EC202Z - Macroeconomics Final Study Guide

Economics

The study of how individuals choose to use scarce resources.

Scarcity

The fundamental economic problem of having unlimited wants in a world of limited resources.

Positive Statements

Statements that describe how the world does work; they are factual and can be tested.

Normative Statements

Statements that express opinions on how the world should work; they are subjective and value-based.

Gross Domestic Product (GDP)

A measure of the total market value of all final goods and services produced in an economy during a given period.

GDP per Capita

A measure of average income per person, calculated as GDP divided by the population.

Real GDP

GDP that has been adjusted for inflation using the GDP deflator.

Nominal GDP

GDP measured at current market prices without adjustments for inflation.

Growth Rate (GR)

A measure of how quickly a variable is growing, calculated as (new - old) / old × 100.

Capitalism

An economic system where private owners of capital goods hire labor to produce goods and services for profit.

Firm

An organization where private owners of capital hire and direct labor to produce goods/services for sale.

Mixed Economy

An economic system where both government and private businesses make economic decisions.

Equilibrium

A situation in which there is no tendency for change in the absence of an external force.

Malthusian Model

A theory that population expands with increased living standards, but will eventually lead to decreased income per person.

Malthusian Trap

The outcome predicted by the Malthusian Model where population growth negates improvements in living standards.

Unemployment

When people who want to work cannot find work despite having made efforts to find a job.

Unemployment Rate

The percentage of the labor force that is unemployed, serving as an indicator of economic health.

Frictional Unemployment

Unemployment resulting from time delays in finding a job.

Structural Unemployment

Unemployment due to changes in the structures of the economy that result in permanent job loss.

Cyclical Unemployment

Unemployment that occurs during periods of economic downturn or recession.

Natural Unemployment

The sum of frictional and structural unemployment in an economy.

Discouraged Workers

Individuals who want to work but have stopped looking for jobs, thereby lowering the unemployment rate mathematically.

Labor Union

An organization of workers that collectively negotiates pay and working conditions.

Business Cycle

Short-run fluctuations in economic activity, characterized by periods of expansion and recession.

Sahm Rule

A guideline indicating that a rise in the three-month moving average of the national unemployment rate may signal a recession.

Intermediate Goods

Goods that are used to produce final goods and are not counted in GDP.

Final Goods

Goods that are sold to final consumers and counted in GDP.