Macroeconomics Review

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GDP

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the market value of the final goods and services produced in a country during a given period

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final goods or services

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goods or services consumed by the ultimate user; because they are the end products of the production process, they are counted as part of GDP

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intermediate goods or services

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goods or services used up in the production of final goods and services and therefore not counted as part of GDP

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capital good

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a long-lived good, which is itself produced and used to produce other goods and services

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value added

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for any firm, the market value of its product or service minus the cost of inputs purchased from other firms

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consumption expenditure

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spending by households on goods and services, such as food, clothing, and entertainment

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investment

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spending by firms on final goods and services, primarily capital goods and housing

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government purchases

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purchases by federal, state, and local governments of final goods and services

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transfer payments

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payments made by the government in return for which no current goods or services are recieved

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net exports

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exports minus imports

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real GDP

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a measure of GDP in which the quantities produced are valued at the prices in a base year rather than at current prices; measures the actual physical volume of production

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nominal GDP

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a measure of GDP in which the quantities produced are valued at current-year prices; measures the current dollar value of production

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labor force

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the total number of employed and unemployed people in the economy

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unemployment rate

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the number of unemployed people divided by the labor force

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participation rate

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the percentage of the working-age population in the labor force

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unemployment spell

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a period during which an individual is continuously unemployed

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duration

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the length of an unemployment spell

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discouraged workers

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people who say they would like to have a job but have not made an effort to find one in the past four weeks

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consumption expenditure are subdivided into three subcategories:

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1)consumer durables
2)consumer nondurables
3)services

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investment is divided into three subcategories:

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1)business fixed investment
2)residential investment
3)inventory investment

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formula for GDP

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Y = C + I + G + NX

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GDP can be expressed equally well as:

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1)the market value of production
2)total expenditure
3)toal income

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three cateegories of people over the age of 16:

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1)employed
2)unemployed
3)out of the labor force

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GDP is the market value of the __________ goods and services produced in a country during a given period.

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final

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__________ goods and services are consumed by the ultimate user.

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final

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__________ goods and services are used up in the production of final goods and services.

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intermediate

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Spending by firms on final goods and services such as capital goods and housing is __________.

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investment

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__________ include purchases by federal, state, and local governments of final goods and services, but exclude transfer payment.

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goverment purchases

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"GDP=Consumption+Investment+Government Purchases+__________" is the expenditure method for measuring GDP.

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Net Exports

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__________ is a measure of GDP using the prices in a base year rather than current prices.

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real GDP

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An economy produces cars only. In 2002, production was 1,000 cars at a price of $10,000 each. In 2003, production was 1,050 cars at a price of $11,000 each. Real GDP in 2003 using 2002 as the base year equals __________.

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$10.5 million

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Labor force is the total number of employed and __________ people in the economy.

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unemployed

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To be considered employed, you must have a full-time job. True/False?

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false

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If the number of unemployed is 100,000, the number of employed is $1 million, and the total population is 5 million, the unemployment rate is __________.

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9%

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If the number of unemployed is 100,000, the number of employed is $1.5 million, the working-age population is 2 million, and the total population is 5 million, the participation rate is __________.

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80%

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Discouraged workers are included in the labor force. True/False?

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false