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Macro > Chapter 1/4 - GDP > Flashcards

Chapter 1/4 - GDP Flashcards

1
Q

A choice is a __

A

Trade off

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2
Q

How do people make rational decisions?

A

comparing cost and benefit

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3
Q

A constraint that involves giving up one thing to get something else

A

tradeoff

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4
Q

the development of new goods and of better ways of producing goods and services.

A

Technological change

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5
Q

inability to satisfy all our needs is called

A

scarcity

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6
Q

difference between micro and macro economics

A

micro is choices surrounding people and firms which includes the demand and supply model.
the part of economics concerned with large-scale or general economic factors, such as interest rates and national productivity.

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7
Q

distinguish how prices and production affect micro and macro.

A

micro = price of particular product/production of a particular firm

macro = price of average of all products/production of the whole economy.

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8
Q

distinguish taxes on micro and macro

A

micro = a firm is taxed

macro = government is taxed.

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9
Q

what are the resources used for an economy (also known as economic resources).

A

Labour - mental and physical effort.
land - natural resources used to produce goods and services.
capital - equipment, tools, factories
entrepreneurship - people who take risks and innovate.

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10
Q

what are the two types of economies? how would a country use them?

A
  1. command
  2. competition

a country would use a hybrid

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11
Q

what are the two types of analysis used? and describe them!

A

positive analysis - describes the world as it is.

and normative analysis - describes the world as it should be.

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12
Q

give examples of both positive and normative analysis

A

Positive - people buy more when prices goes down.

normative - the government should cut taxes for schools.

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13
Q

to make it simple, what are words that can be used for positive analysis and normative analysis

A

P - objective, not opinion

N - subjective. more opinionated.

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14
Q

Does macroeconomics care about the market of cars market?

A

no. It does not care about indiviudal markets

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15
Q

what does GDP measure?

A

the standard of living in an economy/ how well off we are

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16
Q

what are the main variables when determining the state of an economy?

A
  1. GDP
  2. Unemployment
  3. inflation
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17
Q

what is the purpose of having variables?

A

they are used to measure the state of the country by comparing results from different time periods.

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18
Q

the definition of gdp means…

A

is the market value of all final goods and services produced in a country in a given time period

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19
Q

what does market value mean in regards to GDP?

A

it is the market price sold of all the quantities of products in a country

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20
Q

what do final goods and services mean in regards to gdp?

A

final goods and services mean the products and services that are ready to be enjoyed/used.

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21
Q

give some examples of final goods and services

A

-a sandwhich, coffee, a haircut

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22
Q

if it is not a final good, it is a ___

A

intermediate good

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23
Q

what is an intermediate good?

A

they are inputs used to create final goods and services bought from one firm by another firm

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24
Q

why do you not include the intermediate costs of goods in the calculation of GDP?

A

because the final goods already include the costs of intermediate costs. So including intermediate costs would lead to an overvaluation.

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25
Q

what is the general time period used when calculating gdp?

A

a year.

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26
Q

what model would you use to estimate the value of gdp?

A

circular flow of income expenditure model

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27
Q

which group is the most important of an economy in the circular flow of income and expenditure model?

A

households - individuals that buy stuff to meet their desires.

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28
Q

what roles do firms play in the circular flow of income and expenditure model?

A

firms create goods and services to sell to households

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29
Q

what does consumption expenditure mean in the circular flow of income and expenditure model?

A

the amount of money spent by households on goods and services.

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30
Q

what does G represent in the circular flow of income and expenditure model?

A

government expenditure - how much governments spent on goods and services.

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31
Q

is unemployment benefit included in the G?

A

no

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32
Q

when firms buy from other firms in the circular flow of income and expenditure model, what is this called?

A

investment expenditure

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33
Q

what does investment expenditure mean in the circular flow of income and expenditure model?

A

it is when firms buy goods and services from other firms to produce goods and services.

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34
Q

what is the denotation for net export?

A

NX

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35
Q

what is entailed in net export?

A

it is exporting minus importing

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36
Q

True or false - Nx can only be positive

A

false it can be negative

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37
Q

what is aggregate expenditure?

A

it is all the expenditures - investment, consumption, government, and NX

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38
Q

when an import is higher than exports, is it a negative or positive net export?

A

negative

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39
Q

the amount of investment into goods and services is less than export, T/F

A

False, the firms must have equal to or greater than the export

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40
Q

what is another term for aggregate expenditure

A

GDP

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41
Q

Aggregate expenditure = income = ___

A

GDP

42
Q

list the three ways to calculate GDP and explain them

A
  1. Aggregate expenditure
  2. Income
    3 GDP - market value price sold of all products x quantity
43
Q

how can you determine the income in an economy

A

gdp

44
Q

standard of living can also mean___

A

how much we earn

45
Q

give an example of market value where there are 50 oranges sold at 10 c each, and 100 apples sold at 10 c each

A

oranges = $5 in total plus apples which sell at $10, giving a total market value of $15

46
Q

give an example of an intermediate good in relation to a final good

A

ipad is final good, whereas the chip is an intermediate good

47
Q

ignore

A

ignore

48
Q

what is the first part (households and firms) of the circular flow model

A

households sell and firms services. For these services firms pay income to households

49
Q

what does a factor market mean?

A

factor market is a market in which companies buy the factors of production or the resources they need to produce their goods and services

50
Q

what are the types of income that a firm pays to a household?

A

wages (labour), rent (land), interest (capital), profit (entrepreneurship)

51
Q

what is the main goal for gdp?

A

to see how much goods and services are being produced

52
Q

when nominal gdp goes up, why is this not the best indicator that gdp is actually going up?

A

because nominal gdp does not account for inflation

53
Q

what is the difference between nominal and real gdp

A

former does not account for inflation. Latter accounts for inflation

54
Q

in the situation of a question asking whether an individual product counts as the gdp? what do you respond?

A

it is false, because gdp is all the given products (P x Q X amount of products).

55
Q

given columns of nominal gdp and real gdp - the question asks how to calculate real gdp. What do you do?

A

use the production or quantity in the current year, but use the prices in the base year.

56
Q

In your base year, is the nominal gdp the same as real gdp

A

yes

57
Q

What is the MAIN purpose in calculating the real gdp

A

since you are using a base years price, you are simply measuring the increase or decrease in production.

58
Q

how to calculate real gdp per capita?

A

take the population and divide it by real gdp

59
Q

dispite india not being so wealthy, why is their gdp higher than Canada?

A

higher population

60
Q

in order to properly compare real gdp, what are the steps you must take?

A

u must find real gdp per capita (real gdp divide by population)

61
Q

how do u calculate growth rate in real gdp?

A

take the current year’s (year you’re trying to find) real gdp per capita then subtract it from the base years per capita gdp, then divided by former gdp per capita then multiply by 100. Ie: 50 - 30 divide by 50 x 100.

62
Q

if the question asks you how long it will take to double its income, how would you approach it?

A

you would use the rule of 70. Meaning you would divide 70 by whatever the current GDP per capita is.

63
Q

what gdp per capita mean?

A

the amount of gdp per person on average

64
Q

T/F real GDP is always lower than nominal gdp

A

false, nominal GDP is GENERALLY larger, but not always

65
Q

Net exports increase when..

A

Exports increase more than imports

66
Q

total expenditure also is referred to as

A

aggregate expenditure

67
Q

explain the income part about the circular flow model

A

..

68
Q

what are two reasons why economist measure gdp

A
  • to compare the standard of living over time

to compare the standard of living to other countries

69
Q

when a graph of gdp is increasing, what is that indicating?

A

that potential gdp is increasing

70
Q

why are there fluctuations on a graph of real gdp?

A

it indicates the business cycle

71
Q

when a country presents its gdp, which currency do they use?

A

their own

72
Q

what are the two things you must convert when comparing two countries gdp

A

the exchange rate and the purchasing power parity

73
Q

income = ___ = expenditure

A

gdp

74
Q

GDP = income = ___

A

expenditure

75
Q

in regards to gdp, expenditure also equals to __

A

income

76
Q

why Is Domestic Product “Gross”?

A

Gross” means before deducting the depreciation of capital

77
Q

what is the relationship between firms and households in regards to the factor markets

A

firms pay income to households like wages for labour, interest for capital, rent for land, entrepreneurship for profit.

78
Q

what are the limitations of Real GDP?

A

it only measures the final goods and services that are bought in markets. It does not account for

  • household production
  • underground activity
  • health and life expectancy
  • leisure time
  • environmental activity
  • political freedom
79
Q

what does household production mean?

A

something that is produced in your own home (not bought in the markets)

80
Q

why does GDP equal aggregate income and also equal aggregate expenditure?

A

GDP equals aggregate income because one way to value production is by the cost of the factors of production employed -wages, interest, rent, entrepreneurship.

Aggregate expenditure is the total amount being spent on buying the production of the market

81
Q

distinguish between real GDP and potential GDP and describe how each grows over time.

A

Real GDP
- accounts for inflation by using the production of that year and multiplying it by the prices of the base year.

  • actual amount being produced
  • it fluctuated from year to year

Potential GDP
-is the max amount of real gdp that can be produced.

-is the amount that would be produced if there were full employment of all factors of production.

82
Q

how does the growth rate of real GDP contribute to an improved standard of living?

A

-increased growth of consumption of goods and services

83
Q

when a questions uses the word investment, DO NOT think of investing in ___, rather think of one firm buying from another __

A

stocks; firm

84
Q

Imports of goods and services are items that​ _____ in Canada​ _____ the rest of the world.

A

households, government, firms; buy from

85
Q

The total amount spent​ _____ is called gross investment.

A

both buying new capital and replacing depreciated capital

86
Q

The amount by which​ _____ is called net investment.

A

the value of capital increases

87
Q

a final good or service bought by its ___ ___ during a specified time period

A

final user

88
Q

an intermediate good is produced by whom purchased from whom?

A

a firm produces it, and another firm buys it.

89
Q

Starting with firms, the left arrow to the factor market means what?

A

firms buy services

90
Q

From factor market to households, what does the arrow represent?

A

households sell services

91
Q

What does y represent?

A

total income payed by firms to households

92
Q

firms buy capital equipment in investment expenditure, T or F

A

T

93
Q

The arrow that goes from firms to the goods market represent what?

A

Firms buying goods and services from other firms.

94
Q

Are subsidies included for “G”

A

no

95
Q

what is a reason why gdp is undervalued?

A

the underground economy

96
Q

house production means?

A

the services you do without getting paid. IE: making a sandwich or taking kid to park.

97
Q

what is another reason why an economist cares about GDP.

A

it wants to see if there is economic growth

98
Q

more production means a higher ___

A

GDP

99
Q

If there is more consumption, this usually indicates that there is an increase in two what things?

A

production and GDP

100
Q

Economic growth can be understand as percentage change in __

A

Real GDP

101
Q

How do you find the growth rate of real GDP

A

Take the new (most recent real GDP) minus Real GDP of previous year divided by Real GDP of the previous year

102
Q

how do you find the annual growth rate of real gdp? *even if u get this right, mark it as wrong so u can practice more

A

Final year - Initial year / initial year

Macro (6 decks)

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