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EK111 Macroeconomics > Book: Chapter 2 > Flashcards

Book: Chapter 2 Flashcards

1
Q

What does economists mean by aggregate

A

Total

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2
Q

What is gdp

A

It is total output which is the same as total value added/value of final goods produced/total income during a period

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3
Q

What is nominal gdp

A

Volume produced * current price

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4
Q

What is an intermediate good

A

A good that is produced that is used for production

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5
Q

What is real gdp

A

Volume produced * constant weighted average price of all products

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6
Q

Why do we use 2012 when using real gdp chained to 2012 dollars

A

When chained to 2012 the nominal gdp is the same as real gdp at 2012

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7
Q

What are other words for nominal gdp

A

Dollar gdp or gdp in current dollars

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8
Q

What are other words for real gdp

A

Gdpin terms of goods, gdp in constant dollars, gdp adjusted for inflation or gdp in (base year) dollars and lastly gdp in chained (base year) dollars

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9
Q

What are recessions

A

Years of negative gdp growth

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10
Q

How is gdp growth calculated

A

(Y(i) - Y(i-1)) / Y(i-1)

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11
Q

What is hedonic pricing

A

A way to account for changes in products over time, economists assemble a collection of characteristics and compare how much extra people are willing yo pay for them at a certain time

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12
Q

What is the unemployment rate equation

A

U(people looking fore work) / L(labor force)

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13
Q

How does one know who looks for employment

A

In the US they ask in the current population survey

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14
Q

What are discouraged workers

A

People who give up on looking for a job

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15
Q

What is the participation rate

A

Labor force / total population if working age

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16
Q

Why do economists care about unemployment

A

Because it is a burden and represents an unexploited reaource

17
Q

What is the definition of inflation

A

A sustained rise in the general level of pricing

18
Q

What is the gdp deflator

A

A way to measure inflation by comparing the rise of nominal gfp and real gdp. If nominal is faster the economy inflates

19
Q

How is the inflation rate calculated with the gdp deflator

A

P(rice)= Y$(nominal gdp) / real gdp
Pi(Inflation rate) = (P(x) - P(x-1))/P(x-1)

20
Q

What is the mathematical relation between nominal gdp real gdp and the gdp inflator

A

$Y = P*Y for year x

21
Q

Why are the goods produced not the same as the goods consumed by consumers in an economy

A

Some products are used by firms and or foreigners while consumers also consume foreign goods

22
Q

What is the cost if living

A

The average price if consumption

23
Q

How often are the CPI and gdp constructed

A

GDP quarterly and CPI month to month, the products featured in the CPI every two years

24
Q

What is the CPI

A

The consumer price index gives the cost of a specific list of goods at a point in time

25
Q

What does it mean if the CPI is 250

A

That prices are 2,5 times as high as the base year for consumers

26
Q

How does increasing the price of imported goods compared to the value of goods produced affect the relationship between CPI and GDP inflation

A

CIP inflates faster then GDP

27
Q

Why do economists care about inflation

A

Because systems based on price levels like retirement and taxes become distorted and because prices rise not in cynk, inflation is not pure, so it affects the standard if living

28
Q

Why is deflation worse then inflation

A

Because it also comes with the same problems in addition to counteracting monetary policy

29
Q

What is Okun’s law

A

Increased gdp growth will decrease unemployment

30
Q

What is bracket kreep

A

When taxbrackets don’t keep up with inflation

31
Q

What is the ideal rate if inflation

A

Between 1 and 4 percent

32
Q

Why must there normally be growth to keep unemployment constant

A

Because productivity growth and a growing population creates excess labor force

33
Q

What is the Philips curve

A

That when unemployment is too low it will create more inflation as the economy “overheats”

34
Q

What is the core inflation rate

A

Inflation excluding volatile prices

35
Q

What is the ideal unemployment rate for 2% inflation according to the Philips curve

A

5% in the us although the relationship is not as tight as okuns law

36
Q

What is important for output growth in the short run

A

Consumer demand and confidence

37
Q

What determines the output growth in the medium run

A

Supply factors such as capital stock, technology level and labor force size

38
Q

What determines the output growth over the long run

A

Government, education and savings rate

EK111 Macroeconomics (29 decks)

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