B5 - Economic Measures/Indicators Flashcards
Method of Measuring GDP:
Expenditures Approach FORMULA (GICE)
Government purchases
+Investment
+Consumption
-Exports (net)
Net Exports is Exports - Imports
Regarding increases in price levels, a period of inflation:
Increases the price level, which is negatively related to the purchasing power of money
In regards to Aggregate Demand and Aggregate Supply, which would lead to the most inflation?
Aggregate demand increases and aggregate supply decreases.
What type of unemployment is not consistent with full employment?
Cyclical unemployment. When the economy is operating at full employment, there is no cyclical unemployment
A sharp rise in the price of oil (a major input) would result in:
Cost (Push) inflation
The discount rate set by the Federal Reserve is the:
Rate that the central bank charges for loans to commercial banks.
An increase in the discount rate would cause:
The money supply to decrease and interest rates to rise.
What type of unemployment is shown when individuals do not have the qualifications or skills necessary to fill available jobs?
Structural
Real interest rate FORMULA
Real interest rate = Nominal interest rate - Inflation rate
Inflation Rate FORMULA
Inflation rate = ((CPI this period - CPI last period)/CPI last period)) x 100
The inflation rate measures:
The rate at which the overall price level increases
Stagflation is:
A combination of rising unemployment and a rising price level
Method of Measuring GDP
Income Approach “I PIRATED”
I PIRATED Income of proprietors \+ Profits of corporations \+ Interest (net) \+ Rental income \+ Adjustments for net foreign income/misc \+ Taxes (indirect business) \+ Employee compensation \+ Depreciation (consumption of fixed capital)
= Domestic Income
What is one action that is an acknowledged preventive measure for a period of deflation?
Increasing the money supply
What is GDP?
The total dollar (monetary) value of all new final products and services produced within the economy in a given time period. The emphasis is on the FINAL goods and services.
What is Consumer Price Index (CPI) ?
Measurement of the costs of a market basket of goods commonly purchased by consumers. It represents monthly data and is a measurement of what HAS BEEN paid for items, NOT what consumers WILL pay.
What is deflation?
Sustained decrease in the general prices of goods and services.
What is disposable income?
Personal Income less individual income taxes
During periods of inflation, individuals holding monetary assets will bet at a:
Disadvantage. holding net monetary assets will cause an individual to lose purchasing power.
If a CPA’s client expected a high inflation rate in the future, the CPA would suggest to the client what type of investment?
Non-monetary assets (such as precious metals). Non-monetary asset values increase with inflation.
