H-Econ Exam 4 Flashcards
3 Types of Unemployment (ex.)
Frictional
Cyclical
Structural
Frictional - People are not employed but transitioning for better job
Cyclical - Co. supply and demands (success or failure) are the basis for employing people due to production
Structural - Unemployment caused by rifts between higher demand of more skilled workers, but there is an influx of underskilled workers
Employed people vs. Unemployed people differentiations
Unemployed people include all of those able-bodied and seeking work in the civilian labor force.
Discouraged workers are a subcategory of unemployed who are able to work but have decided to not look for work.
Economists see outsourcing as a prime example for
comparative advantage (ch. 2)
The demand for labor is a
Derived Demand: where the no. of workers hired and the wage rate are determined at the intersection of the MRP curve and Marginal cost curve for labor.
The Marginal cost curve for serves as the supply curve for labor
The “Backward Bending” supply curve
Is the phenomena when higher wages motivate workers to work less in replacement for leisure.
Unions on wages can increase union wages and decrease union nonunion wages and increasing nonunion employment in market. The effect of ____ ____ is to raise income and reduce employment.
Licensing requirements
Although retained workers benefit from the higher wage rate, the general view is
That increases in the min. wage creates unemployment
What is defined in terms of total people who work / are seeking work which include: resident armed forces.
Labor force
Related concepts: Civilian labor force, labor force participation rate, employed labor force, and unemployed labor force
What are the changing trends in the labor foce?
Older workers - have decreased Female workers - have increased Unskilled workers - decreased Service Oriented jobs - Increased Agricultural jobs - Decreased Union jobs - have decreased
The BLS measures unemployment by conducting how many surveys per year collecting approx. 60k sources of data?
12 - because they do it monthly
Offshore and outsourcing jobs have spread from ____ to ___
spread from manufacturing to service jobs
The rise and fall of economic activity relative to economy’s long term growth trend
Business Cycle
3 forms of Business cycles Major Minor Long-Wave (Describe)
Major: Wide fluctuations and serious contractions (success and failed)
Minor: No severe fluctuations - business’s staying afloat
Long-wave: cycles that last 50-60yrs
Example of internal & external forces that bring about business cycles
Internal: production, income, demand, credit, interest rates, and inventories
External: pop. growth, wars, basic changes in nation’s currency, natural catastrophes
Inventories play various roles in business cycles.
During troughs inventories would _____.
During expansions inventories would ______.
During peaks inventories would _____.
During contractions inventories would _____.
Inventories will drop in “troughs”
Inventories will increase to meet demand in “expansion”
Inventories will inventories and sales will increase in “peaks”
Inventories will reduce due to excess bc price stabilizes and demand slacken in “contraction”
If a business starts to expand through increased: production, employment, inventories, and financing what type of sources can overcome the effects of a trough?
Internal forces
Psychological impact on the business cycle
If investors perceive the economic conditions in the imminent future to be good or bad they will either increase or decrease their investment / financing the business.
Difference between
Leading indicators
Lagging indicators
Coincident indicators
Leading indicators precede peaks and troughs
Lagging indicators occur after turning points for general business
Coincident indicators act coinciding with peaks and trough activity
Major theories concerning causes to business cycle
See chap. 12
The Aggregate Supply and Aggregate Demand curves are used to explain the levels of national income and output and determine the equilibrium level average of prices and total output in the economy.
How are they different?
AD: Shows ttl amt. or real output *buyers will purchase at alt. prices
AS: Shows qty. of ttl. real output *producers will offer for sale at alt. price levels
Classical economists believe
The equilibrium output is normally the full-employment output
Aggregate expenditure is
Consumption investment + Goverment expenditure + Net Exports= Ttl planned spending
Chap 11: The Circular Flow of Income is the operation of demand output + income + new demand. What are its 2 channels of output and input called?
Leakages and Injections
Leakages include
Resource income received and not spent on domestic firms (i.e. imports)
Injections include
Added spending in the circular flow that are not paid out of resource income.
e.g. Investment, government spending, exports bought by foreign buyers
The current market value of total final g/s produced within US
GDP: Gross Domestic Product
GDP + value of g/s produced by US resources abroad less the value of g/s produced by foreign resources in the US
GNP: Gross National Product
It is the difference between cost of raw materials and price of final product
Value Added
Value Added + various producers + services = Total output of economy
Value Added Approach: he change of value of an intermediate or end product attributable to completion of a productive stage.
The Value Added approach is not to be used to measure what?
Total output in the US.
In Europe it is used only as a basis for a “value added tax”
Final g/s produced in a given period —intermediate goods do not count until they are made into a final good
Dollar Value of Total output
How do you equate or readjust the GDP and national income?
Resource Income received - Resource payments = GNP
The total productive resource costs of the g/s produced by our economy
and
income earned by the owners of productive resources in producing GDP
National Income:
Total resource cost and combined earnings
The current income received by person from all sources
Personal Income
A payment of money in return for which no current g/s are produced
Transfer Payment
Government Transfers include
SSID Benefits, Unemployment Compensation, Welfare payments, and Veteran Benefits
Personal income - Personal taxes
Disposable Income
GDP is produced by the activity of
numerous businesses and individuals who in turn make payment to the various productive resources for their contributions.
Incomes received are used to purchase g/s.
The Dept. of Commerce publishes how many reports on GDP?
Quarterly
What are the 4 sectors of the GDP?
Personal Consumption Expenditure,
Gross Private Domestic Investment,
Imports and Exports,
Government
What is the difference between final sales and GDP?
GDP represents net inventory
Index that converts GDP and related data from current dollar figures into constant dollar figures…
GDP Implicit Price Deflators
GDP expressed in constant dollars
Real GDP (Hint: It will be lower dollar value than the current dollar GDP)
Per Capita disposable income adjusted for changes in price level
Real Per Capita Disposable Income
Value of Nonmonetary Transactions: The unregulated portion of the economy involving g/s that are produced and exchanged without monetary transactions
Underground Economy
The number of units of currency needed in one country to buy the same amt. of g/s that one unit of currency will buy in another country.
Purchasing Power
Businesses pay out
Wages
Rent
Interest
Profits
Savings, taxes, imports are all
Leakages which contract Circular Flow of Income
Business investment, government spending, and exports
Injects that expand Circular Flow of Income
Difference between GNP and GDP
GDP: Refers to current market value of total g/s produced by domestic and foreign resources IN Us.
GNP: Market value of total g/s produced by U.S -owned resources in foreign countries excluding foreign owned co. in U.S.
The Value-Added approach to obtaining value the value of total output is to count the value added in
the production of both g/s = total payments made to the owners of the productive resources
Total resource costs which include (___) and
earnings which include (___)
]from the production of GDP.
Total resources: Land, labor, capital, enterprise
Earnings: Wages, Rent, wages, interest, profit
The categories in the allocation of GDP are
Personal Consumption
Private Domestic Investments
Net Exports
Government
What is and is not the true measure of GDP?
True dollar is NOT the true measure of GDP
Real/Constant GDP takes into account price level between periods.
How to calculate Real GDP?
Total GDP in yr
divided by
Implicit price deflator for that year
Limitations of using GDP in economic welfare
Effect of Price changes
Impact of population changes per capita disposable income
Exclusion of monetary transactions
Social Costs
Value of Leisure time
Doesn’t distinguish between types of g/s
Does not treat effect output of durable goods over business cycle
In order to make international comparisions
Purchasing Power Parity
E.g. How my currency’s value can buy more stuff from you
