Midterm Flashcards
requirements for gdp inclusion
final rather than intermediate, must be produced within time period, must be produced within nation’s borders
gdp components
consumption - consumer spending on final products
investment - firm spending on final products
government - government spending
net exports - (sell - buy)
gdp doesn’t measure….
quality of life - distribution of goods/services
non market activities - services w/ potential market value performed w/o charge
underground economy - unreported market activities to avoid taxation and legal system
types of gdp
nominal - states gdp in current value of goods/services
real - states gdp corrected for changes in prices from year to year and is more accurate
gdp?
value of all final goods and services produced within a nation in a given time period
gnp?
gdp + income earned abroad - foreign income inside borders
when is gnp > gdp
when foreign production is larger
real gdp per capita?
real gdp / total population
higher real gdp per capita = ?
better educated / healthier population of a country
real gdp per capita measures what? and what does it not measure?
measures standard of living but NOT quality of life
factors that determine economic growth
- natural resources
- human resources - labour force measured through labour input = labour force * work week
- capital resources - better capital = increased output - increase in capital to labour ratio = capital deepening
- tech and innovation
how is a nation’s productivity measured?
using multi factor productivity = real output / combined inputs, estimation of economy productivity
what contributes to productivity?
- quality of labour - educated/healthy workforce = more productive
- tech and innovation - better tech = more output from same amount of input
- energy costs - more expensive = use of tools decreases and productivity decreases
- financial markets - easier the funds flow in an economy = more productive economy
productivity and economic growth relationship
direct
what happens when there is economic growth
prices decrease
business cycle?
a series of expanding/contracting periods of economic activity, measured by increases/decreases in real gdp
expansion?
economic growth - jobs are easy to find - low unemployment - more resources needed to keep up w/ demand - resource become scarce —> prices rise
at peak?
lowest unemployment - prices rise - businesses are less profitable
using NGDP instead of RGDP for business cycle curve = ?
more volatile/stark change in curve
factors that cause change in business cycle?
- business decisions: demand slump = reduced production, new tech = increase AS = reduce costs
- changes in interest rates = rising interest rates = falling AS and AD = contraction
- consumer expectations
- external issues
