Macroeconomics Unit 2

Front 1

measures the value of final goods and services produced within borders of a country during a period of time, typically a year

Back 1

real GDP

Front 2

totals the dollar value of all goods and services produced within the borders of a country using their current prices during the yea that they were produced

Back 2

nominal GDP

Front 3

modern economic growth is measured by what?

Back 3

output per person

Front 4

purchase of assets such as stocks,bonds, and real estate in the hope of reaping financial gain

Back 4

financial investment

Front 5

creation/expansion of business enterprises by purchasing newly created capital goods such as machinery, tools, factories, and warehouses

Back 5

economic investment

Front 6

situations in which firms expect one thing and something else happens

Back 6

shock

Front 7

how does the economy respond to demand shocks?

Back 7

by changing output, because prices are inflexible, or "sticky"

Front 8

techniques used to measure overall production of the economy and other related variables for nation as a whole

Back 8

national income accounting

Front 9

these commodities are purchased for resale or for further processing; not included in GDP

Back 9

intermediate goods

Front 10

these commodities are consumed by final users; included in GDP

Back 10

final goods

Front 11

market value of a firm's output minus the value of inputs the firm bought from others

Back 11

value added

Front 12

amount of capital used up over the course of a year

Back 12

depreciation

Front 13

total of all sources of private income plus government revenue form taxes on production and imports

Back 13

national income

Front 14

difference in profits made from domestic resources and foreign-owned resources; not part of domestic income

Back 14

net foreign factor income

Front 15

depreciation change made against private and publicly owned capital each year; not included in capital income

Back 15

consumption of fixed capital

Front 16

what is the formula for net domestic product?

Back 16

NDP = GDP - consumption of fixed capital

Front 17

what is the formula for national income?

Back 17

NI = national domestic product - statistical discrepancy + net foreign factor income

Front 18

how is inflation dealt with in terms of GDP?

Back 18

inflation is dealt with by inflating or deflating GDP

Front 19

measure of the price of a specified collection of goods/services in a given year as compared to the price of an identical collection in a reference year

Back 19

price index

Front 20

what kind of price index is used in the U.S.?

Back 20

chain-type annual-weights price index

Front 21

what are the shortcomings of GDP?

Back 21

1. nonmarket activities
2. leisure/well-being
3. improved product quality
4. underground economy
5. gross domestic "by-products"
6. composition and distribution of outputs

Front 22

an increase in real GDP or in real GDP per capita, calculated as a percentage rate of growth per quarter

Back 22

economic growth

Front 23

how do you calculate real GDP per capita?

Back 23

dividing real GDP by population

Front 24

what is the main cause for uneven distribution of growth?

Back 24

different starting dates

Front 25

bookkeeping of supply-side elements that contribute to changes in real GDP

Back 25

growth accounting

Front 26

knowledge/skills that make a worker productive

Back 26

human capital

Front 27

reductions in per-unit production costs that result from increases in output levels that results in greater GDP

Back 27

economies of scale

Front 28

what determines the average real hourly wage?

Back 28

economy's labor productivity

Front 29

new firm focused on creating and introducing new product or employing a specific new production/distribution method

Back 29

start-up firm

Front 30

situation in which a given % increase in amounts of input leads to an even large % increase in amount of output produced (ex. economies of scale... highways, internet, etc)

Back 30

increasing returns

Front 31

increases in the value of the product for each user, including existing users, as the total # of users rises

Back 31

network effects

Front 32

alternating rises and declines in the level of economic activity

Back 32

the business cycle

Front 33

temporary maximum in the business cycle in which the price levels usually rise

Back 33

peak

Front 34

period of decline in total output, income, and employment in the business cycle (must last 6 months or longer)

Back 34

recession

Front 35

part of the business cycle in which output and employment bottom out at their lowest levels

Back 35

trough

Front 36

rise in GDP, income, and employment in the business cycle

Back 36

expansion

Front 37

what are fluctuations in the business cycle driven by?

Back 37

shocks

Front 38

who is affected most by the business cycle?

Back 38

firms that produce capital goods and consumer durables

Front 39

how is unemployment measured?

Back 39

the BLS conducts a random survey of 60,000 people

Front 40

workers who are either searching for jobs or waiting to take jobs in the near future

Back 40

frictional unemployment

Front 41

workers whose skills are not demanded by employer, lack sufficient skill, or cannot easily move to locations where jobs are available

Back 41

structural unemployment

Front 42

caused by a decline in total spending

Back 42

cyclical unemployment

Front 43

this occurs when the economy is said to be producing its potential output

Back 43

natural rate of unemployment

Front 44

difference between actual and potential GDP

Back 44

GDP gap

Front 45

rule that says for every 1 % point by which the actual unemployment rate exceeds the natural rate, a negative GDP gap of about 2% occurs

Back 45

Okin's Law

Front 46

this reports price of a "market basket," comprised of typical urban consumer goods (updated every 2 years)

Back 46

consumer price index

Front 47

this occurs when excess demands bids up the prices of limited output

Back 47

demand-pull inflation

Front 48

this occurs when rising prices caused by factors that raise per-unit production costs at each level of spending (generally caused by supply shocks)

Back 48

cost-push inflation

Front 49

what are the differences between cost-push and demand-pull inflation?

Back 49

1. cost-push will die out on its own, while demand-pull will continue as long as there is excess total spending
2. cost-push generates a recession

Front 50

who is hurt by inflation?

Back 50

1. fixed-income receivers
2. savers
3. creditors

Front 51

percentage increase in purchasing power that the borrower pays the lender

Back 51

real interest rate

Front 52

% increase in money that the borrow pays the lender

Back 52

nominal interest rate