SSE 200 Foundations of Economics Test 4 Bob Jones University

Labor Union

Group of employees, employed in the same business or industry that come together in such a way as to appeal to their employer

Capital

refers to financial assets or the financial value of assets, such as cash and funds held in deposit accounts, as well as the tangible machinery and production equipment used in environments such as factories and other manufacturing facilities. (Capital is one of three resources)

Human capital

the knowledge and capabilities of an individual

Physical capital

man made productive resources

Financial capital

money/cash reserves

Who distributes income?

the person who has control over the most productive resources (the more resources you have the more wealth you create)

Land

Natural resource

Labor

Human resource

Is poverty and income inequality the same thing?

No, they are different entities

Gross Domestic Product (GDP)

the total dollar value of all final goods and services produced IN an economy in a year (annual measure)

Final goods

Product sold to the end user

Intermediate goods

a product utilized to produce a final good

Gross National Product (GNP)

the total dollar value of all final goods and services produced BY a an economy in a year (only lowers if a company changes hands to another country)

Consumption Spending

private purchases of goods for the household (makes up 70% of spending)

Investment Spending

business purchasing goods for the business

Government Spending

purchases of goods by a government

Net Exports

selling of goods or services to another country (-10% of spending)

How are unsold goods accounted for in GDP calculations?

they are counted as inventory investment for the company that purchased the goods

What does reduction in GDP lead too?

Recession and a rise in unemployment

Stagflation

the rise in prices during a recession (normally prices go down)

Inflation

the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling (putting money into the economy)

Macroeconomics

a branch of the economics field that studies how the aggregate economy behaves. In macroeconomics, a variety of economy-wide phenomena is thoroughly examined such as, inflation, price levels, rate of growth, national income, gross domestic product and changes in unemployment (It focuses on trends in the economy and how the economy moves as a whole)

Unemployment rate

the number of people unemployed divided by the number of people in the civilian labor force

Civilian Labor Force

people 16 years or older in the non institutional population who are either employed or unemployed

Discouraged worker

has given up searching for work

Unemployed

somebody 16 years or older in the non institutional population who is currently not employed, and is either looking for a job or waiting to begin or return to a job

What is the difference between GDP and GNP?

GDP calculates the all companies within a countries borders and GNP calculates for all the countries companies including those based in other countries

How does inflation affect the purchasing power of money?

the purchasing power is decreased

What is the difference between macroeconomics and microeconomics?

Microeconomics is generally the study of individuals and business decisions, macroeconomics looks at higher up country and government decisions

Why should we not count intermediate goods in the calculation of GDP?

Intermediate goods are not ready to be sold as a final product and GDP only calculates the sale of final goods