Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

AP ECONOMICS > Chapter 8: Introduction to Economic Growth and Instability > Flashcards

Chapter 8: Introduction to Economic Growth and Instability Flashcards

1
Q

Causes of Economic Growth

A

(1) Increase in real GDP occurring over some time period
(2) Increase in real GDP per capita occurring over some

….. calculated as a percentage rate of growth per quarter

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Real GDP Per Capita

A

Real GDP / size of population

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Economic Growth

A

Goal; expansion of total output leads to rising incomes/wages and higher standards of living

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Rule of 70

A

Provides a quantitative grasp of the effect of economic growth - it tells us the # of years it will take for measures to double given its annual percentage increase by dividing that percentage by 70.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Rule of 70 Equation

A

Approximate number of years required to double real GDP = 70 / annual percentage rate of growth

ex: 3% annual rate of growth = 70 ÷ 3 = 23 years

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Main Sources of Growth

A

(1) By increasing its inputs of resources

(2) Increasing the productivity of those inputs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Productivity

A

Real output per unit of input

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Business Cycle

A

Refers to alternating rises and declines int he level of economic activity, sometimes extending over several years

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Individual Cycles

A

(One “up” followed by one “down”)

Vary in duration and intensity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

(Business Cycle): Peak

A

Business activity has reached a temporary maximum. The economy is near or at full employment and level of real output is at or very close to the economy’s capacity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

(Business Cycle): Recession

A

Peak is followed by recession- a period of decline in total output, income, employment, and trade.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

(Business Cycle): Trough

A

During a recession/depression, output and employment “bottom out” at their lowest levels.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

(Business Cycle): Recovery

A

Output and employment rise toward full employment once again

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Firms and Industries producing what are affected most during a business cycle?

A

Capital Goods (housing, commercial building, etc) and Consumer Durables (automobiles, computers, etc)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

How to divide population in terms of who is eligible to work.

A

(1) Under 16 and/or institutionalized
(2) Not in labor force
(3) Employed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Labor Force

A

People who are able and willing to work

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Unemployment Rate

A

Percentage of the labor force unemployed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Unemployment Rate Calculation

A

Unemployment Rate = (unemployed ÷ labor force) x 100

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Part-Time Employment

A

The BLS lists part-time workers as fully employed; temporary

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Discouraged Workers

A

those who are not actively seeking employment are not considered “not in the labor force”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Three Types of Unemployment

A

(1) Frictional
(2) Structural
(3) Cyclical

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Frictional Unemployment

A

Unemployed individuals who other job seekers, back from temporary layoff, or were laid-off who are looking for jobs; “search employment, wait unemployment” – frictional implies that the labor market does not operate perfectly

23
Q

Cyclical Unemployment

A

Caused by a decline in total spending and is likely to occur int he recession phase of the business cycle; demand for goods/services decrease, employment falls, and unemployment rises; deficient - demand unemployment

24
Q

Structural Unemployment

A

Changes over time in consumer demand and technology alter the “structure” of the total demand for labor
(ex: the automobile reduced the need for carriage makers)

25
Q

Potential Output

A

Real GDP when economy is “fully employed”

26
Q

Natural Rate of Unemployment (NRU)

A

Occurs when the number if job seekers equals the number of job vacancies

27
Q

Forgone Output

A

When the economy fails to create enough jobs for all who are able and willing to work, potential production of goods and services is lost

28
Q

GDP Gap (Calculation)

A

The difference between actual and potential GDP:

GDP gap = actual GDP - potential GDP

29
Q

Okun’s Law

A

Quantify the GDP gap and unemployment rate: for every 1 percentage point by which the actual unemployment rate exceeds the natural rate, a negative GDP gap of about 2 percent occurs

Ex: Unemployment rate = 7.4 percent ; natural rate = 6.0
7.4 - 6.0 = 1.4 (2) = 2.8% of potential GDP

30
Q

Unequal Burdens

A

(1) Occupation
(2) Age
(3) Race/Ethnicity
(4) Gender
(5) Education
(6) Duration

31
Q

Occupation

A

Workers with lower-skilled jobs (laborers) have higher unemployment rates than workers in higher-skilled occupations (professions)

32
Q

Noneconomic cost

A

Social catastrophe!!! Depression = idleness; lack of self -respect; family disintegration; etc.

33
Q

International Comparisons

A

Unemployment rates differ greatly among nations at any given time.

34
Q

Inflation

A

Rise in the general level of prices; each dollar will buy fewer goods/services – reduces purchasing power of money

35
Q

Consumer Price Index (CPI)

A

Main measurement of inflation

36
Q

CPI Calculation

A

CPI = (Price of the most recent market basket ÷ price of the same market basket in past year) x 100

Ex: CPI was… 179.9 in 2002; 177.1 in 2001
(179.9 - 177.1) ÷ (177.1) = 1.6% of inflation

37
Q

Two Types of Infaltion

A

(1) Demand - Pull inflation

(2) Cost - Push inflation

38
Q

Demand - Pull Inflation

A

Changes in the price are cause by an excess of total spending beyond the economy’s capacity to produce; businesses cannot responding to excess demand by expanding output; “TOO MUCH SPENDING CHASING TOO FEW GOODS.”

39
Q

Cost - Push Inflation

A

Inflation may rise on the supply or cost sector of the economy; (in history) when output/unemployment were declining, the general price level was rising; rising prices in terms of factors that raise per-unit production

40
Q

Per-Unit Production

A

The average cost at/of a particular level of output:

Per-unit production cost = (total input cost ÷ units of output)

41
Q

Supply Shocks

A

Abrupt increases in the cost of raw materials or energy inputs have increased per-unit production costs and product prices

42
Q

Nominal Income

A

Number of dollars received as wages, rent, interest , or profits

43
Q

Real Income (Calculation)

A

Measure of the amount of goods and services nominal income can buy = purchasing power of nominal income

Real Income = Nominal Income ÷ Price Index (in hundredths)

44
Q

Who is hurt by inflation?

A

(1) Fixed-Income Receivers
(2) Savers
(3) Creditors

45
Q

Who is unaffected by inflation?

A

(1) Flexible-Income Receivers

(2) Debtors

46
Q

Real Interest Rate

A

Percentage increase in purchasing power that the power pays the lender

47
Q

Nominal Interest Rate

A

Percentage increase in money that the borrower pays the lender

48
Q

Nominal Interest Rate Equation/Calculation

A

Nominal interest rate = real interest rate + inflation premium (the expected rate of inflation)

49
Q

Addenda: Redistribution Effects of Inflation

A

(1) Deflation
(2) Mixed Effects
(3) Arbitrariness

50
Q

Deflation

A

Declines in the price level - reverse of inflation

51
Q

Mixed Effects

A

Person who is an income earner, a holder of financial assets, but may also benefit from inflation (mixed)

52
Q

Arbitrariness

A

Redistribution occurs regardlessly of society’s goals and values.

53
Q

Cost-Push Inflation and Real Output

A

Cost-push inflation REDUCES real output. It redistributes a decreased level of real income.

54
Q

Hyperinflation

A

Extremely rapid inflation whose impact on real output and employment usually is devastating

AP ECONOMICS (7 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions