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20 Cards in this Set
- Front
- Back
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What is GDP? |
Gross Domestic Product, measures the aggregate output (Quantity*Price) of the current year, as well as the market value of final goods TL;DR: GDP calculates the dollar value of final goods produced that year |
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What is included in the GDP? |
Final goods, newly produced goods, and goods produced domestically |
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What isn't included in GDP? |
Intermediate goods (Goods used in the production process), goods sold secondhand (in a previous year or otherwise), foreign goods, and financial transactions (checks, bonds, etc.) |
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What is the Income Approach? |
Income Approach measures income derived from production in order to calculate GDP |
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What is the Expenditure Approach? |
Expenditure Approach measures the sum of money spent buying the final goods in order to calculate GDP |
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What makes up GDP? |
C+Ig+G+Xn=GDP (Consumption by Households, Gross Private Domestic Investments, Government Purchases, and Net Exports) |
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What is Nominal GDP? |
The GDP evaluated at current prices |
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What is Real GDP? |
The GDP adjusted for price changes (inflation, deflation) |
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What is the Business Cycle? |
Alternating increases and decreases in economic activity over time |
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What are the four phases of a business cycle, and what are their levels? |
Peak (Highest point; Low unemployment and high output), Recession (Decline, decrease in output), Trough (Lowest point, high unemployment and low output), and Expansion (Recovery, increase in output) |
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What groups constitute the Labor Force, and which do not? |
Employed and Unemployed (Do not have a job but are ACTIVELY SEARCHING) constitute the labor force, while those who are under 16 and/or institutionalized, and those who are not willing to work are not counted. |
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What is the Natural Rate of Unemployment? |
The Full employment level of unemployment |
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What are the 3 types of unemployment? |
Frictional (Individuals searching for a job), Structural (Occurs due to changes in the demand for labor), and Cyclical (Caused by a recession) |
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What is Okun's Law? |
For every 1% unemployment there is a 2% loss in potential GDP |
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What is Inflation? |
A general rise in price level that reduces the purchasing power of money |
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What are the Types of Inflation? |
1) Demand-Pull: Caused by excess spending 2) Cost-Push: Cost per unit drives up price (Demand-pull continues as long as excess spending continues, while cost-push ends in a recession) 3) Core Inflation: inflation in the categories of food and energy |
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Who is hurt the most by inflation? |
Receivers of fixed income, People saving money, People giving loans |
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Who is hurt the least by inflation? |
Flexible income receivers, Social Security Recipients, Cost of Living Adjustments, Union members, and Debtors |
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What is Hyperinflation? |
And extraordinary, rapid rate in the increase of price levels |
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What is Stagflation? |
Inflation accompanied by a stagnant economy (little to no growth) |
