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29 Cards in this Set
- Front
- Back
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What are the components of GDP? |
C + I + G + ( X - M ) |
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What are each of the categories in C + I + G + ( X - M )? |
1. Consumption 2. Investment 3. Government Spending 4. Exports - Imports |
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What is price index? |
A normalized average of price for goods or services |
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Real GDP |
Expressed in a reference year |
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Nominal GDP |
Expressed in current prices |
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Rule of 72 |
72 divided by growth rate of X |
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Recession |
2 consecutive quarters of negative GDP (6 months) |
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Types of Unemployment? |
1. Frictional 2. Structural 3.Cyclical |
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Frictional Unemployment |
Searching,but just haven’t found a job yet. Willfind a job. |
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Structural Unemployment |
Job skills are not marketable. Must retrain to find a job. |
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Cyclical Unemployment |
Job lost due to macroeconomic conditions. Must wait until economy recovers. |
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What is the natural rate of unemployment? |
Sum of frictional and structural unemployment |
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What is full employment? |
There is zero cyclical unemployment but still structural and frictional. |
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Unemployment rate = |
Number of "unemployed" as a share of the labor force |
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Labor Force = |
Employed + Unemployed |
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Difference between unemployed and discouraged workers? |
Unemployed are currently looking for work |
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Aggregate Demand |
therelationship between the price level and the quantity of RGDP that consumers,businesses, government, and foreigners want to purchase. |
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Real Wealth Effect |
asprice levels rise, the purchasing power of your assets (savings) falls, andthis will cause people to buy less. |
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Interest Rate Effect |
as price levels rise and the amount of money inthe economy stays constant, people scramble for the existing money (they needmore to buy the same stuff). This pushesup interest rates. As interest ratesrise, people choose to buy less. |
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Foreignexchange (international trade) effect |
as prices rise in the US (but not in Europe),people everywhere buy less American goods (and more European goods). |
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Short Run Aggregate Supply |
i. Businesses/supplierswill try to sell more as the price level rises. Suppliers will try to sell less if prices fall. |
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Long Run Aggregate Supply |
thequantity we can produce given our resources (prices do not matter in thelong-run). |
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What shifts Aggregate Demand? |
C I G X M |
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What shifts short run aggregate supply? |
Changes to input prices |
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What shifts long run aggregate supply? |
Actual changes to resources. A shift in LRAS will also shift SRAS |
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Recession on a graph: |
Quantity is less than LRAS |
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Bubble on a graph: |
Quantity is more than LRAS |
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How to fix a recession: |
1. Not do anything and SRAS will eventually fix itself 2. Changes in CIG will increase AD to equilibrium |
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How to fix a bubble: |
SRAS will shift back to equilibrium. |
