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Macro Econ > Chapter 4 - What Macroeconomics is All About > Flashcards

Chapter 4 - What Macroeconomics is All About Flashcards

1
Q

What is the value of total production of goods and services of a nation

A

National product or national income
(or output)

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2
Q

Total output is measured in __________

A

dollars

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3
Q

With real national income, _______ are held constant to enable us to see changes in _________

A

prices

quantity

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4
Q

What is a nation’s potential output

A

When all of​ a country’s resources - its ​land, labour, and capital - are being employed at normal levels of​ utilization
(fully employed)

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5
Q

What is the output gap

A

Difference between actual and potential outputs
(Actual - Potential) = (Y - Y*)

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6
Q

When does an inflationary gap occur?

A

When the actual output is greater than the potential one

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7
Q

When does a recessionary gap occur?

A

When the potential output is greater than the actual one

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8
Q

What is the business cycle?

A

Recession –> Trough –> Recovery –> Peak –> …

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9
Q

What is the nominal national income?

A

The total national income measured in current dollars

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10
Q

What are 3 ways to increase nominal national income

A

1- Change in production
2- Change in price
3- Change in both

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11
Q

What is the GDP definition?

A

Market value of all final goods and services produced in a region over a period of time

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12
Q

Of what consists the labor force?

A

The unemployed and the employed

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13
Q

What type of unemployment is this:
Caused by the normal turnover of labor. New people enter the market, some quit or are fired.

A

Frictional

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14
Q

What is frictional unemployment?

A

Unemployment caused by the normal turnover of labor. New people enter the market, some quit or are fired.

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15
Q

What type of unemployment is caused by the mismatch between jobs and workers (between the structure of the supplies of labor and the structure of the demands of labor)

A

Structural

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16
Q

What is structural unemployment

A

Unemployment is caused by the mismatch between jobs and workers (between the structure of the supplies of labor and the structure of the demands of labor)

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17
Q

When does cyclical unemployment occur?

A

When real GDP is less than potential GDP

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18
Q

What are the 5 requirements to be unemployed?

A

1- Out of work
2- Able to work
3- Willing to work
4- Actively looking for a job
5- Aged 15+

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19
Q

What is the unemployment rate equation?

A

unemployed / # in the labor force

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20
Q

What is the measure of the amount of output that the economy produces per unit of input

A

Productivity

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21
Q

What is the definition of productivity?

A

The measure of the amount of output that the economy produces per unit of input

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22
Q

What is labor productivity (equation)

A

𝑙𝑒𝑣𝑒𝑙 𝑜𝑓 𝑟𝑒𝑎𝑙 𝐺𝐷𝑃 /
𝑙𝑒𝑣𝑒𝑙 𝑜𝑓 𝑒𝑚𝑝𝑙𝑜𝑦𝑚𝑒𝑛𝑡 (𝑡𝑜𝑡𝑎𝑙 ℎ𝑜𝑢𝑟𝑠 𝑤𝑜𝑟𝑘𝑒𝑑)

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23
Q

What is inflation?

A

A rise in the average level of all prices

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24
Q

What is the price level?

A

The average level of all prices in the economy,

expressed as an index number

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25
Q

What is the CPI and what does it measures

A

Consumer Price Index
Measures the average prices of goods and services bought by the typical Canadian household

26
Q

What is the equation for the rate of inflation?

A

𝑅𝑎𝑡𝑒 𝑜𝑓 𝑖𝑛𝑓𝑙𝑎𝑡𝑖𝑜𝑛=
(𝑁𝑒𝑤 𝐶𝑃𝐼−𝑂𝑙𝑑 𝐶𝑃𝐼) / (𝑂𝑙𝑑 𝐶𝑃𝐼) ∗100

27
Q

Formula of real GDP per person?

A

Real GDP / Population

28
Q

Formula of real GDP per hour worked

A

Real GDP / (number of full-time employed worker * hours worked per worker)

29
Q

At what inflation rate do prices come closest to being stable?

A

If they’re close to 0%

30
Q

When is the inflation rate closest to being stable for 2 consecutive years

A

When it stays the same

e.g., 2014: 2.7% and 2015: 2.7%

31
Q

How do you calculate CPI

A

Total expenditures year x
/
Total expenditures base year
* 100
answer should be around 100 (but depends)

32
Q

What is the real interest rate formula?

A

Real Interest Rate = Nominal Rate - Inflation Rate

33
Q

Suppose Honest​ Rob’s Used Cars buys a used car for ​$5,000 and resells it for ​$6,200. The result of Honest​ Rob’s transactions is to

A

Increase the value of national income by $1,200

34
Q

_________ are better off when real interest rate falls

A

Borrowers

35
Q

________ are better off when real interest rate rises

A

Savers

36
Q

What is the main result of​ long-term economic​ growth?

A

Rising average living standards

37
Q

Understanding business cycles requires an understanding of __________

A

Monetary policy

38
Q

How can actual GDP exceed potential GDP?

A

When labour works overtime

39
Q

What is the actual output

A

What the economy actually produces

40
Q

True or False

Economic growth makes everyone better off

A

False

e.g., shift from agriculture to manufacturing

41
Q

What tend to be associated with long-term unemployment

A

Crimes, mental illness and general social unrest

42
Q

What is the amount of goods and service that can be purchased with a unit of money

A

The Purchasing Power of Money

43
Q

Inflation reduces, increases, or has no effect on purchasing power

A

It reduces it

44
Q

What is the interest rate

A

The price to pay to borrow money for a stated period of time

45
Q

What is the interest rate that banks charge their best customers

A

Prime interest rate

46
Q

What is the prime rate?

A

The interest rate that banks charge their best customers

47
Q

What is an exchange rate

A

The price of one currency in terms of the other

In our Class, it’s the number of CAD needed to buy 1 unit of another currency

48
Q

If it now takes more CAD to buy one unit of foreign currency, the CAD has __________

A

Depreciated

49
Q

If it now takes less CAD to buy one unit of foreign currency, the CAD has __________

A

Appreciated

50
Q

A strong dollar is _____ for importing and _______ for exporting

A

good and bad

51
Q

What are net exports

A

the balance between imports and exports
Exports - Imports

52
Q

Who plays an important role in the credit market?

A

Banks
They intermediate between households and firms

53
Q

Which type of growth has a larger effect for a society’s living standards?

A

Long-term growth
(but its less talked about in the medias)

54
Q

When was the interest rate high in Canada? (2)

A

In the mid-1970s
and between 1980-1982

55
Q

A rise in the exchange rate means that it takes _________ Canadian dollars to purchase one unit of foreign currency?

A

more $

a rise in the exchange rate is a depreciation of the Canadian dollar

56
Q

What happens when the prime rate increases?

A

Most other rates in the economy increase as well

57
Q

People may decide to join the labour force during booms because

A

more jobs become available and hence there are more opportunities to find a job.

58
Q

Is there a link between productivity and employment?

A

No

59
Q

Consider an imaginary​ 10-year period over which output per ​falls, but GDP increases. How can this​ happen?
This is possible if

A

the rate of technical progress is small

60
Q

How the Bank of Canada uses its policies is associated with short-term fluctuations or long-term growth?

A

Short-term fluctuations

Macro Econ (14 decks)

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