Study your flashcards anywhere!

Download the official Cram app for free >

  • Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off

How to study your flashcards.

Right/Left arrow keys: Navigate between flashcards.right arrow keyleft arrow key

Up/Down arrow keys: Flip the card between the front and back.down keyup key

H key: Show hint (3rd side).h key

A key: Read text to speech.a key


Play button


Play button




Click to flip

74 Cards in this Set

  • Front
  • Back
Equation for GDP
C + I(sug)g + G + X(sub)n
the personl consumption expenditures which is all expendirures by households on durable consumer goods (automovile,etc) nondurable consumer goods (bread, etc) and consumer expenditures for services (of lawyers, etc.)
The Gross private domestic investments which includes all final purchases on the equiptment, machinery and tools by businesses enterprises, all construction ad changes in inventories. (the stuff in back).. they wont sell this right away but eventually will restock with this. additions to invintory is bad for GDP. when it is low it is good for GDP
GDP investment. it is the replacement capitol + aditional capitol. (I(sub)n +depreciation
Rules: I(sub)g will always be positive
I(sub)n can be negative (we see a decline sometimes)
the money spent replacing worn out capitol
government expeditures. (Federal, State, and local gets included)
Note: Fed gov spend 1/2 of G
There are two components. the first is expenditures for money and food tht government consumes in providing public services. the second is those for social capitol which are long lasting.
Trade transactions. exports(x)-imports(n) (can be and is frequently a negative number)
Budget Deficiet
we spend more than we take in GDP. (economic welfare): if we dont spend someones job is gone. However, GDP ONLY measures Numbers (and they stagger)
GNP:stuff made by amerians (can be made in china)
GDP: stuff made in america
disposable income (C+S) comusmed and saved
Disposable +income taxes (includes federal income tax, state income tax, and social security tax)
rent, wages, interest and profit. (includes transfer payment (ex. social security))
Problem: not all profits are profits
3 things that a company can do with profit
1) retained earings
3)comperate income tax (CIT)
Retained earings
(undistrivuted coporate profits) saves money and puts it bakc into the company
comapnies payment to a shareholder when it earns a profit it pays stock holder
national Domestic Product (GDP-depreciation)
In what ways are national income statistics useful?
National income accounting measures the ecomony's overall performace. The statistics allow economists to assess the HEALTH of the economy by comparing levels of production at regular intervals. it also enables them to track the overall course that the ecomony has take (whether it has grown, been constant, or declined. Lastly, it allows economists to make policies that protect and improve the eocnomy's proformace
Explain why an economy's out put ios also its income
this is because income is the flow of moneyh generated by the productiojn of final goods and services. There are two sides to every sale. Stuff that is bought and stuff that is sold. output=income. we can add all money spent and it would be = to all money earned
What is GDP? what is it important?
GDP is the abbreviation of gross domestic product. it is the annual total output of goods and services (also known as aggregate output) "the total market value of all final goods and sevices produced in a given year" is another way of putting it. This is the primary measure of how the economy is doing. (the moneytary measure). GDP includes all putput produced by either citizen or fireign resources used with the country. Without GDP, economists would not have a way to compare relative values of goods and services produced in different years. Ex. comepare grades over years.. in us GDP is expressed in $ (monetary figure)
What is the difference between an intermediate good and a final good? why do we exclude intermediate goods from GDP calculations?
Intermediate goods are those purchased for resale, processing, or manufactoring. final goods are those that are to be used by the consumer and not anything else. Intermediate goods are exluded because the final goods already includes the value of the intermediate goods. thus if they were used, those goods would be counted twice resulting in multiple counting. ex. paper in books
what transactions are excluded from GDP? why?
monitary transactions are excluded from GDP because although some involve final goods, others do not. these transactions are called nonproduction transactions there are plenty of finacncial transctions (which includes public transfer payments, private transfer payments, stock market transactions and secondhand sales
public transfer payments
are social security payment, welfare payments and veterans payments that gets paid directly to the household. these are not included because the recipients dont contrivute to production in return thus that would be overstating the years output
Private transfer payments
are payments made as gifts. they produce no output and just transfer funds from one person to another and consequently does not enter GDP.
Stock market transcations
bying and selling of stocks and bonds. stock market transactions create production and are subsequently not added to GDP. payments for serives of a secutiry broker are included because they contrivute to current output.
Second hand sales
not included in GDP because they dont contrivute to current production because it is not oging through the market.. has already been "bought". for example.. do it yourself stuff (building your own house)
initial public offering... stock up for first time.. it included in GDP
Measure using GDP
as gdp rises, economy grows. This does not mean that the individual is better off, just the country as a hole. Does not inlude job satisfaction or leasure time specifically we measure economic growth in REAL gdp not nominal gdp
real gdp
gdp with price level changes taken into account
gdp doesnt take price changes into account
exconmic growth
a rise in gdp(sub)r over time
a rise in gdp(sub)r per capita
Goals for people in market
1)keep up with everyone else
2)stay on top
3)rising income and wages... Rise in S.O.L. and opportunity and a decrease in burden scarcity
4)good growth is 3 to 5% per year
sources of growth (why)
-rise in the factors of productions (1/3)
-production (2/3)
what we do with the existing stuff we adapt technology to be more productive
what makes us productive
-better work envirment/savety
-rise in the motivation of workers
-better organized production methods
-more efficienty industries
-useing resources efficiently and allocating them
if you grow too fast...
its hard to sustain
(see pic in notes)phases of cycle of growth
peak, trough, recession, and recovery
business activity reaches a maximum: full poroductivity. we can produce no more than what we have
period of decline... two consequative quaters of gdp
prolonged recession
economy bottoms out
getting back to where we were
goes beyond provious peak
when economy is in recession...
we see a decline in gross investment... we arent replacing things. it would mean moving from on the curve to inside the curve. (see notes)
unemployment rate
1)total population-nonworkers(those under 16, stay at home rents, institutionlized, retired, ppl in school and people not working and not looking for work) =labor force
2)labor force-unemployment divided by labor force x by 100 =those employed (thus subtract from 100
good unemployement
4-6% acceptable.
goes beyond provious peak
when economy is in recession...
we see a decline in gross investment... we arent replacing things. it would mean moving from on the curve to inside the curve. (see notes)
unemployment rate
1)total population-nonworkers(those under 16, stay at home rents, institutionlized, retired, ppl in school and people not working and not looking for work) =labor force
2)labor force-unemployment divided by labor force x by 100 =those employed (thus subtract from 100
good unemployement
4-6% acceptable.
4 types of unemployment
frictional, structural, seasonal, and cyclical
frictional unemployment
those between jobs (ex. college grad)
structural unemployment
when ppls skills yet obselete move from labor intensive to capital intensive. ex. tv repair men... not a bad thing.. sign of econ that can adapt quickly
seasonal unemployment
ex. ski patrol, grape pickers, rafting guide, life guard, etc
(those layed off) this is BAD... great workers who dont have a job because of a decline in econ activity
Full employment
occurs when cyclical U is 0. S+F+ST is about 5% unemployment (doesnt include CU)
thought there was relationship between GDP and unemployment so he treid to caluclate cost of U
oakens law
for every 1% that unemploymentis greater than the natural rate there is a 2% cost in GDP
ex. Natural rate (FE)=5%
GDP=200b dollars
8-5 is 3% more unemployment than we should have... times 2 is 6% less GDP than we should have. 6% of 200b is 12b.. so GDP could be 212B
different countries
have diferenty natural rate of U
unemployment bennifits
help with soft landing when jobs are lost. US 26 weeks to collect bennifits...
how does U vary?
with age, gender, and race
National income accounting
measures the economys overall performace. it does for economy as a whoile what private accounting does for the individual firm or for the individual household
Net investment
includes only investment in the form of added capital. the amount of capital that is used over the course of the year
the amount of capital that is used up over the course of a year
net investment=
gross investment-depreciation
useing up more capital than it is producing
1)compensation of employees.
4)Proprietors' income
(money paid by private businesses to the suppliers of money capital)
Proprietors' income
(consists of net income of sole proprietorships, partnerships, and unicorperated buinesses)
interect buiness taxes
general sales taxes , etc.
consumption of fixed capital
alloance for capital that hads ben consumed in producing the years GDP. .. par that is used to pay for the ultimate replacement of capital goods
the toal income of american, whether it was earned in the US or abroad.
corporate profits
coporate profits (corperate income taxes-those taxes are levied on corporations net earning and flow to gov; dividends-part of the corporate profits that are paid to the corporate stockholders and flow flow to households; undistrivuted corporate profits-monies save by corportions to be invested later in new plants and equptment.)