Econ exam review

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74 Terms

1
unemployment
Number of civilians at least 16 years willing and able to work who have been trying to find a job within the prior four weeks.
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2
what does the cost of unemployment include
loss of output and pyschological impact
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3
labor force
the total number of workers, including both the employed and the unemployed
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4
Civillian non-institutional population
non military and prisoned people employed and unemployed
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5
marginally attached workers
would like to be employed and have looked for a job in the recent past but are not currently looking for work
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6
Underemployment
individuals who are unemployed, part time, or marginally attached
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7
unemployment rate
unemployed/labor force * 100
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8
labor force participation rate
(labor force/adult population) * 100
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9
Labor Force Marginally Attached (LFMA)
labor force + marginally attached
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10
underemployment rate
(Underemployed/LFMA) x 100
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11
employment population ratio
(employed/non institutionalized labor pop) x 100
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12
frictional unemployment
unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills
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13
cyclical unemployment
unemployment caused by a business cycle recession
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14
structural unemployment
unemployment that occurs when workers' skills do not match the jobs that are available
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15
seasonal unemployment
unemployment caused by seasonal changes in the demand for certain kinds of labor
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16
full employment
the condition in which virtually all who are able and willing to work are employed.
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17
natural rate of unemployment
The rate of unemployment that is estimated to prevail in long-run, when all workers and employers have fully adjusted to any changes in the economy.
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18
Inflation
A continuous rise in the price of goods and services
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19
Deflation
a decrease in the general level of prices
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20
baskets of goods and services
Representation of consumer spending used to track changes in price over time
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21
purchasing power
the value of money for buying goods and services
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22
price index
(Market basket cost)/(basket cost in base year)
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23
inflation rate
(Price index in year 2 - price index in year 1)/(Price index in year 1) x 100
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24
nominal value
the face value of an amount of money
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25
real value
the value of an amount of money in terms of what it can buy
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26
anticipated inflation
inflation that is expected to occur
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27
unexpected inflation
inflation that occurs as a result of an unexpected event increases demand for goods and services beyond what can be met by producers, causing prices to rise faster than expected
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28
nominal interest rate
the rate of interest expressed in today's dollars
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29
real rate of interest
The nominal rate of interest minus the anticipated rate of inflation.
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30
Gross Domestic Product (GDP)
A measurement of the total goods and services produced within a country.
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31
expansion
A period of economic growth as measured by a rise in real GDP for 2 quarters
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32
contraction
a period of economic decline during which trade and industrial activity are reduced
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33
Recession
A period of economic decline as measured by a fall in real GDP for 2 quarters
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34
Depression
a period of sustained economic decline
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35
Costs of negative economic growth
-Lost Output -Possible Higher Unemployment Rates
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36
value added approach
measuring GDP by summing the values added by all firms in the economy
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37
Limitations of GDP
GDP excludes non-market production
Different countries have different legal versus illegal activities
Quality of life is not measured
GDP poorly measures a nation's well-being
Does not discuss distribution of income
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38
national income accounting
A measurement system used to estimate national income and its components
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39
Expenditure Approach
A way of computing national income by adding up the dollar value at current market prices of all final goods and services
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40
GDP Expenditure Approach
GDP = C + I + G + (X-M)
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41
consumption(c)
includes durables, nondurables, and services
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42
GPDI(I)
the creation of capital goods that can yield production in the future
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43
Government Expenditure(G)
State, local, and federal expenditures
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44
Next Exports(NX)
EXPORTS -IMPORTS
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45
Income Approach
A way of measuring national income by adding up income received by all factors of production
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46
NDP
GDP - depreciation
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47
indirect business taxes
transfers + net US income abroad + other business income adjustments
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48
income approach GDP formula
w+r+i+p+dep+IBT
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49
nominal values
Measurements in terms of the actual market prices at which goods are sold
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50
real values
Measurements after adjustments have been made for changes in the average of prices between years; expressed in constant dollars
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51
Economic Growth Rate
the rate of change in real GDP between two time periods
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52
Real GDP per capita
real GDP divided by the total population
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53
Long-Run Economic Growth
the process by which rising productivity increases the average standard of living
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54
Rule of 70
70/growth rate=doubling time
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55
potential gdp
the level of real GDP attained when all firms are operating at capacity
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56
New Real GDP formula
old real gdp*(1+growthrate)^n
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57
five keys to economic growth
increase number of resources
increase productivity
saving
human capital
technology
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58
increase productivity
real gdp/output per worker
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59
Real GDP per capita formula
(technology*(cap+human cap+labor+natural resources)
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60
3 stages of economic development
agriculture, manufacturing, service
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61
Aggregate Supply
the total of all planned production in the economy
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62
Aggregate Demand (AD)
The total of all planned expenditures in the economy
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63
Long Run Aggregate Supply (LRAS)
The total quantity of goods and services (real GDP) supplied by firms in the economy in the long-run
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64
Long-run quantity of goods/services supplied
where firms operate at "capacity" - "normal" output given quality/quantity of inputs in the economy
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65
Potential real GDP
the level of real GDP attained when all firms are operating at capacity.
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66
other names of LRAS
potential real gdp, real gdp at full employment
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67
drawing the bras
LRAS is not effected by changes in price level
assumes that prices are flexible in the long run
input prices adjust to change in output price
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68
Determinants of LRAS
changes in quantity or productivity of inputs
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69
Aggregate Demand
The total quantity of goods and services (real GDP) demanded by households, firms, and the government
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70
drawing the aggregate demand curve
downwards sloping, increases when price level decreases
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71
Why is AD downward sloping?
wealth effect, interest rate effect, foreign trade effect
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72
wealth effect
Price level increases reduce the real value of wealth and this reduces the quantity of AD.
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73
interest rate effect
increases in price level leads to increased borrowing and less saving
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74
Foreign Trade Effect
price level increases make domestic prices increase
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