macro 112 Flashcards
how is labour productivity measured?
output per period/units of labour
What are the 4 sources of economic growth?
quantity and quality of labour resources (human capital), amount of physical capital, technological change, amount and quality of natural resources
what are the 5 types of income?
wages, interest, profits, self employed income and farming income
how do you find the labour participation rate?
labour force/working age pop
what is frictional unemployment?
unemployment due to people caused by the time it takes to match the right employees to the right jobs.
what is structural unemployment?
caused by shifts in technology or changes in preference that make certain industries obsolete (and those working in the out of a job) or create “sunset” industries. (industries on the decline that must lay off workers)
What is cyclical unemployment?
unemployment due to business cycles. (recession).
What is full employment?
full employment is when there is only frictional and structural employment but no cyclical unemployment. Also called natural rate of employment
what are some issues with the way unemployment is measured?
discouraged workers who are no longer have been looking for work for so long but are too discouraged to continue are not counted, part time people who wish to be working full time are counted as fully employed, also some count as unemployed while not searching for work but waiting for benefits to dry up as well as underground workers counting as unemployed (potentially)
What is Okuns law?
states that for each 1% of cyclical unemployment the GDP drops 2.5%. to measure the gap; 2.5 x cyclical unemployment % x actual GDP
what is the GDP deflator?
the GDP deflator measures inflation by dividing nominal GDP by real GDP
what is the rule of 70?
take 70 and divide it by the interest rate to figure out how long it will take to double
what is it called when inflation shifts cost from one group to another?
redistributive costs
What are the costs of inflation?
Redistribution costs and output costs. Output costs are the costs of loss of output resulting from inflation. Menu costs also contribute by having businesses need to update menus and website to reflect inflation in their prices. Inflation also increases the cost of exports which makes them less desire able to other countries.
Inflation caused by the demand within a economy exceeding the ability to produce those goods is called which kind of inflation?
Demand pull inflation
Inflation caused by wage increases greater than increases in productivity, industries in which a firm has the power to increase profits through price increases or by the rise in costs of imports is called what kind of inflation?
Cost push inflation
What does the following symbols represent?
S, Y, C, X, I, IM, Xn, Ig, In, TP, AE, G
S -savings Y -income C -consumption X -exports IM -imports G -government spending TP -transfer payments I -investment spending AE -aggregate expenditures Xn - net exports Ig- gross investment In - net investment
What are transfer payments?
One way transaction from govt. ie welfare
If
I + G + X > S + T + IM
Will the GDP rise or fall?
The GDP will grow
If
I + G + X < S + T + IM
Will the GDP rise or fall?
The GDP will fall
What is aggregate expenditures?
Total spending within economy divided into 4 components, C, I, G and Xn
how would you calculate the real interest rate?
interest rate minus inflation
What is autonomous spending?
Spending that is irrelevant of income
What is induced income?
Spending that depends on level of income
How is the marginal propensity to consume calculated?
(change in consumption)/(change in income)
How is marginal propensity to expend (MPE) calculated?
(Change in aggregate expenditures)/(change in income)
How do you calculate MLR?
Change in leakages divided by change in incomes
How is the MPS (marginal propensity to save) calculated?
)change in savings)/(change in income)
What is expenditure equillibrium?
When expinditures and value of production are equal
Unplanned investment?
The amount of unintended investment by firms in the form of a build up or rundown of inventories
what is the recessionary gap?
the difference between the real GDP and the potential GDP when the economy is producing below its potential
Why might a firm produce more despite no rise in prices?
- improvement in human capital
- increase in amount of capital
- technological improvement
- Increase in natural resources
