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AP Econ > MACRO- unit one > Flashcards

MACRO- unit one Flashcards

0
Q

Discouraged worker

A

Employees who have left the labor force because they were unable to find employment

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1
Q

Fisher equation

A

.

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2
Q

Disposable income

A

Personal income-taxes (what you receive)

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3
Q

Durable goods

A

Hardest hit during a recession (goods that people do not buy during a recession)

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4
Q

Most economists believe that the immediate causes of business cycles are changes in the level of this

A

total spending

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5
Q

NBER national bureau of economic research

A

The group that gets to officially decide whether or not a recession has occured

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6
Q

BLS

A

Bureau of labor statistics

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7
Q

Frictional unemployment

A

Good unemployment

Two specific categories: search unemployment and wait unemployment

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8
Q

Consumer Price Index

A

Price of market basket of goods in current year/Base year price of basket of goods x100

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9
Q

Amount of official us recessions since 1950

A

10

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10
Q

Demand-pull inflation

A

“Too much spending chasing too few goods”
When the business cannot respond to excess demand in any way but raise the prices
*Economists argue about the affect of this

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11
Q

Cost-push inflation

A

Rising per unit costs reduce the amount of output firms are willing to produce which in turn raises the price
Main source is supply-shocks
*Reduces real output and redistributes a decreased level of income

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12
Q

Intermediate goods

A

products for further processing or resale

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13
Q

Final goods

A

products purchased by end users

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14
Q

Net domestic product

A

market value of GDP (consumption of fixed capital)

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15
Q

National income

A

income earned through use of american earned resources, includes taxes on production and imports

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16
Q

Personal income

A

all income (earned or not) by households

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17
Q

Disposable income

A

all income received minus taxes

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18
Q

Short comings of GDP

A
  • nonmarket activities (services of stay at home parents)
  • leisure
  • improved product quality
  • GDP does not measure well being
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19
Q

National accounting income enables economists to

A
  • assess economy health
  • track the long run course economy
  • formulate policies
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20
Q

When do prices fall during the business cycle?

A

Recession

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21
Q

Sticky prices

A

prices that are slow to change in the short run, they respond by changing employment and output but not by changing prices

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22
Q

Demand shocks

A

unexpected changes in demand

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23
Q

Supply shocks

A

unexpected changes in supply

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24
Q

Rule of 70

A

.

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25
Q

The economy can only grow if

A

it invests and the economy can only invest if it saves some output

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26
Q

Economic investment

A

creation and expansion of business enterprises

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27
Q

Financial investment

A

What ordinary people refer to as investment, the purchase of assets such as stocks and bonds

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28
Q

Investment

A

resources devoted to increasing output (ie: producing capital)

29
Q

Saving

A

Consumption<income

30
Q

Macroeconomics studies

A

long run economic growth and short run economic fluctuations

31
Q

What are the three things macroeconomics looks at?

A

1) Real GDP (value of goods and services produced)
2) Unemployment rate
3) Inflation

32
Q

How do living standards rise?

A

When the economy grows faster than the population

*Key to raising living standards is saving and investment

33
Q

What are the two ways to measure GDP?

A

Expenditures approach or the income approach

34
Q

GDP consists of

A

new items and final goods

35
Q

Expenditures approach

A

C+I+G+(X-M)
Private Consumption=majority of GDP, it is whatever we buy
Business Investment=anything a business buys to use for their service/good, any new construction (even if it is a private home), change in inventories
Government
Net exports (+exports-imports)

36
Q

What does not count in GDP?

A

Stocks and transfer payments

37
Q

Real GDP

A

adjusted for inflation

38
Q

Personal income

A

Total amount of income received (earned or not earned)

39
Q

Depreciation

A

Consumption of fixed capital

an estimate of the amount of the amount of capital used up in producing the GDP

40
Q

Labor force

A

At least 16 years old, not institutionalized, and looking for work

41
Q

Unemployment rate

A

people who want work and are looking/total labor force

42
Q

Is military in the labor force?

A

No

43
Q

Cyclical unemployment

A

Desired skills but the economy is not doing well enough to hire

44
Q

Structural unemployment

A

No desirable skills (because of technology)

45
Q

Seasonal unemployment

A

Is not one of the three types but an example is a lifegaurd

46
Q

Full employment

A

The same as natural rate of unemployment

Only frictional and structural unemployment, no cyclical

47
Q

Inflation

A

<2% means price stability

48
Q

Four phases of the business cycle

A

Peak, recession, trough, expansion

49
Q

Peak

A

Business activity has reached a temporary maximum
Near or at full employment
Price level is likely to rise

50
Q

Recession

A

Period of decline in total output, income and unemployment

Generally 6 months or more

51
Q

Trough

A

Output and unemployment bottom out, can be short or long

52
Q

Expansion

A

Real GDP, income and employment rise

Prices will rise and inflation will occur

53
Q

National income

A

Total amount earned by american owned businesses

54
Q

Net domestic product

A

How much we are better off

55
Q

Net domestic product+depreciation

A

GDP

56
Q

Okun’s Law

A

Any rise of 1% above the full employment rate will lead to a 2% rise in the negative GDP gap

57
Q

Who calculates the CPI?

A

BLS

Bureau of labor statistics

58
Q

How to calculate inflation

A

% change in CPI or % change in GDP deflator

current-previous/previous
x100

59
Q

GDP deflator

A

nominal GDP/real GDP x100

Uses ALL of what we produce

60
Q

What are 5 shocks that can cause business cycles

A
  • irregular innovation
  • productivity changes
  • monetary factors
  • political events
  • financial instability
61
Q

What goods are most affected by business cycles?

A

Durable goods and capital goods because people can postpone buying these goods and make do with what they already have

62
Q

Durable good

A

a good with a life longer than 3 years

63
Q

Nondurable good

A

A good with a life less than 3 years

64
Q

NRU

A

natural rate of unemployment

the point where the economy is producing its potential output

65
Q

GDP gap

A

Actual GDP-potential GDP

66
Q

In GDP the largest dollar amount is

A

consumer spending

67
Q

The largest dollar amount of national income is

A

wages and salaries

68
Q

What is leakage from the circular flow of economic activity?

A

saving

69
Q

Income approach

A

Compensation of employees, rents, interest, proprietors’ income, corporate profits, taxes on production and imports

AP Econ (15 decks)

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