Intro To Macro Flashcards
What is Macroeconomics?
It is the study of all of the segments of the economy as a whole.
What is GDP?
GDP (Gross Domestic Product) measures the total market value of all goods and services produced for final use in an economy.
What is the expenditure approach for measuring GDP?
The expenditure approach for measuring GDP uses the formula: C+G+I+(X-M)
C - cost I - investments G - Gov't X - exports M - imports
What is the income approach to calculating GDP?
The income approach to calculating GDP uses the formula: Profit+Income+Interest and Expense Income+Wages
(P+In+E+W)
Why did Statistics Canada switch from GNP to GDP in 1986?
This is because GDP gave a better indication of Canadian output.
What is Multiple Counting?
Multiple counting is inflating the size of the GDP by including the value of the components of the final goods in the total.
What are transfer payments?
Government investments
Give 2-3 drawback to GDP.
GDP doesn’t measure:
1) Distribution of income
2) Environmental degradation
3) the Underground Economy
Why is a high unemployment rate bad?
A high unemployment rate is bad because this indicates that the economy is not using it’s resources very efficiently, which shows less of economic output.
How do you calculate unemployment rate?
UR= #unemployed / labour force • 100
What is CPI?
CPI (Consumer Price Index) is a price index that measures changes in prices of consumer goods.
How do you calculate CPI?
CPI=Total Spent Yr1 / Total Spent Yr2
Percentage — x100%
Give a limitation to CPI.
A limitation to CPI is the weighting of the categories of major components of spending – not every household’s spending habits reflect the index rates of the CPI.
What is the difference between GDP and Real GDP?
GDP is the total value of final goods and services produced by an economy in a given year, whereas Real GDP is the total value of all goods and services in a given year ADJUSTED FOR PRICE CHANGES.
What is the difference between the GDP deflator and CPI?
The GDP deflator is the price index that includes ALL goods, while CPI only includes consumer goods.
Give a criticism to Per-capita GDP.
Everyone’s financial situation and habits are different.
What is Full Unemployment?
Full unemployment is considered to be achieved when only frictional and some structural unemployment exists. It is also known as the natural rate of unemployment. In Canada, it is considered to be between 6-7%.
What is Structural Unemployment?
Structural Unemployment occurs when the skills/location of workers no longer matches the patterns of demand in the economy.
What is Technological Unemployment?
Technological Unemployment occurs when industries use more tech in the production process and thus reducing the need for workers.
What is Replacement Unemployment?
Replacement Unemployment results as firms move labour-intensive production to other countries where labour rates are lower. Workers producing in another country replace the local worker.
What is Frictional Unemployment?
Frictional Unemployment results from people moving between jobs. A certain amount of this is natural.
What is Cyclical Unemployment?
Cyclical Unemployment results from a reduction in overall consumer spending. When demand declines, need for workers decline.
What is Seasonal Unemployment?
Seasonal Unemployment is caused by a variation in climate over the course of the year. Stats Canada adjusts for this type.
