Midterm 1: Chapter 8 Flashcards
What Info does macroeconomic analysis provide
understanding of current economic conditions and predict future conditions
gives gov. help in determining US econ. policy
Micro vs Macro
study how households and firms interact (micro)
study of economy as a whole; inflation, unemployment and growth are main topics (macro)
Business Cycle and different periods
Alternating periods of expansion and recession
expansion - total production and employment increase
recession - production and employment decrease
Economic Growth
ability of economy to produce increasing quantities of goods and services
Inflation Rate
percentage increase of price level from one year to the next
What is GDP
Gross Domestic Product - market value of all final goods and services produced in a country during a period of time
only final goods, their market value ($), and used goods don’t count either, and no transfer payment
What is GDP said to be equal to?
Total Income
Components of GDP
Consumption, Investment, Gov. Spending, Net Exports
What is a trend among high-income countries
moving away from goods production and shifting to production of services
Largest component of investment?
Business Fixed Investment
Who spends more on purchases - local/state gov or federal gov.
local/state gov spends more
What is the Value added way of calculating GPD
the additional market value a firm adds to a product, equal to price firm sold good minus price firm bought good
What are the Shortcomings of GDP
doesn’t estimate values of goods/services that are not bought in marketplace, one example is Household production, which is a good one makes for personal use
Underground Economy - illegal goods/services (its about 10% of our economy 1.7 tril)
Shortcoming of GDP (per capita) for measuring well being
- value of leisure not included in GDP
- Not adjusted for pollution or negative effects of production
- Not adjusted for crime and social problems
- Doesn’t measure the exact distribution (the 1%)
Nominal vs Real GDP
nominal is summing the current value for goods/services
Real GDP is measured by using a year as a base year and calculate GDP while taking inflation into account
What is chain-weighting
comparing prices to previous year, and eventually creating a chain of price comparisons
What is the Price level
measure of average prices of various goods and services in an economy
GDP deflator
measure of price level; calculated by dividing nom GDP by real GDP and multiplying by 100
What is Gross National Product
Value of final goods and services produced by RESIDENTS of USA even if they’re produced OUTSIDE of the country
National Income
When you subtract the amount of depreciation from GDP (GDP - consumption of fixed capital)
Personal Income
income received by households - (measured by looking at how much corporations retain) also transfer payments are included or interest on gov. bonds
Disposable Income
equal to personal income minus tax payments
