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15 Cards in this Set
- Front
- Back
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Frictional
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Normal Labor turnover
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Structural
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Changes in technology, international competition changes the skills needed to perform jobs or change the location
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Cyclical
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Fluctuating Unemployment over business cycle- recession/ expansion
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Relationship between potential GDP and full employment
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Quantity of real GDP at full employment is called potential GDP
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CPI
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Consumer Price Index- a measure of the average prices paid by urban consumer for a fixed basket of consumer goods and services
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Inflation Rate
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Percentage change in the price level from one year to the next.
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3 Reasons CPI may Overstate True Inflation
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New Goods: new goods cost more than the ones they replace.
Quality Change: Price change reflects quality improvements Commodity Substitution: consumers substitute away from goods and services with large relative price increases. |
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CPI vs GDP deflator
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CPI is based on basket of goods for base year and GDP is based on GDP of base year.
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What are the Fundamentals that determine the Aggregate Quantity of Goods and services Supplied
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Labor, Capital, Technology
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Production Function Mathematically
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Y/L=F(K/L, T)
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Def Of Macroeconomic Long Run
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The time frame that is sufficiently long for economic forces to operate to bring the labor market to full employment and equivalently real GDP to potential GDP
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Def of Macroeconomic Short Run
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A period during which some money prices are sticky and real GDP might be below, above or at potential GDP and the unemployment rate might be above, below or at the natural rate of unemployment.
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Def of LRAS
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the relationship between the quantity of real GDP supplied and the price level in the long run when real GDP= potential GDP.
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Def SRAS
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Relationship between quantity of real GDP supplied and the price level in the short run when the money wage rate, the price of other resources, and potential GDP remain constant.
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Why is SRAS Upward Sloping
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A higher price level combined with fixed money wage rate, lowers the real wage rate, thereby increasing the quantity of labor employed and hence, increasing real GDP.
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