macro test 2 Flashcards
what is GDP?
The GDP is the value of all final goods and services produced within a country during a particular year
what are the 6 limitations of GDP
- Exclusion of non-market transactions from the GDP
- Does not account for inequality of income and wealth
- GDP rises with each incident of social breakdown (e.g., crime, imprisonment, and divorce)
- GDP rises with each environmental disaster, pollution, and repair expenditure
- Does not account for the depletion of natural resources.
- GDP increases with war expenditures and post-war rebuilding activities.
the human index?
- Standard of living
- Longevity
- knowledge or education
what is not included when measuring the GDP?
- Financial Transactions
- transfer of second hand goods
- other excluded transactions
when measuring the GDP with the expenditure approach what do we look for?
- personal consumption
- durable or hard goods
- nondurable goods or soft goods
- services
- gross domestic private investment
- government purchases
- net exports
what are the factors of income approach?
- labour or employment income
- gross corporate profit
- farm and unincorporated business income
- interest and investment income
what is the formula of the income approach?
GDP: NDI + indirect taxes - subsides + depreciation
what is the NDP formula?
NDP= NDI + indirect taxes - subsidies
what is the nominal GDP + the formula?
Nominal GDP is the value of current output measured in terms of current prices.
formula:
NGDPt = ΣPt x Qt,
what is the real GDP?
is the value of current output measured in terms of some base-year constant prices.
formula:
RGDPt = ΣPb x Qt,
what is the potential GDP and actual GDP? and what is the formula for the output gap?
Potential GDP (Y*) measures what the economy could produce if all resources were employed at their normal levels of utilization. This is often called full-employment output. Actual GDP (Y) is what the economy actually produces. The output gap measures the difference between actual output and potential output. Output Gap = Y - Y*
what are the three gaps?
Recessionary gap
Inflationary gap
Zero Gap
what is employment?
employment is the numbers of adults workers 15+ who have a job
what is unemployment?
is the number of individuals who are not employed but are actively searching for a job.
what is labour force?
is the number of people of age 15+ who are either employed or unemployed
what are the exceptions for labour force?
informs, homeworkers, students
what is the working age population?
is the number of people 15+ who are legally entitled to work
what is the unemployment rate?
the number of unemployed people expressed as a percentage of the labour force. It’s calculated as:
what is the employment rate?
a measure of the extent to which the available labour resources (people available to work) are being used. It’s calculated as:
what is the labour force participation rate?
the proportion of the total working-age population who are currently in the labour force. That is, the proportion of the working-age population who are currently employed or seeking work. It’s calculated as:
what is the formula for labour force?
L=E+U
what are the different types of unemployment?
- frictional unemployment: type of unemployment that is due to the fact that people are temporarily between jobs either because they quit their current job or they got fired.
- Structural unemployment: due to a mismatch between available jobs and available workers.
- cyclical unemployment: results from the short-term cyclical fluctuations in the economy.
what is the expenditure approach formula?
C+I+G+NX+(X-IM)
What is indirect taxes?
are sales taxes paid by consumers on their purchases (goods and services taxes - GST)
