Macroeconomics 2 Flashcards
NNP (Net National Product)
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.
GDP Gap
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.
Real GDP
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.
National Income
the total payments for economic resources included in the production of all G/S
Productive-possibility curve
the maximum amount of G/S an economy can produce at a given time with available technology and efficient use of all available resources.
What are the two ways to measure GDP?
the expenditures approach and the income approach
Items to be included in the calculation of GDP
consumption by individuals/households, investment by businesses, government purchases
net exports
Nominal GDP
total output of G/S produced for exchange in the domestic market during the year WITHOUT adjusting for changing price levels.
Structural unemployment
They lack the skill for currently available jobs. Invent of computers and technology, decreased the need for bookkeepers
Frictional unemployment
In transition between jobs. moving to seek employment
Seasonal unemployment
school bus drivers. Their jobs vary by season of the year.
Cyclical unemployment
downturn in the business cycle. recession.
cyclical rate of unemployment - difference between the total rate of unemployment and the natural rate of unemployment
Unemployment rate
% of labor force not employed
natural unemployment rate
those unemployed due to frictional, structural, and seasonal reasons
Full employment
when there is no cyclical unemployment. There can still be frictional, structural, and seasonal unemployment present
Aggregate Demand
Total spending in economy. Sum of: consumption spending investment government spending net export
Consumption spending
spending by individuals on G/S.
(does not include new housing). primarily determined by disposable income
consumption function
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.
Average propensity to consume
% of disposable income spent on consumption. Have $1, spent $.85. APC = 85%
Average propensity to save
reciprocal of APC. APC +APS = 100%
MARGINAL propensity to consume
For every additional $1 in disposable income, how much is spent on consuming goods. .9 = 90%
