Blink Chapter 13-20

Question 1

define macroeconomics

Answer 1

the branch of economics concerned with large-scale or general economic factors and concerned with the allocation of a nation’s resources, such as interest rates and national productivity.

Question 2

the objective of Economic growth?

Answer 2

a steady rate of increase of national income

Question 3

the objective of Employment?

Answer 3

a low level of unemployment

Question 4

the objective of Price stability?

Answer 4

a low and stable rate of inflation

Question 5

the objective of National Debt?

Answer 5

a sustainable level of government. (national) debt

Question 6

the objective of Income Distribution?

Answer 6

an equitable distribution of income

Question 7

what is GDP?

Answer 7

it is a measurement of a countrys national income

Question 8

ways to measure GDP

Answer 8

1. Output method
2. Income method
3. Expenditure method

Question 9

what does the Output method calculate

Answer 9

the actual value of the goods and services produced

Question 10

what does the Income method calculate

Answer 10

the value of all the incomes earned in the economy.

Question 11

what does the Expenditure method calculate

Answer 11

the value of all the spending on goods and services in the economy.
- spending by households (consumption) (C)
- spending by firms (investment) (I)
- spending by the government (G)
- spending by foreigners on exports minus spending on imports (net exports) (X-M)

Question 12

What is GNI

Answer 12

Gross national income, total income that is earned by a country’s factors of production regardless of where the assets are located.

Question 13

How to calculate the income earned in assets held in foreign countries

Answer 13

net property income from abroad = (property income from abroad) - (income paid to foreign assets operations domestically)

Question 14

GNI =

Answer 14

GDP + net property income from abroad

Question 15

what is nominal GDP

Answer 15

is the value at current prices

Question 16

what are Real GDP and Real GNI adjusted for?

Answer 16

Real GDP= Nominal GDP adjusted for inflation
Real GNI = Nominal GNI adjusted for inflation

Question 17

How to calculate GNI and GDP per capita?

Answer 17

GNI per capita = GNI / size of the population

GDP per capita = GDP / size of the population

Question 18

Limitaltions of national income statistics

Answer 18

• Inaccuracies
• Unrecorded or under-recorded economic activity, informal markets
• External costs
• Other quality of life concerns
• Composition of output

Question 19

what is the business cycle

Answer 19

the periodic fluctuations in economic activity measured by changes in real GDP.

Question 20

define:
recovery
boom
recession
trough

Answer 20

Recovery phase: GDP increasing at a rising rate

Boom: the maximum GDP

Recession: 2 consecutive quarters of negative GDP growth (falling GDP).

Trought: contraction comes to an end.

Question 21

what are the impacts of a recession?

Answer 21

2 consecutive quarters of negative GDP growth (falling GDP). → lay off workers (unemployment rises) → less spending/ low demand → lower rates of inflation.

Question 22

what are the impacts of a trough?

Answer 22

contraction comes to an end. There will be lower interest rates → demand will slowly increase again → cycle starts again.

Question 23

what is the OECD Better Life Index

Answer 23

The index allows that comparison of well being across countries

Question 24

3 measures of economic wellbeing

Answer 24

OECD Better Life Index, Happiness index, Happy Planet index (HPI)

Question 25

define Aggregate demand

Answer 25

the total spending on goods and services in a period of time at a given price level.

Question 26

List the 4 components of AD.

Answer 26

• Consumption
• Investments
• Government spending
• Net Exports (eXports revenues minus iMports expenditures) (X-M)

Question 27

There will be a shift in AD if…
there will be a movement along AD if…

Answer 27

• shift it there is an change (+ or -) in one of the components of AD
• movement along if there is a change (+ or -) in price level

Question 28

The formula for AD?

Answer 28

AD = C + I + G + (X - M)