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42 Cards in this Set

  • Front
  • Back
the amount of goods and services produced for each hour of a workers time.
GDP measures two things:
The total income earned y everyone in the economy and the total expenditure on the economy's output of goods and services
the four determinants of productivity
physical capital, human capital, natural resources, and technological knowledge
foreign portfolio investment
an investment that is financed with foreign money, but operated by domestic residents
foreign direct investment
a capital investment that is owned ad operated by a foreign entity
the effect of one person's actions on the well-being of a bystander.
brain drain
the emigration of many of the most highly educated workers to rich countrir where these workers can enjoy a higher standard of living.
property rights
refers to the ability of people to excercise authority over the resources that they own
inward-oriented policies
Policies that are aimed at raising productivity and living standards within the country by avoiding interaction with the rest of the world.
outward- oriented policies
policies that attemot to integrate countries into the world economy.
financial system
the group of institutions in the economy that help to match one person's saving with another person's investment.
financial markets
are the institutions through which a person who wants to dave can directly supply funds to a person who wants to borrow. AKA the bond market and stock market
financial intermediaries
are financial insitutions through which savers can indirectly provide funds to borrowers AKA: banks and mutual funds
financial markets
are the institutions through which a person who wants to dave can directly supply funds to a person who wants to borrow. AKA the bond market and stock market
Identity for GDP
Y= C(consumption)+ I(investment)+ G(government expenditures)+ X(Net Exports)
nominal interest rate
the interst rate that is usually reported, the monetary return to saving and cost of borrowing
real interest rate
the nominal interest rate, adjusted for inflation. it equals the nominal interst rate minus the inflation rate.
tax incentives for saving would...
increase the supply of loanable funds
national savings
the source of the supply of loanable funds, is composed of private and public savings.
if the government is running a deficit, it will result in a shift of the...
the supply curve for loanable funds would shift to the left
natural rate un unemployment
refers to the amount of unemployment that an economy normally experiences
the BSL defines the labor force as:
the sum of all of the employed and the unemployed
the BSL defines the unemploymemt rate as:
the percentage of of the labor farce that is unemployed... unemployed rate= (number of unemployed/labor force)X 100
there are two parties for every transaction:
a buyer and a seller
measure of the market value of all final goods and services produced in the domestic economy in a given period of time (usually a calendar year)
NX equals
exports- imports
nominal GDP
the production of goods and services valued at that years prices
Real GDP
the production of goods and services valued in some base year's prices
GDP deflator
A price index: (nominal GDP/Real GDP) X100
inflation rate(in percentage) equation
= GDP deflator (later year) - GDP deflator (earlier year)
/ GDP deflator earlier year (all times 100)
consumer price index:
the CPI is a measure of the average price of a representative "basket of goods" purchased in a given year
Inflation rate (in percentage terms) = (equation)
CPI later year- CPI earlier year
/ (CPI earlier year)
GDP does not reflect things such as:
the value of production in the home, the value of leisure, the effects of production on environment quality
can be defined as the amount of goods and services produced with an hour of a workers time
relationship between technology and human capital:
technology refers to our level of understanding about ho things work. Human capital depends on the extent to which that understanding had been conveyed to workers.
research and developement can be encouraged through
public funding of research and patents(or property rights)
policies that encourage economic growth:
investment, investment from abroad, education, property rights and political stability, free trade, control of population growth, research and developement
savings refers to:
any action where a person uses part of her income for something other than consumption or paying taxes. Thus, putting money into a savings account, or buying a CD, bond, or share of stock are all saving.
income can be used in one of three ways:
C (consumption)+ S (savings) + T (net taxes)
(Y= C+S+T)
Investment equation:
I= S (private savings by households) + (T-G)(net savings of the government - NX (foreign savings flowing into the US)
there are three sources of the supply of loanable funds:
private savings, government savings, and foreign savings
there are two sources of demand for loanable funds:
people wishing to buy houses, and businesses wishing to buy capital stock