Aggregate Output, Price, and Economic Growth Flashcards
Calculate/explain GDP using expenditure and income approaches
Income - total income earned by all households and businesses in a country during a period
Expenditure - total amount spent on goods and services produced in that country during a period
Compare sum-of-value and value-of-final-output methods of calculating GDP
Sum-of-value adds up each value-add at each level of production.
Value-of-final-output only looks at final price
Compare nominal and real GDP
Nominal GDP looks at current prices, while real GDP looks at it as though prices did not change
Calculate GDP deflator
Value of current year output at current year prices DIVIDED BY value of current year output at base prices TIMES 100
Compare GDP, national income, personal income, and personal disposable income
GDP - broadest measure of economy incl. households, business, government, and foreign sectors
National income - income received by all factors of production used in generation of a final output
Personal income - closely watched for consumer spending
Personal disposable income - most relevant measure b/c it is final, after-tax number
Explain fundamental relationship among saving, investment, the fiscal balance, and trade balance
S = I + (G - T) + (X - M)
Saving is used/absorbed into either investment spending, financing govt deficits, and building up financial claims against foreign economies
Explain the IS and LM curves and how they combine to generate aggregate demand curve
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Explain aggregate supply curve in short run and long run
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Explain causes of movements along and shifts in aggregate demand and supply curves
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Describe how fluctuations in aggregate demand and aggregate supply cause short-run changes in economy and business cycle
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Explain how short-run macroeconomic equilibrium may occur at a level above or below full employment
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Analyze effect of combined changes in aggregate supply and demand on the economy
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Describe sources, measurement, and sustainability of economic growth
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Describe production function approach to analyzing sources of economic growth
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Distinguish between input growth and growth of total factor productivity as components of economic growth
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