Chapter 6 Flashcards
Macroeconomics involves..
adding up the economic activity of all households and businesses to obtain the overall demand and supply in the economy
The goals of Macroeconomics is to
assess overall economic performance that includes inflation, unemployment rate, growth and production
Economic growth determines the…
Standard of Living in a country
Inflation is measured by the..
consumer price index
low inflation and an inflation rate of ____ is the goal
1-2%
A growth rate more than ___ is considered good
3%
The Framework for Macroeconomics include?
Macroeconomic Models,Theories of Aggregate demand and Aggregate Supply, Charts and Case Studies
The general policies for Macroeconomics include? describe them.
Fiscal Policy(involves changed in gov’t spending/purchases and taxes) and Monetary Policy(involves managing the money supply and interest rates)
Growth is measured by
the change in real GDP
An unemployment rate of __% or less is considered good
5
GDP (Gross Domestic Product) is the
value of the production of all goods and services produced in a country within a year
GDP can be measure by?
- the total amount of money that consumers, the gov’t and investors purchased within the economy minus the value of imported goods
- The total amount of money of the final goods and services a country produces
- market prices
GDP is equal to the
total expenditure(total income)
GDP involves who?
both the buyer and seller
Gross National Product(GNP) is
what is produced domestically and what is produced by domestic labor and business nationally in a year
GNP includes?
GDP plus Canadian income earned abroad
Net National Product (NNP) is
GDP minus the value of depreciation
Depreciation is
the process of which the capital(money) ages and loses value overtime
Nominal Value is
the economic value of inflation before it has been adjusted, uses the current prices for products
Real Value is
the economic value of inflation after it has been adjusted, uses past prices for products
The GDP Deflator is the
measures the price of all goods and services included in GDP
The opposite of Deflation is?
Inflation
Demand for production can be divided into 4 main parts, describe each:
Consumer Spending(consumption), Business Spending(purchasing new capital goods, building factories, buildings, stores and equipment, construction) Government Spending on Goods and Services(bridges and highways), and Spending on Net Exports
What makes up half of the demand side components of the GDP?
Consumption
GDP can be measured by the following calculation..
GDP=Consumption+ Investment+ Government spending+ (Trade Balance)
The gap between exports and imports is known as the…
Trade Balance
When a country’s exports are larger than its imports it is called a….
Trade Surplus
When a country’s imports exceed its exports it is called a….
Trade Deficit
We measure real GDP by the following calculation:
Real GDP=Nominal Value/GDP DeflatorX100
One year in economics is known as a
base period
We can calculate real GDP Growth rate by the following calculation:
Real GDP of 2nd year- Real GDP of 1st year/ Real GDP of 1st yearX100
A Recession is a
decline in GDP
A Depression is a
long and deep decline in output
A Depression happens when
a recession deepens and lasts longer, during economic slowdown
The Business Cycle is
the economies short term movement in and out of recessions
The highest point of the output is known as the
Peak
The lowest point of the output is known as the
Trough
A recession lasts from…
Peak to Trough
An economic upswing lasts from…
Trough to Peak
To compare the GDP’s of country’s with different currencies we?
convert using the exchange rate
The Exchange Rate is the
value or price of on currency in terms of another
GDP Per Capita can be calculated by
GDP/ the population
What makes a country better off, is the country with a _____ GDP
higher
Investment Expenditure refers to
purchases of physical plant and equipment
A country produces durable goods, non durable goods and inventories. describe each.
Durable Goods- long lasting goods(ex.fridge cars)
Non-Durable Goods- may not last forever (food, clothing)
Inventories(goods that one business has produced but has not yet sold to consumers, still sitting in warehouses)
The largest part of GDP is
services (healthcare, education)
The Smallest Part of GDP is
aggregate supply
goods at the furthest stage of production at the end of the year are known as
Final Goods
all the elements that affect peoples happiness and well being is known as
Standard of Living
GDP is different from Standard of Living because GDP does not include:
Leisure time, Environmental cleanliness, learning, inequality in society, technology and products that are available, production that is not exchanged in the market
a sustained increase in the overall level of prices and is measured by consumer price index is known as
Inflation
Government expenditure includes spending of which levels of the government
All three(federal, state, and local)
intermediate goods are
goods that go into producing other goods, these goods are excluded in statistics
The calculation for nominal GDP is:
GDP Deflator X Real GDP
The calculation for value is:
Price X Quantity
if real GDP rises so does
employment
The most significant problem with a recession is that
firms may need to layoff/ fire some workers
A PPP-equivalent exchange rate provides
a longer run measure of the exchange rate
The rise in GDP understates
The actual rise in the standard of living
