Comprehensive Macroeconomics and Economic Indicators Review

What is Macroeconomic policies?

gov actions designed to affect the performance of the economy as a whole (large scale)

What is Standard of living?

the degree to which people have access to goods and services that make their lives easier, healthier, safer, and more enjoyable

What is Economic growth?

a process of steady increases in the quantity and quality of the goods and services the economy can produce

What is the US unemployment rate?

The % of labor force that is out of work; typically fluctuates 5-10%

The US inflation rate

Prices in general are increasing over time 

What is Open economy?

National economies are becoming increasingly interdependent

What is a Trade deficit?

exports < imports

What is a Trade surplus?

exports > imports

What is Monetary policy?

Determination of the nation's money supply, controlled by the central bank (Federal Reserve)

What is Fiscal policy?

Decisions that determine the government's budget, spending, and revenues

What is a budget deficit?

gov spending > tax revenue

What is a budget surplus?

gov spending < tax revenue

What is Structural policy?

Government policies aimed at changing the underlying structure of the nation's economy

What is Positive analysis?

Addresses economic consequences of a policy/event, not desirability (prediction)

What is Normative analysis?

Addresses whether a policy should be used; involves values (not prediction)

What is Aggregation?

Adding up individual variables to obtain economy-wide totals

What does GDP stand for?

Gross Domestic Product

What is GDP?

The market value of final goods and services produced in a country in a given period

What does "Domestic" mean in GDP?

Activity measured within a country's borders

What are Final goods?

Goods consumed by the ultimate user; included in GDP

What are Intermediate goods?

Goods used up in producing final goods; not included in GDP

What is a Capital good?

Long-lived good used in production of other goods (not money)

What are the 4 expenditure components of GDP?

Consumption, Investment, Government purchases, Net exports

What is the GDP equation?

Y = C + I + G + NX

What is the Income approach to GDP?

GDP = Labor income + Capital income

What is Real GDP?

Output valued using base-year prices (measures physical production)

What is Nominal GDP?

Output valued using current-year prices (current dollar value)

What is the Labor force?

Employed + Unemployed

What is the Unemployment rate?

Unemployed / Labor force

What is the Participation rate?

Labor force / Population age 16+

What are Costs of unemployment?

Economic (lost wages/taxes), Psychological (self-esteem), Social (crime/stress)

What is a Discouraged worker?

Wants job but stopped looking because no jobs available

What are Involuntary part-time workers?

People wanting full-time but only finding part-time

What is CPI?

measures cost of a standard basket of goods relative to base year

What is the formula for CPI?

(Cost of basket in current year / Cost in base year) × 100

What is Inflation?

Annual % change in the price level

What is Deflation?

Negative inflation rate

What is a Real wage?

Nominal wage / CPI; purchasing power of wages

What is Indexing?

Adjusting nominal quantities by inflation automatically (e.g. Social Security)

What is Bracket creep?

Household moved to higher tax bracket due to inflation, not real income gains

What is Hyperinflation?

Extremely high inflation rate

What is the Real interest rate?

Nominal interest rate - inflation (r = i - π)

What is the Fisher effect?

Nominal interest rates tend to rise when inflation is high and fall when inflation is low

What is Real GDP per capita?

Real GDP / population; measure of living standards

What are Determinants of labor productivity?

Human capital, Physical capital, Natural resources, Technology, Entrepreneurship, Political/legal environment

What is Human capital?

Workers' education, training, and skills

What is Physical capital?

Machinery and equipment used in production

What is Diminishing returns to capital?

Each additional unit of capital adds less output if other inputs fixed

What is Technology's role in growth?

Main driver of productivity improvements; spreads across industries

What are Limits to growth?

Natural resource depletion, environmental damage

Living standards are determined by what?

output per person

Output per Capita

Value of output/ population

Average value productivity (AVP)

value of output/ labor force

When does GDP decrease

Never

net exports

exports-imports

Compound interest

100(1.06)^15 

Simple interest

100(15 × 6)