First 3 chapters Flashcards
What is economics?
how society manages scarce resources
what is land as a resource?
anything from mother nature
what is capital as a resource
goods that make other goods
what is labour as a resource
all mental and physical human efforts
what is a positive statement?
one that can be tested
what is a normative statement?
one that is a judgement (how should be)
What are the 4 key economic problems?
1) What is produced and how
2) What is consumed and by who
3) why are resources idle
4) is capacity growing?
What does gdp measure?
market value of all final goods produced domestically
what are the four sectors of the economy measured in gdp?
household consumption, business investments, government spending, exports minus imports
does gdp measure used goods?
no
what is nominal gdp?
quantity of final goods/services times current prices
what is real gdp?
quantity of final goods/services times base year prices
what are the 4 phases of the business cycle?
peak, recession, trough, recovery
what is potential gdp?
real gdp if all resources were employed (full employment)
what is the gap called when potential gdp greater than real gdp?
recessionary gap
what is the gap called when potential gdp is less than real gdp?
inflationary gap
does inflation cause bracket creep?
yes
what is inflation?
rise in the general price level
how is inflation measured?
CPI or GDP deflator
what is cpi and what does it measure?
consumer price index. it measures the average cost of goods and services purchased by a typical canadian family
what are limitations of cpi?
assumes households don’t change consumption when prices change, basket may not represent everyone, new products not included, quality improvements not taken into consideration
what is core cpi?
typical basket excluding food, gst/pst, and energy
how is cpi calculated?
(price of basket in year / price of basket in base year ) x100
what must you be doing to be officially unemployed?
must be actively looking for work
how to calculate unemployment rate?
of people unemployed/ labour force
what is a discouraged worker?
would like to work but have given up looking
what is natural rate of unemployment for canada?
6-8 percent
who is the banker to the federal government
bank of canada
who distributes bank notes?
bank of canada
who is the bank to the major chartered banks?
bank of canada
what is the overnight interest rate
the rate banks charge each other for overnight loans
what is the upper limit of the operating band?
bank rate. rate chartered banks borrow from the bank of canada
what is the lower limit of the operating band?
interest rate paid by bank of canada on deposits with the BoC
