Chapter 4 - What Macroeconomics is All About Flashcards
What are the seven key macroeconomic variables?
National income, unemployment, productivity, inflation, interest rates, exchange rates, net exports.
What does macroeconomics study compared to microeconomics?
Macroeconomics = economic aggregates; Microeconomics = individual markets.
What are the two main macroeconomic issues?
Long-run growth and short-run fluctuations.
What is the difference between real and nominal GDP?
Real GDP = adjusted for inflation; Nominal GDP = current prices.
What defines a recession?
Two consecutive quarters of declining real GDP.
What is the formula for the output gap?
Output gap = Actual output (Y) – Potential output (Y*).
What are the four types of unemployment?
Frictional, structural, cyclical, and seasonal
What is “full employment”?
When only frictional and structural unemployment exist – cyclical unemployment is zero.
How is labour productivity measured?
Real GDP per worker or real GDP per hour worked.
What three factors drive productivity growth?
Employment, capital, and technology/skills.
What is the CPI?
Consumer Price Index, a measure of average price changes in a basket of goods.
How do you calculate the inflation rate?
% change in CPI over time.
What’s the difference between nominal and real interest rates?
Real = Nominal – Inflation.
What is the prime rate?
The interest rate banks charge their best customers
What happens when the Canadian dollar depreciates?
Imports get more expensive; exports become cheaper.
What is a trade-weighted exchange rate?
An average exchange rate considering trade shares with major partners
What are business cycle phases?
Trough → Recovery → Peak → Recession
What’s the big macroeconomic debate on growth?
Growth vs. sustainability, deficits, inflation levels, and the role of innovation.
What’s the formula for the unemployment rate?
Unemployment Rate = (Unemployed / Labour Force) × 100
What’s the difference between real GDP and nominal GDP?
Real GDP is adjusted for inflation; nominal GDP is not. Real GDP reflects actual purchasing power.
What is the inflation rate formula using CPI?
Inflation Rate = ((CPI_new - CPI_old) / CPI_old) × 100
What is the real interest rate formula?
Real Interest Rate = Nominal Interest Rate - Inflation Rate
What is the difference between real and nominal interest rates?
Nominal is the stated rate; real adjusts for inflation to show the true cost of borrowing.
