macro 112

Question 1

how is labour productivity measured?

Answer 1

output per period/units of labour

Question 2

What are the 4 sources of economic growth?

Answer 2

quantity and quality of labour resources (human capital), amount of physical capital, technological change, amount and quality of natural resources

Question 3

what are the 5 types of income?

Answer 3

wages, interest, profits, self employed income and farming income

Question 4

how do you find the labour participation rate?

Answer 4

labour force/working age pop

Question 5

what is frictional unemployment?

Answer 5

unemployment due to people caused by the time it takes to match the right employees to the right jobs.

Question 6

what is structural unemployment?

Answer 6

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)

Question 7

What is cyclical unemployment?

Answer 7

unemployment due to business cycles. (recession).

Question 8

What is full employment?

Answer 8

full employment is when there is only frictional and structural employment but no cyclical unemployment. Also called natural rate of employment

Question 9

what are some issues with the way unemployment is measured?

Answer 9

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)

Question 10

What is Okuns law?

Answer 10

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

Question 11

what is the GDP deflator?

Answer 11

the GDP deflator measures inflation by dividing nominal GDP by real GDP

Question 12

what is the rule of 70?

Answer 12

take 70 and divide it by the interest rate to figure out how long it will take to double

Question 13

what is it called when inflation shifts cost from one group to another?

Answer 13

redistributive costs

Question 14

What are the costs of inflation?

Answer 14

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.

Question 15

Inflation caused by the demand within a economy exceeding the ability to produce those goods is called which kind of inflation?

Answer 15

Demand pull inflation

Question 16

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?

Answer 16

Cost push inflation

Question 17

What does the following symbols represent?

S, Y, C, X, I, IM, Xn, Ig, In, TP, AE, G

Answer 17

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

Question 18

What are transfer payments?

Answer 18

One way transaction from govt. ie welfare

Question 19

If

I + G + X > S + T + IM

Will the GDP rise or fall?

Answer 19

The GDP will grow

Question 20

If

I + G + X < S + T + IM

Will the GDP rise or fall?

Answer 20

The GDP will fall

Question 21

What is aggregate expenditures?

Answer 21

Total spending within economy divided into 4 components, C, I, G and Xn

Question 22

how would you calculate the real interest rate?

Answer 22

interest rate minus inflation

Question 23

What is autonomous spending?

Answer 23

Spending that is irrelevant of income

Question 24

What is induced income?

Answer 24

Spending that depends on level of income

Question 25

How is the marginal propensity to consume calculated?

Answer 25

(change in consumption)/(change in income)

Question 26

How is marginal propensity to expend (MPE) calculated?

Answer 26

(Change in aggregate expenditures)/(change in income)

Question 27

How do you calculate MLR?

Answer 27

Change in leakages divided by change in incomes

Question 28

How is the MPS (marginal propensity to save) calculated?

Answer 28

)change in savings)/(change in income)

Question 29

What is expenditure equillibrium?

Answer 29

When expinditures and value of production are equal

Question 30

Unplanned investment?

Answer 30

The amount of unintended investment by firms in the form of a build up or rundown of inventories

Question 31

what is the recessionary gap?

Answer 31

the difference between the real GDP and the potential GDP when the economy is producing below its potential

Question 32

Why might a firm produce more despite no rise in prices?

Answer 32

• improvement in human capital
• increase in amount of capital
• technological improvement
• Increase in natural resources