Chapter 4 Macroeconomics Overview

FILL_IN_THE_BLANK flashcards covering GDP, business cycles, labour markets, productivity, inflation, interest rates, exchange rates, trade, and macroeconomic policy.

_ measures the amount of aggregate output the economy produces during a year.

Gross Domestic Product (GDP)

Short-term fluctuations of real GDP around its long-run trend are called the _.

business cycle

The highest point of actual GDP before a downturn is called the .

peak

The lowest point of actual GDP in a cycle is known as the .

trough

The level of output the economy would produce if all resources were fully employed is called _.

Potential Output (Potential GDP)

The Output Gap is calculated as Y − Y*, where a negative value indicates a _ gap.

recessionary

A positive Output Gap, where actual GDP exceeds potential GDP, is called an _ gap.

inflationary

People who worked part-time or full-time during the past week are classified as .

employed

The Labour Force equals the total number of people who are either or .

employed; unemployed

The unemployment rate is computed as (Number unemployed / Labour force) × _.

100

A person who wants a job but has stopped searching because they believe none are available is a worker.

discouraged

Unemployment caused by normal turnover of workers between jobs is called _ unemployment.

frictional

Unemployment arising from a mismatch between workers’ skills and employers’ needs is unemployment.

structural

Full employment is said to occur when the only unemployment present is and .

frictional; structural

Unemployment that moves with fluctuations in actual GDP around potential GDP is unemployment.

cyclical

Labour productivity can be measured as Real GDP per .

employed worker

Another measure of productivity is Real GDP per worked.

hour

The average level of prices in the economy is known as the .

price level

The rate at which the price level is rising is the rate.

inflation

The Consumer Price Index tracks the cost of a fixed of consumer goods and services.

market basket

The formula for the CPI is (Cost of basket in current year / Cost in base year) × .

100

The real interest rate equals the nominal interest rate minus the rate.

inflation

The exchange rate convention used in the textbook expresses the number of dollars required to buy one unit of foreign currency.

Canadian

Goods and services produced in Canada and sold abroad are called .

exports

Net exports, or the trade balance, are calculated as the value of exports the value of imports.

minus

Government use of taxation and spending power to influence the economy is known as policy.

fiscal

Decisions about how much money to supply to the economy, typically made by the central bank, constitute policy.

monetary