Economics Midterm 3

Front 1

marginal product of labor (MPL)

Back 1

increase in the amount of output from an additional unit of labor.

ΔQ/ΔL

Front 2

value of the marginal product of labor (VMPL)

Back 2

the marginal product of an input times the price of the output.

P x MPL

marginal profit = VMPL - W

Front 3

utilitarianism

Back 3

maximize the total utility of everyone in society. (a dollar means more to a poor person then a rich person). also problem of leaky bucket - will not try to reach complete equality.

j. bentham and john stuart mill

Front 4

liberalism

Back 4

chose policies that are just if behind a "veil of ignorance". aka help the poor, redistribute even if it is a leaky bucket.

john rawls

Front 5

libertarianism

Back 5

punish crimes and enforce voluntary agreements, but not redistrute income. don't care about equality, what one owns is his.

robert nozick

Front 6

GDP

Back 6

the market value of all final goods and services produced within a country in a given period of time.

Y = C + I + G + NX (exports-imports)

Front 7

nominal GDP

Back 7

production of g & s at current prices.

sum of price x quanity

Front 8

real GDP

Back 8

production of g & s at constant prices.

sum of price from base year x quantity

Front 9

GDP deflator

Back 9

reflects g & s but not quantities produced.

= (nominal GDP/Real GDP) x 100

Front 10

consumer price index (CPI)

Back 10

measure of overall cost of g & s bought by a typical consumer.

1. determine basket

2. find price of each good

3. compute cost of total basket

4. choose base year and compute CPI in each year
(basket of year z/basket of base year) x 100

5. use CPI to compute interest rate (%Δ of price index)
inflation in year z
= (CPI year z - CPI year y)/(CPI year y) x 100

Front 11

two types of inflation rates

Back 11

nominal: w/o correction for inflation effects

real: corrected for effects of inflation

real = nominal - inflation rate

Front 12

national saving (saving)

Back 12

total income in the economy that remains after paying for consumption and gov purchases.

S = I

Front 13

private saving

Back 13

private = income that households have left after paying for taxes and consumption
(Y - T - C)

S = (Y - T - C) + (T - G)

T is gov tax revenue minus transfer payments (SS, welfare)

Front 14

public saving

Back 14

public = the tax revenue that the government has left after paying for spending

(T - G)

S = (Y - T - C) + (T - G)

T is gov tax revenue minus transfer payments (SS, welfare)