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Macro > chapter 6 (simple version) > Flashcards

chapter 6 (simple version) Flashcards

1
Q

<p>when you want to find the real gdp per capita ANNUAL growth rate, what is the first step?</p>

A

<p>identify how many years of a difference there is</p>

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2
Q

<p>what is the rule of 70 used for?</p>

A

<p>estimating the number of years it takes for an investment or your money to double.</p>

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3
Q

<p>what is the formula for finding how long it will take to double a countries income?</p>

A

<p>70/growth rate%</p>

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4
Q

<p>if you want to know how long it will take for a country to double it's income, what do you do?</p>

A

<p>rule of 70</p>

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5
Q

<p>is a one shot increase in GDP = economic growth?</p>

A

<p>nope</p>

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6
Q

<p>economic growth is the sustained year to year increase in \_\_ GDP</p>

A

<p>potential GDP</p>

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7
Q

<p>Economic growth occurs when \_\_ increases</p>

A

<p>real GDP</p>

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8
Q

<p>in order to have an increase in Real GDP we need an increase in \_\_\_</p>

A

<p>potential GDP</p>

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9
Q

<p>if we have a higher Real GDP than our potential GDP this can lead to what and why</p>

A

<p>burn out because we are doing more than we are capable of</p>

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10
Q

<p>if our potential GDP is not growing, what will this lead to</p>

A

<p>leads to our real gdp not growing</p>

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11
Q

<p>potential GDP is defined as</p>

A

<p>the capability of production</p>

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12
Q

<p>potential gdp depends on</p>

A

<p>how much resources/inputs we can use</p>

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13
Q

<p>our standard of living depends on</p>

A

<p>how much we consume</p>

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14
Q

<p>output depends on</p>

A

<p>our inputs</p>

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15
Q

<p>what does Capital mean?</p>

A

<p>goods used in the production process</p>

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16
Q

<p>give an example of capital</p>

A

<p>computers (for coding a biz) or tractors (for using corn to sell)</p>

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17
Q

<p>when goods are used to produce other goods, this is known as</p>

A

<p>capital</p>

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18
Q

<p>what are the 4 productive resources of an economy?</p>

A

<p>1. labour2. capital 3. land4. entrepreneurship</p>

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19
Q

<p>the aggregate production function shows the amount of \_\_\_ that could be produced by various quantities of \_\_</p>

A

<p>output/production; labour</p>

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20
Q

<p>the aggregate production function exhibits \_\_</p>

A

<p>diminishing returns to labour</p>

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21
Q

<p>as the labour increases in the aggregate production function</p>

A

<p>as labour increases, production produces less and less compared to previous units (diminishing returns)</p>

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22
Q

<p>in regards to the aggregate production function: a graph is concave rather than straight line because of</p>

A

<p>diminishing returns to labour</p>

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23
Q

<p>aggregate production function: "moving along the line" refers to what?</p>

A

<p>a change in the size of labour</p>

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24
Q

<p>to find the labour productivity:</p>

A

<p>you divide real GDP (Y) by Labour (L)</p>

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25
Q

<p>as more labour is used, Aggregate output \_\_\_ but output per unit of labour \_\_\_</p>

A

<p>increase; decrease</p>

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26
Q

<p>an increase in human capital means?</p>

A

<p>you have a more educated team/humans have more skills</p>

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27
Q

<p>what happens when capital stock, human capital, and technology improves?</p>

A

<p>increase in labour productivity</p>

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28
Q

<p>what are the three questions you ask when looking at the aggregate labour market? and what are the answers</p>

A

<p>who are the demanders for labour?: firmswho are the suppliers?: householdswhat is the price?: real wage rate</p>

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29
Q

<p>what is the formula for real wage?</p>

A

<p>nominal wage/price level</p>

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30
Q

<p>what does price level mean?</p>

A

<p>average of current prices across the entire spectrum of goods and services produced in an economy.</p>

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31
Q

<p>what are the two things that suppliers of labour are thinking about?</p>

A

<p>1. what is the wage, and 2. what can I buy with it</p>

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32
Q

<p>price in the labour market is the</p>

A

<p>real wage rate</p>

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33
Q

<p>when there is a change in real wage, what does it effect and what does it not effect</p>

A

<p>it affects the nominal wage, but does not effect the price level</p>

34
Q

<p>what is a basic behaviour of demanders for labour?</p>

A

<p>the lower the wage the more hours of labour demanded</p>

35
Q

<p>what do you put on the x and y axis of the demand for labour curve</p>

A

<p>on the x axis is L for labour, on the y axis, it is real wage</p>

36
Q

<p>the curve for the demand for labour is</p>

A

<p>downward sloping</p>

37
Q

<p>demand for labour curve: the points on the line represent the</p>

A

<p>real wage rate</p>

38
Q

<p>for an improvement in production, what will happen to the demand curve</p>

A

<p>it will shift to the right</p>

39
Q

<p>if buyers require less labour, what happen to the demand curve?</p>

A

<p>it will shift to the left</p>

40
Q

<p>what are the factors the increase the demand for labour</p>

A

<p>Better human capital, better tech</p>

41
Q

<p>anything that affects your production function will also affect your</p>

A

<p>demand for labour</p>

42
Q

<p>if there is an earthquake, and capital stock goes down, what will happen to the demand for labour and why</p>

A

<p>shift the curve to the left because there is less capital to work with</p>

43
Q

<p>an increase in productivity increases demand by 10 units, how would this affect the demand schedule and the graph</p>

A

<p>at every unit of hours of labour demanded, it increases by 10</p>

44
Q

<p>why is the most people supplied for the highest wage?</p>

A

<p>because the higher the wage the more it is as a incentive to attract more people</p>

45
Q

<p>do you draw a new supply curve if there is a change in the real wage rate?</p>

A

<p>no, just move along the line</p>

46
Q

<p>a change in the real wage causes a \_\_\_ the supply curve</p>

A

<p>movement</p>

47
Q

<p>a movement along the supply curve is indicative of what</p>

A

<p>a change in the real wage</p>

48
Q

<p>what are the factors the effect the supply of labour?</p>

A

<p>population# of hours worked on average</p>

49
Q

<p>real wage above the equilibrium creates a surplus in the labour market, the real wage will fall/rise?</p>

A

<p>falls</p>

50
Q

<p>real wage below the equilibrium creates a</p>

A

<p>shortage</p>

51
Q

<p>a shortage in the aggregate market leads to a \_\_ in real wage</p>

A

<p>rise</p>

52
Q

<p>equilibrium level of employment is also called \_\_</p>

A

<p>full employment</p>

53
Q

<p>one way to find the potential GDP is to find the</p>

A

<p>equilibrium of the aggregate economy</p>

54
Q

<p>if aggregate employment goes up, what will happen to potential gdp</p>

A

<p>its gonna go up</p>

55
Q

<p>increase in labour =</p>

A

<p>increase economic growth</p>

56
Q

<p>an increase in population has two noticeable things related to the production function curve</p>

A

<p>1. it increases the production output2. output per hour falls (diminishing returns)</p>

57
Q

<p>when there is an increase in the population, does this increase economic growth? explain</p>

A

<p>no, because even though potential GDP has gone up, output per hour has fallen</p>

58
Q

<p>in order to have economic growth, there must be</p>

A

<p>an increase in technology, a increase in human capital, and capital</p>

59
Q

<p>what is the premise of economic growth?</p>

A

<p>every unit of labour is more productive</p>

60
Q

<p>I have better computers/ more human skill/ better tractors, this means I have</p>

A

<p>better output per hour / economic growth</p>

61
Q

ignore

A

ignore

62
Q

<p>this is due to:</p>

A

<p>increase in output per person. Ie: better tech, better human capital, better capital</p>

63
Q

<p>if the labour is more productive, firms will</p>

A

<p>hire more at every wage rate</p>

64
Q

<p>if the demand for labour goes up, what happens to the wage rate (try and draw this in your head)</p>

A

<p>the average wage rate goes up</p>

65
Q

in order to increase economic growth FASTER, what must a country do?

A

increase the overall capital per hour or increase the pace of technological change

66
Q

in order to increase overall capital and technological change, what must a country do?

A

save their dang money $$

67
Q

what are the two precursors for improving overall capital and technology?

A

saving money & investing into research and developement

68
Q

what are some ways that the government can encourage research and development?

A
  • provide direct funding

- subsidies

69
Q

what are some ways the government can encourage savings?

A

tax incentives

70
Q

How can a country improve human capital?

A

improve the quality of education

71
Q

better education leads to what

A

better human capital

72
Q

international aid does what

A

nothing, because of corruption

73
Q

emerging countries are emphasizing in

A

international trade

74
Q

Economic growth is the

A

Expansion of production possibilities

75
Q

Expansions of production possibilities means

A

Either increase in potential gdp or economic growth

76
Q

What are the two main components that the CPI does

A
  1. Measures the value of a basket of goods by a typical consumer 2.used to measure inflation over time
77
Q

What is the formula for the cpi calculation

A

CPI for year / CPI for base year

78
Q

the equilibrium wage rate is

A

when the labour hours supplied = labour hours demanded

79
Q

The quantity of real GDP produced by the​ full-employment quantity of labour is

A

potential GDP

80
Q

the​ full-employment quantity of labour is the ___ of labour employed.

A

equilibrium quantity

81
Q

The quantity of real GDP produced by the equilibrium quantity of labour is the

A

potential GDP.

Macro (6 decks)

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