Chapter 11 & 12

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Expenditure Approach

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Tags and Description

Gross Domestic Product, Business Cycle, and Unemployment

29 Terms

1

Expenditure Approach

leading approach; totals annual expenditures on four categories of final goods:

  1. spending by households, or consumption (c)

  2. business good and services, or investment (i)

  3. government goods and services (g)

  4. total exports - total imports, or net export (x)

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2

Income Approach

calculates GDP by adding up all the incomes in the country

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3

GDP Per Capita

identifies the quantity of goods and services attributed and made available for each member of society -real gdp per person in the population

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4

Frictional Unemployment

the unemployment which exists in any economy due to people being in the process of moving from one job to another -the regular hiring and firing of workers

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5

Structural Unemployment

unemployment caused by a mismatch between jobs and skills, or other long-term changes in the economy -technology or international competition changes workers needs -ex: telephone operators lost, influencers gained

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6

Cyclical Unemployment

loss/gain of jobs due to swing of business cycle -not a part of the "natural rate of unemployment"

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7

Nominal GDP

the dollar value of all final goods and services produces within a country's borders in one year, expressed in current dollar value (UNADJUSTED for inflation)

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8

Real GDP

the dollar value of all final goods and services produces within a country's borders in one year, expressed in current dollar value (ADJUSTED for inflation)

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9

GNP

the value of goods and services produced overseas in foreign nations by domestic firms

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10

Imports

goods which add to the stock of material resources of a country by entering its economic territory

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11

Exports

movable goods produced within the boundaries of one country, which are traded with another country

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12

Expansion

GDP is growing, consumers are shopping, employment is improving and prices are rising

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13

Peak

high point where gap stops growing, prices are at they highest and unemployed workers are hard to find

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14

Contraction

GDP is shrinking, consumers are not shopping, prices are falling and workers are losing jobs

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15

Trough

demand, production, and unemployment are at their lowest point

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16

Leading Indicators

measure of economic performance that usually changes six to nine months before real GDP changes: Stock market, interest rates and new home sales

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17

Coincident Indicators

measure of economic performance that usually changed with Real GDP: employment, sales volume and personal income

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18

Lagging Indicators

measure of economic performance that usually changes after real GDP: confirms a cycle has ended: ratio of consumer credit to personal income

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19

Consumer Price Index (CPI)

a measure of the average change in prices over time in a fixed market basket of goods and services

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20

Depression

a steep and sustained drop in economic activity featuring high unemployment and negative GDP growth

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21

Recession

a significant, widespread, and prolonged downturn in economic activity

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22

Double Counting

The mistake of including both the value or intermediate products and the value of final products in calculating gross domestic product

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23

US Bureau of Labor Statistics

measures labor market activity, working conditions, price changes, and productivity in the U.S. economy to support public and private decision making

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24

Final Goods

-goods which used either for consumption or for investment -they are ready for use in the sense that no value has to be added -they have crossed the production boundary -ex: milk purchased for household consumption

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25

Intermediate Goods

-a product used to produce a final good or finished product -goods that are used by businesses for producing goods or services -known as producer goods

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26

Underground Economy

there is much economic activity which, although income in generated, is never reported to the government: Black market transactions and under the table wages: Drug dealing

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27

Quality of Life

countries with high GDP's have high living standards: GDP does not show how goods and services are distributed

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28

How to Calculate Unemployment Rate:

UR= # of unemployed/labor force

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29

What is not included in GDP?

-illegal goods -unpaid work -used goods -non market activities

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