Ch 19 defining and measuring macroeconomic aggregates

Question 1

income per capita

Answer 1

income per person

Question 2

recession

Answer 2

economic downturn lasting at least two quarters

Question 3

unemployed (3 conditions)

Answer 3

1. does not have a job
2. actively seeking a job
3. currently available for work

Question 4

unemployment rate

Answer 4

fraction of the labor force that is unemployed

Question 5

GDP

Answer 5

measure of aggregate economic activity
market value of goods and services produced within the borders of a country during a particular period of time
measure of production, so even it its not sold we still count it

Question 6

expenditure

Answer 6

all items sold by firm is gdp

but items in inventory are considered bought, so we get the same answer as aggregate activity

Question 7

income

Answer 7

another way to think of aggregate income

pays x amount to workers, keeps the rest for owners, therefore ends up with the same amount

Question 8

relationship between production, expenditure, and incomme

Answer 8

they are identical, you get the same value

Question 9

factors of production

value added

Answer 9

capital and labor

firsms slaves revenue - firms purchases of intermediate products

Question 10

production

Answer 10

represents the goods and services that are produced by firms

Question 11

expenditure (five categories)

Answer 11

payments for goods and services
five cataegories:
consumption: the market value of consumption goods and consumption services bought by households

investment: physical capital bought by domestic househoulds and firms, called private investment

government expenditure: market value of government purchases and services, ex tanks and bridges

exports: sold to households in foreign countries
imports: foreign goods sold to households firms and governments

Question 12

income

Answer 12

payments to households

Question 13

two different types of income: labor income and capital income

Answer 13

labor income: income paid for peoples work, wages, salary, health insurance, pension

capital income: dividents paid to shareholders, interest to lenders, earnings by corporations

Question 14

what does gdp omit

Answer 14

physical capital depreciation: reduction of the calue of physical capital due to wear and tear

home production: ex growing your own flowers, childcare

the underground economy: transactions hidden from govt statisticians, ex black market or workers lying to avoid taxes

negative externalities: pollution

Leisure

Question 15

gdp vs gnp

Answer 15

gross national product only accounts for production from domestic workers, ex includes us worker working in china

Question 16

nominal gdp

Answer 16

total market value of production using current prices to determine value per unit produced

Question 17

real gdp

Answer 17

same as nominal gdp but uses a base year

multiply current quantity by base year prices

Question 18

gdp deflator

Answer 18

how much prices of goods and services produced in a country have risen since the base year

Question 19

consumer price index

Answer 19

-similar to gdp deflator
-both use the same years, both have same interpretation
but cpi only considers a certain basket of goods
-cpi considers foreign goods, gdp doesnt
-cpi weights certain things differently than gdp, ex housing costs are weighted more in cpi

Question 20

how to find the value of the dollar in a different year

Answer 20

value of target year dollars = (cpi of target year/ cpi of comparison year) x value of comparison year dollars