the country’s borders?

GNP does income income from abroad

gross domestic product (GDP) does/does not include income earned by citizens outside of the country’s borders?

GDP does NOT include income from abroad

net national product =

GNP - depreciation

nominal GDP is

GDP measured in current dolalrs

real GDP is

GDP adjusted for price changes

which measure of GDP adjusts for changes in prices

real GDP

the chain-weighted procedure is

calculate changes in real GDP over time, adjusting for changes in prices and the composition of output

\
involves using a set of weights that are updated each year to reflect changes in the relative importance of different sectors of the economy and changes in the prices of goods and services

the fixed-weight procedure is 

a method used to calculate changes in real GDP (Gross Domestic Product) over time, adjusting for changes in prices but not for changes in the composition of output

a base year is

the year chosen for the PRICES when calculating GDP, using the quantities of the year “it’s real for”

the ____ calculates unemployment

Bureau of Labor Statistics

how often is unemployment calculated?

every month

how often is GDP calculated? 

quarterly

to be employed, you must be

* 16+
* have at least an hour of paid work for someone else
* at least 15 hours of unpaid work for family
* logical absence but employed

to be unemployed, you must be 

* 16+
* available for work
* made efforts in the last 4 months to find work

to be not in the labor force, you must be 

* not looking for a job because
* do not want a job
* given up
* students, retirees, institutionalized, stay at home caregiver

\
military is NOT COUNTED

discouraged workers are those who

have stopped looking for a job because discouraged

are discouraged workers counted unemployed, not in the labor force, both, or neither?

discouraged workers counted in NEITHER

as the number of discouraged workers increase, the unemployment rate **increases/decreases**?

decreases

total population =

labor force + not in the labor force

labor force =

employed + unemployed

unemployment rate =

(unemployed) / (employed + unemployed)

labor force participation rate =

(labor force) / (population)

frictional unemployment is

unemployment from natural turnover in the labor market

structural unemployment is

due to the industries themselves

seasonal unemployment is

unemployment from seasonal, temporary, or project based jobs

cyclical unemployment is

from economic cycles like recessions or expansions

cyclical unemployment =

actual unemployment rate - natural rate of unemployment

cyclical unemployment =

current employment rate - (total frictional + structural unemployment)

natural unemployment is

the rate of unemployment the economy will achieve at its potential level of output

\
also is when no increase in inflation

____ unemployment is the unemployment rate when there is no increase in inflation

natural unemployment

natural unemployment =

friction + structural unemployment

the consumer price index is

the BLS price index of goods which represent the “market basket”

the market basket is

the quantities of all of the goods and services an average household buys every month

how often is inflation calculated?

monthly

the market basket compares ___ to goods to ___

todays goods ; the base year

consumer price index (CPI) =

(vale of market basket in todays $) / (vale of market basket in base year’s $) x 100

\
* the quantities are the same if using fixed-weight method