Econ Flashcards
Memorization
What is the definition of employment?
The total number of people currently employed, either full-time or part-time.
What is unemployment?
The total number of people who are actively looking for work but aren’t currently employed.
What is frictional unemployment?
Unemployment that occurs due to the time workers spend searching for jobs.
What causes cyclical unemployment?
Fluctuations in the business cycle, causing unemployment to rise during economic downturns.
Name three costs associated with inflation.
Shoe-leather costs, menu costs, and unit-of-account costs.
Define structural unemployment.
It is when more people are looking for jobs than there are jobs available at the current wage.
Who benefits when inflation is higher than expected?
Borrowers benefit by repaying loans with money that’s worth less.
What is disinflation, and why is it challenging?
Disinflation is lowering the inflation rate, which often leads to higher short-term unemployment.
Why is real GDP per capita used to measure economic growth?
It is adjusted for inflation, reflecting living standards.
What does the Rule of 70 calculate?
It estimates the number of years it will take GDP per capita to double.
What are the three main sources of productivity growth?
Physical capital, human capital, and technological progress.
Define physical capital.
Human-made resources like machinery and buildings.
What is human capital?
It is the skills, knowledge, and experience individuals gain through education and training.
What does the aggregate production function describe?
The relationship between total output (GDP) and the inputs (labor, capital, human capital, technology)
What are diminishing returns in the context of capital?
Each extra unit of capital adds less to output when other inputs are fixed.
