Foundations of Economics Test 4

money transfers

money payments from government to people

Poverty in the US

decreased since 1960

Labor Unions

Decrease the number of jobs available to people

The rich have earned

a larger share of income since 1980

Income is distributed based on

the supply and demand for productive services

Human capital

the skills and knowledge gained by a worker through education and experience

The most effective way to reduce poverty is to

grow the whole economy

Government cannot really "redistribute" income because

incomes are determined by the ownership of productive resources

Unions effect labor markets by

keeping wages above equailibrium, like a price floor

Discouraged worker

a worker who has given up looking or work

stagflation happens when

there is both a recession and inflation

Unsold goods are considered to be part of a countries

inventory investment

Intermediate good

A good that is produced and included in the production of another good.

Civilian labor force

men and women 16 years old and over who are either working or actively looking for a job

civilian labor force equation

the number of people who are employed plus the number of people who are unemployed equals

Unemployment

the most troubling consequences of lower GDP for the general public

Gross Domestic Product measures

the value of goods and services produces in a country

GDP deflator is used to measure

changes in the price level

GDP focus

where the production occurs

Macroeconomics

The study of the economy as a whole. Consequences of all the choices made

GNP

Gross National Product. Focuses on who owns capital

Intermediate goods are not calculated in GDP because

You would be counting them twice

Unsold Goods are accounted for in GDP

acting as if the company bought their product from themselves

The most troubling consequence of reduction in GDP is

unemployment

Consequences of reductions in GDP are

Decline in production of goods and services, and unemployment

Inflation affects the purchasing power of money by

decreasing the amount that can be purchased with money

Inflation is a problem because it

generates uncertainty

GDP

Gross Domestic Product. The dollar value of all final goods and services produced in an economy in one year. Measured yearly. Value of production.

The majority of American GDP is made of

services

Real GDP

GDP adjusted for inflation

somebodies income is

somebody else's expenditure

per capita GDP

the GDP divided by the total population

underground economy

unreported legal and illegal activities that do not show up in GDP statistics

unrecorded transactions include

Cash, exchange of services, household production (chores)

Consumption

Household consumptions (not just food)

Investment

Business spending for facilities and equipment to help them produce more. Capital purchased to enhance production.

Government

Spending by government

Net Exports

Exported goods.

GDP is equal to

consumption + investment + government spending + net exports

Final Good

a good that is used by an end user for it's intended purpose (house, car, bookshelf, clothing)

intermediate good

good that is not final; will become part of another good

Unemployment rate

Unemployed divided by the civilian work force. Looking for work, but not working now.

discouraged workers

individuals who would like to work but have given up looking for a job

Income is distributed by

As they are produced and demanded

false

lifetime income is the true determiner

Machines will replace people when

the marginal cost of using a machine is less then the marginal cost of people

It's not necessarily bad thing for machines to replace people because

it releases these people to work in other fields that they are needed in

Labor unions create unemployment by

making the wage above the market clearing price

To increase income you must

increase the production of goods

Is it possible to reduce poverty without reducing income inequality

Yes. Poverty and Inequality are not the same.

Wealth

positions, stock, investments

Income

what you get to add to your wealth

Labor unions goal

work together to drive wages up (causing a surplus , or unemployment)

Distribution is more

unequal

The most effective way to reduce poverty is

Economic growth by producing more real goods

Income inequality has increased since 1980 because

changes in education, less skilled immigrants, single parents, nature of jobs (salary)

The poor have gotten richer while they have also received a smaller share of all the income in the economy because

Money increases, but inflation keeps it from increasing the amount they can buy with it

Governments do not distribute income because

income is not distributed by anyone

Capital

goods that produce other goods