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Economics > Midterm 4 > Flashcards

Midterm 4 Flashcards

1
Q

Gross Domestic Product

A

Market value of the final goods and services produced in the economy during a given time period

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2
Q

How do you determine the economies state

A

Comparing GDPs from over the years

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3
Q

What are the two ways to measure GDP

A

Expenditure approach
Income approach

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4
Q

What is Expenditure approach

A

expenditure approach measures the value of GDP by adding all expenditures to produce final goods and services

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5
Q

What are all the expenditures that needs to be added to find GDP under Expenditure approach

A

Consumption approach
Investment expenditures
Government Expenditures
Foreign Expenditures

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6
Q

Consumption Expenditures

A

Includes all expenditures made by household, endurable and non durable goods as well as services

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6
Q

Investment Expenditures

A

Investment in capital and Equipment
Investment in all construction
Investment in inventories

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7
Q

Gross Net Investment =?

A

Gross Investment - Depreciation

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8
Q

If In > 0 then?

A

The economy is expanding

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9
Q

If In < 0 then?

A

Declining Economy

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10
Q

If In = 0 then?

A

The economy is static

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11
Q

Government Expenditures

A

Building highways, parks, hospitals and payments for the services of labor

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12
Q

Foreign Expenditures

A

Net Exports (Xn) = Exports - Imports

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13
Q

Are stock and bond investments included in GDP

A

No

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14
Q

Income Approach in Measuring GDP +?

A

Wages + Net Income of farm and other unincorporated businesses including rent + Interest and Investment Interest + Profits

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15
Q

What are wages?

A

Payments by firms and private businesses as well as government for services of labor

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16
Q

Interests are what

A

Payments on capital and mortgages

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17
Q

Investment Income is what?

A

Money received that Canadians do abroad

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18
Q

What are the three types of profits

A

Distributed Profits
Business taxes
Undistributed Profits

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19
Q

NDP =?

A

Net Domestic Income + (Indirect Business Taxes - Subsides)

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20
Q

Real GDP is what

A

Nominal GDP that has been adjusted for inflation

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21
Q

Real GDP in a given year = ?

A

Nominal GDP in a given year / GDP price index in base year x 100

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22
Q

GDP price index in a given year = ?

A

Price of the Market basket in a given year / Price of the same Market basket in base year x 100

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23
Q

What isn’t included in GDP

A

Non marketed activities
Underground economy
Transfer Payments
Second hand sales

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24
Q

What happens in a Trough

A

High rate of unemployment
Low rate of economic growth
Weak confidence
A lot of unused capacity
Low demand in the economy
Low income

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25
Q

What is the only way to get out of a trough

A

The government must get involved along with the central bank

25
Q

What happens during a recovery

A

Employment goes up
Economic growth will go up
Gradually confidence in the economy will be restored
Excess capacity will gradually disappear
Income will go up
Total demand will go up

26
Q

What happens during a economic peak

A

Could be combined with inflation
Usually shortage of raw material
Skilled labor in key industry’s

26
Q

What happens during a recession

A

Downturn in economic activities
Needs to last tow quarters to be considered recession
Recessions need government involvement

27
Q

How are capital goods affected by economic shifts

A

They are affected are affected significantly because demand for those goods can be halted

28
Q

How are non durable goods affected by economic shifts

A

They are not impacted significantly because demand for them are not able to be halted

29
Q

What is unemployment

A

The unemployed are people over the age 15 actively looking for a job and can’t find one

30
Q

How is unemployment rate determined

A

Statistic Canada does a random survey of about 60,000 households in Canada

31
Q

Unemployment rate = ?

A

number of employed / labor force x 100

32
Q

What is the labor force

A

employed + unemployed

33
Q

What are the three types of unemployment

A

Frictional unemployment
Structural Unemployment
Cyclical Unemployment

34
Q

What is Frictional Unemployment

A

People who are in between jobs or are looking for a new job (seasonal workers)

35
Q

What is Structural Unemployment

A

Unemployment due to the changes of structure in the economy

36
Q

What is Cyclical unemployment

A

Happens as a result of changes in the cycle of the economy

37
Q

What is the percentage of employment that is needed for it to be considered full employment

A

93-94%

38
Q

What are the costs of Unemployment

A

Economic Cost (GDP Gap)
Social Cost

39
Q

What is GDP Gap

A

Difference between potential and actual GDP

40
Q

What is Potential GDP

A

Total output that could potentially be produced if all resources were fully employed

41
Q

What are the two types if Inflation

A

Demand Pull Inflation
Cost Push Inflation

42
Q

Demand Pull Inflation

A

Increase in General Price level because of excessive total demand

43
Q

Cost Push Inflation

A

Increase in cost of production which pushes prices up

44
Q

What is the equation for Inflation rate in a given year

A

CPI in a given year - CPI in base year / CPI in base year x 100

45
Q

What is the Redistributive effect of Inflation

A

% ^ in real income = % ^ in nominal Income - rate of inflation

46
Q

Aggregate Expenditure = ?

A

C + I + G + Xn

47
Q

If Disposable Income goes up what happens to consumption

A

Consumption goes up

48
Q

Look at Consumption schedule graphs

A

Look at Consumption schedule graphs

49
Q

What is APC

A

Average Propensity to Consume

50
Q

What is APS

A

Average Propensity to Save

51
Q

APS = ?

A

S / Y

52
Q

MPC = ?

A

^C / ^Y

53
Q

MPS = ?

A

^S / ^Y

54
Q

What are some non income determinants of (C) and (S)

A

change in wealth
expectations
income tax
interest rates

55
Q

Real Rate of Interest = ?

A

Nominal interest rate - Rate of inflation

56
Q

Look at Investment Schedules

A

Look at Investment Schedules

57
Q

Look at Expenditure - output approach schedules

A

Look at Expenditure - output approach schedules

58
Q

Look at Leakage - Injection approach schedules

A

Look at Leakage - Injection approach schedules

59
Q

What is Multiplier Effect

A

When a initial injection leads to more than porportion change in income and employment

60
Q

Multiplier = ?

A

1 / 1- MPC or 1 / MPS or ^Y / ^ in Spending

61
Q
A

Economics (6 decks)

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