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29 Cards in this Set
- Front
- Back
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Explain why prices are used rather than quantities, in national income accounting. |
Prices measure output, you want to compare the period of time |
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GDP vs GNP |
GNP= we own, GDP= our factors, our borders |
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Identify examples of and non-examples of things included in GDP |
Non market value- stay at home mom Under the table- babysitting Intermediate- wheat that goes to farmer that goes to village bagel |
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Intermediate vs Final goods in GDP |
GDP excludes intermediate |
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How is the real interest rate calculated? |
nominal=real+inflation rate |
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Depreciation |
wearing out of old plants and equipment |
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Relate Net Domestic Product to country's potential for long-term growth |
NDP is best measure of future growth |
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The role of inflation in creating two separate line |
nominal is above real, inflation causes value of money to fall |
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The GDP deflator's base year |
where nominal GDP and real GDP meet |
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INvestment |
business spending on plant, equipment, changes in inventory |
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2 uses of household disposable income |
save or spend |
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Explain the equivalency between total output and total income in an economy |
spending=income, income=new production, cir circular flow |
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Labor force |
people over 16 working for pay of actively looking |
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Unemployment |
inability of labor force participant |
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How does labor force growth impact economic outcomes? |
can increase a country's PPC |
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Explain the major macro consequence of unemployment for an economy |
lost output |
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Describe how unemployment is impacted during period of economic growth or reason (duration, costs, rate, underemployment) |
more cyclical in recessions, less growth |
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Inflation & Deflation |
Inflation: average prices rise, relative uncertain Deflation: prices falling |
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Explain income effects as a redistributive effect of inflation |
Have a redistributive effect among people via inflation |
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Apply income and price effects to an inflationary context. What is their impact on real income? |
Nominal income is constant, but real income is falling |
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Money Illusion |
Use of nominal dollars rather than real dollars to gauge income or wealth |
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Given a population and its labor force, calculate unemployment rate |
amount unemployed/total labor force |
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Macroeconomic effects of inflation |
Bracket creep, uncertainty, speculation |
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Describe how the Bureau of Labor Statistics constructs the CPI |
what people buy and how prices of those items change over time |
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Characterize the GDP deflator |
All goods and services produced, both price changes and market responses, usually less than CPI |
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Cost-push |
supply curve contracting, increase in production costs |
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demand-pull |
too many consumers chasing too few goods |
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role of COLA |
adjust nominal income to rate of inflation |
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Relationship between wages and prices over the course of recent US history |
direct relationship with wages rising first and more prices following
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