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Macroeconomics > Discussion handouts > Flashcards

Discussion handouts Flashcards

1
Q

Movement along the supply curve

A

A change in the quantity supplied of a good that is the result of a change in that good’s price

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2
Q

Law of Demand

A

Price goes up

Quantity demanded goes down

*creates downward sloping demand curve

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3
Q

Substitution effect

A

If the price of good A falls relative to price of good B (substitute)

then quantity demanded for good A increases relative to quantity demanded for good B

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4
Q

Income effect

A

If the price of good A (normal) falls

then Quantity demanded for good A increases as the purchasing power of consmers has increased

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5
Q

Possible demand shifters

A

Income

Price of related goods

Preferences

Population

Expectations

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6
Q

GDP defintion

A

the market value of all final goods and services produced in a country during a period of time, typically over one year

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7
Q

GDP is measured using ____________

A

market values, not quantities

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8
Q

GDP includes only ______________

A

final goods, not intermediate goods

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9
Q

final good/service

A

Purchased by its final user and is not included in the production of any other good or service

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10
Q

Intermediate good/service

A

A good or service used as an input into the production of another good or service

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11
Q

GDP formula

A

GDP (Y) = C + I + G + NX

Consumption

Investment

Government purchases

Net exports (exports - imports)

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12
Q

Value added

A

Refers to the additional market values a firm gives to a product

GDP calculation: (price for which the firm sells a good) - (price it paid other firms for intermediate goods)

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13
Q

Income approach: GDP calculation

A

GDP = Wages + Interest + Rent + Profits

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14
Q

Real GDP

A

Real GDP = Quantities (current) x Price (base year)

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15
Q

Nominal GDP

A

Nominal GDP = Quantities (current) x Prices (current)

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16
Q

GDP deflator

A

A measure of price level

_Nominal GDP _

Real GDP X100

*Used to describe inflation vs. deflation

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17
Q

Gross National Product (GNP)

A

The value of final goods and services produced by residents of the U.S, even if the production takes place outside of the US

*does not include domestic production by non U.S firms

18
Q

Personal Income

A

Income received by households, not earned by the firms, add transfer payments

19
Q

Disposable personal income

A

Personal income - tax

20
Q

Unemployment rate

A

Measures the percentage of the labor force that is unemployed

number of unemployed

labor force X100

21
Q

Labor force includes:

A

employed + unemployed

22
Q

Underemployed

A

People who have a part time job but are looking for a full time job

23
Q

Employed includes:

A

Full time + part time

24
Q

Labor force participation rate

A

Measures the percentage of the working age population that is in the labor force

labor force

working age population X100

25
Q

Note: Labor Force

A

Refers to the employed and unemployed individuals of working age

People not included in labor force: students, retirees, prisoners, stay-at-home parents, discouraged workers, etc.

26
Q

Frictional unemployment

A

Imperfect information and temporary periods of unemployment while workers are changing jobs

27
Q

Structural unemployment

A

Arises from a persistent mismatch between the job skills or attributes of workers and the requirement of jobs

“retraining”

28
Q

Cyclical unemployment

A

Caused by changes in the business cycle

29
Q

Full unemployment

A

frictional unemployment + structural unemployment

30
Q
A
31
Q

Real GDP =

A

Nominal GDP

GDP deflator X 100

32
Q

CPI

A

Average of the prices of some commonly consumed goods and services

Value basket current year

Value basket base year X100

33
Q

Value basket in CPI

A

Hold quantities the same to see the change in price of the basket

34
Q

Inflation =

A

Change in deflator

Deflator base

Change in CPI

CPI base

35
Q

Real interest rate

A

Real interest rate = Nominal interest rate - Inflation rate

36
Q

Unanticipated inflation

A

An increase in the price level that comes as a surprise, at least for most individuals

37
Q

Anticipated inflation

A

A widely excepted change in the price level

38
Q

Introduction of new goods and services into the economy

A

causes the CPI to overestimate the cost of living

because:

New goods cost less than existing goods

Consumers start switching to new goods

39
Q

Adjusting for effects of inflation:

A

Value (Y2) = Value (Y1) x CPI (Y2)

                                    CPI (Y1)
40
Q
A

Macroeconomics (26 decks)

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