CSC Chapter 4 Flashcards
Identify the components used to measure GDP using the expenditure approach
Consumer Spending, Business Spending and investment, government spending, and net exports
What is the difference between the real GDP and nominal GDP?
Real GDP removes the impact of inflation from the measure of growth.
Which factor directly contributes to growth in GDP?
Technological advances.
What indication shows us we are moving into the peak of the business cycle?
Demand outstrips supply
What is a characteristic of a recession?
Inventory levels rise
What do lagging indicators tell us about the economy and the business cycle?
Lagging indicators may confirm that a change in the business cycle is occurring
What is a characteristic of the unemployment rate measure?
It has an inverse relationship with phases of the business cycle
What does the participation rate measure?
The share of the working-age population that is in the labour force
In his report, Jean-Pierre states that strong consumer demand continues to place upward pressure on prices. If the economy is indeed experiencing a period of inflation, what are some of the costs associated with rising prices?
Erosion of standard of living for those on a fixed income.
Jean-Pierre’s report includes a reference to the Phillips curve. Based on this theory, what is the impact on inflation if unemployment continues to be low?
Inflation will tend to be high
What is Demand Pull Inflation
Demand-pull inflation is caused by increased consumer demand and increased consumer income.
Calculate the inflation rate using the CPI statistics from last year (128.7) and this year (132.8) that Jean-Pierre provided in his report.
3.19%
What is the impact on the Canadian dollar and Canadian interest rates if the U.S. raises its interest rates?
Interest rates will increase and the dollar will fall in value.
If discouraged workers are not included, what impact does that have on the unemployment rate?
The unemployment rate goes down because it includes only those looking for a job.
Who is included in the working age population?
The working age population includes everyone 15 years of age and older, regardless of whether they are looking for work.
What is the unemployment rate of 5.8% based on?
It means that 5.8% of the labour force is looking for a job. The labour force is made up of people who are either working or looking for work.
Does the unemployment rate ever reach zero?
No, because there will always be some workers who have quit, been fired, or laid off, and recent graduates are typically unemployed until they find a job.
What is the natural unemployment rate?
The natural unemployment rate is the minimum level below which unemployment does not drop. There will always be frictional and structural factors that affect unemployment.
Phillips curve
A graph showing the relationship between inflation and unemployment.
coincident indicators
Statistical data that, on average, change at approximately the same time and in the same direction as the economy as a whole.
Consumer Price Index (CPI)
Price index which measures the cost of living by measuring the prices of a given basket of goods. Often used as an indicator of inflation.
microeconomics
The branch of economics that analyzes the market behaviour of individual consumers and firms, how prices are determined, and how prices determine the production, distribution, and use of goods and services.
participation rate
The share of the working-age population (15 and older) that is in the labour market, either working or looking for work.
equilibrium price
The price at which the quantity demanded equals the quantity supplied.
deflation
A sustained fall in prices where the consumer price index (CPI) is negative.
seasonal unemployment
Unemployment that results from a company or industry that only operates during specific seasons of the year.
Gross Domestic Product (GDP)
The value of all goods and services produced in a country in a year.
final good
A finished product; one that is purchased by the ultimate end user.
balance of payments
The detailed statement of a country’s economic transactions with the rest of the world over a given period.
macroeconomics
The branch of economics that focuses on the performance of the economy as a whole, looking at the broader picture and to the challenges facing society as a result of scarcity and choice.
natural unemployment rate
Also called the full employment unemployment rate. At this level of unemployment, the economy is thought to be operating at close to its full potential or capacity.
frictional unemployment
Unemployment that results from normal labour turnover, from people entering and leaving the workforce, and from the ongoing creation and destruction of jobs.
labour force
The sum of the population aged 15 years and over who are either employed or unemployed.
discouraged workers
Unemployed individuals that cannot find jobs and have not made specific efforts to find a job within the previous month.
disinflation
A decline in the rate at which prices rise – i.e., a decrease in the rate of inflation. Prices are still rising, but at a slower rate.
structural unemployment
Unemployment that results when workers are unable to find work or fill available jobs because they lack the necessary skills, do not live where the jobs are available, or decide not to work at the wage rate offered by the market.
