Macroeconomics 2

Question 1

NNP (Net National Product)

Answer 1

GNP - Depreciation = NNP
measures the total output of all goods and services produced worldwide using the economic resources of US entities. but does not include an amount for depreciation.

Question 2

GDP Gap

Answer 2

the difference between potential GDP and real GDP. The gap is positive when potential GDP exceeds real GDP - which indicates that the economy is not operating at full capacity, which implies unemployment and under utilized plant and equipment.
Negative GDP gap - indicates that the economy is operating at above normal full capacity which will put pressure on prices.

Question 3

Real GDP

Answer 3

the market value of all goods and services produced adjusted for changes in the price level, in terms of constant prices of a base period.

Question 4

National Income

Answer 4

the total payments for economic resources included in the production of all G/S

Question 5

Productive-possibility curve

Answer 5

the maximum amount of G/S an economy can produce at a given time with available technology and efficient use of all available resources.

Question 6

What are the two ways to measure GDP?

Answer 6

the expenditures approach and the income approach

Question 7

Items to be included in the calculation of GDP

Answer 7

consumption by individuals/households, investment by businesses, government purchases
net exports

Question 8

Nominal GDP

Answer 8

total output of G/S produced for exchange in the domestic market during the year WITHOUT adjusting for changing price levels.

Question 9

Structural unemployment

Answer 9

They lack the skill for currently available jobs. Invent of computers and technology, decreased the need for bookkeepers

Question 10

Frictional unemployment

Answer 10

In transition between jobs. moving to seek employment

Question 11

Seasonal unemployment

Answer 11

school bus drivers. Their jobs vary by season of the year.

Question 12

Cyclical unemployment

Answer 12

downturn in the business cycle. recession.

cyclical rate of unemployment - difference between the total rate of unemployment and the natural rate of unemployment

Question 13

Unemployment rate

Answer 13

% of labor force not employed

Question 14

natural unemployment rate

Answer 14

those unemployed due to frictional, structural, and seasonal reasons

Question 15

Full employment

Answer 15

when there is no cyclical unemployment. There can still be frictional, structural, and seasonal unemployment present

Question 16

Aggregate Demand

Answer 16

Total spending in economy. 
Sum of: 
consumption spending
investment
government spending
net export

Question 17

Consumption spending

Answer 17

spending by individuals on G/S.

(does not include new housing). primarily determined by disposable income

Question 18

consumption function

Answer 18

relationship between people’s disposable income and how much they are spending (consumption spending)
if they are spending more than their disposable income - going in debt or spending their savings. the reverse - saving.

Question 19

Average propensity to consume

Answer 19

% of disposable income spent on consumption. Have $1, spent $.85. APC = 85%

Question 20

Average propensity to save

Answer 20

reciprocal of APC. APC +APS = 100%

Question 21

MARGINAL propensity to consume

Answer 21

For every additional $1 in disposable income, how much is spent on consuming goods. .9 = 90%