Key Words and Definitions Flashcards
GDP(E)
Expenditure Approach, Y = C + I + X - M
GDP(P)
The total goods and services that are produced in an economy in a given period of time.
GDP(I)
The total income produced in an economy in a given period of time.
Utility
The total satisfaction gained from consuming a unit of a good or service.
Profit maximisation in the labour market
Profit maximisation occurs in the difference between revenue and cost, by hiring the quantity of labour N*.
Exogenous variable
Determined outside of a model, acting as a driver.
Endogenous variable
A model is the relationship between endogenous variables, inside the model.
Pareto Optimaility
The allocation to make the representative consumer as well off as possible given what is feasible in the economy.
MPC = MPT = MPN = w
Unemployment
When an individual is actively looking for work but is unable to find it.
Unemployment rate
Unemployed / Labour Force
Labour Force
Employed + Unemployed
Participation rate
Unemployed / Working age population
Employment Population Ratio
(Labour force - Unemployed) / Working age population
Reservation wage
The minimum wage a consumer will accept to take employment, anything lower than the reservation wage offered the consumer will take unemployment.
Vu = Ve(w)
Nash Bargaining
The surplus generated from a labour match taking place.
z - b
