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Econ 102 > Final Exam > Flashcards

Final Exam Flashcards

1
Q

Three ways to calculate GDP

A
  1. Total spending (AE)
  2. Total income
  3. Value added (output)
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2
Q

Nominal GDP

A

measured in today’s dollars

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3
Q

Real GDP

A

measured in a constant dollar

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4
Q

GDP vs GNP

A

GDP is only in origin country
GNP is in any country

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5
Q

Technology

A

new and efficient ways of combining inputs to produce more outputs

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6
Q

Best form of technology

A

division of labour

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7
Q

Is population growth good for economic growth?

A

No. This lowers the GDP/person

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8
Q

Four factors that impact GDP

A
  1. Investment in physical capital
  2. Population growth rates
  3. Investment in human capital
  4. Technology growth
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9
Q

efficiency wages

A

really high wages to entice workers not to leave

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10
Q

structural unemployment

A

unemployment that results when wages are too high and supply doesn’t equal demand

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11
Q

frictional unemployment

A

unemployment due to people moving from one job to another

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12
Q

cyclical unemployment

A

due to recession

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13
Q

working age population

A

people 15 years and older

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14
Q

employed population

A

working age people who work atleast 1 hour a week for some kind of pay: includes parental leave

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15
Q

unemployed population

A

working-age people without jobs who are searching and could immediately accept a job

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16
Q

labour force

A

employed + unemployed

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17
Q

labour force participation rate

A

(labour force / working age population) x 100%

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18
Q

unemployment rate

A

(unemployed/labour force) x 100%

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19
Q

shoe leather costs

A

increased cost of transactions caused by inflation (i.e the pain of getting more cash)

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20
Q

menu costs

A

refer to the real costs of changing listed prices due to inflation

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21
Q

real interest rate

A

nominal rate - inflation

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22
Q

indexing

A

a way to correct the effect of inflation

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23
Q

whats the relationship between saving and investment

A

savings = investment

(this is for unplanned investment) and think that spending is inversely

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24
Q

AE > output

A

negative unplanned investment

25
Q

AE < output

A

positive unplanned investment

26
Q

if hours are ever reduced in a lockdown/shutdown

A

effective unemployment increases

27
Q

compounding

A

present value x (1 + r)^t

28
Q

discounting

A

future value x (1/(1+r)^t)

29
Q

present value of sum of payments

A

(next years revenue)/(r+d)

30
Q

supply in market for loanable funds

A

savers

31
Q

demand in market for loanable funds

A

investors

32
Q

current account balance

A

difference between the income receive from and paid abroad

33
Q

financial account balance

A

difference between financial inflows and outflows

34
Q

read this

A

current account defecit means canadians spend more than they make
the financial account covers this gap

35
Q

balance of payments

A

current account = financial account
keeps everything in check

36
Q

nominal exchange rate

A

foreign / domestic

37
Q

floating exchange rate regime

A

exchange rate fluctuates in response to market forces

38
Q

fixed regime

A

The exchange rate is set by the government and never (or rarely) changes.

39
Q

Managed Exchange Rate Regime

A

The government buys and sells currency to reduce volatility and/or to keep the currency cheap.

40
Q

devaluation

A

a reduction in the value of a currency (giving in as a fixed regime)

41
Q

revaluation

A

an increase in the value of a currency (giving in as a fixed regime).

42
Q

purchasing power parity

A

the nominal exchange rate at which a given basket of goods would cost the same in each country

43
Q

Okuns rule of thumb

A

for every percentage point that actual output falls below potential output, the unemployment rate is around 1/3% higher

44
Q

GDP multiplier

A

ΔGDP = Δspending x multiplier

45
Q

GDP multiplier (for transfers/tax)

A

ΔGDP = Δspending x multiplier x MPC

46
Q

the yield curve illustrates

A

the relationship between time to maturity of an asset and the interest rate of that asset

47
Q

is there more or less uncertainty overtime for bonds?

A

less

48
Q

difference in yield rate is due largely to?

A

term risk

49
Q

supply shocks

A

sudden changes to output (input prices, intermediates, etc) any rise in production cost

50
Q

three causes of inflation

A

inflation expectations
demand-pull inflation
cost-push inflation

51
Q

how does inflation affect unemployment rate

A

structural unemployment - supply shock

anything with oG = cyclical

52
Q

multiplier

A

1 / (1-MPC)

53
Q

specie money

A

gold/silver coins

54
Q

fiat money

A

bills from bank

55
Q

commodity money

A

random items

56
Q

deposit rate

A

rate bank pays to store peoples money

57
Q

bank rate

A

rate bank charges to loan money

58
Q

what does gdp not include

A
  • value of intermediate goods
  • value of stored inventories
  • value of things from other years
  • goods that are not final
  • anything produced foreignly

Econ 102 (5 decks)

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