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AP MacroEconomics > Module 2 > Flashcards

Module 2 Flashcards

1
Q

Depression

A

A deep and prolonged downturn

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2
Q

Rescission

A

Short pweriods where the economy is falling (from a peak down to a trough)

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3
Q

Expansion

A

When the economy is in an upturn, (the distance from a trough to a peak)

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4
Q

Employment

A

Number of people with a paid job

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5
Q

Unemployment

A

Number of people without a job

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6
Q

Labor force

A

The sum of the employed and unemployed

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7
Q

Output and unemployment are ____________ related

A

Inversely

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8
Q

Aggregate output

A

The economies total production of stuff for a given time.

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9
Q

Inflation

A

A rise in the overall price of everything

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10
Q

Deflation

A

A decrease in the price of everything

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11
Q

Disinflation

A

When the rate of inflation is getting smaller, (note, still inflating)

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12
Q

Full employment on graph

A

The strait line

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13
Q

Peak (graph)

A

The maximums

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14
Q

Trough (graph)

A

The minimums

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15
Q

3 economic goals

A
  1. Promote economic growth
  2. Limit unemployment
  3. Keep prices stable
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16
Q

National income and product accounts

A

Keeps tract of flows of money among different people

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17
Q

Stocks

A

A share of the ownership of a company

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18
Q

Bonds

A

A loan in the form of an IOU

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19
Q

Final goods and services

A

Goods and services sold to final user

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20
Q

Intermediate goods and services

A

Bought by firms as inputs for the production of final goods

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21
Q

GDP equation

A

GDP= C+I+G+X-IM

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22
Q

C

A

Consumer spending

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23
Q

I

A

Sales of investment goods

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24
Q

G

A

Government purchases

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25
Q

X

A

Exports

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26
Q

IM

A

Imports

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27
Q

Is consumer spending included in GDP

A

Yes

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28
Q

Is investment spending counted in GDP

A

Yes

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29
Q

Is government purchases included in GDP

A

Yes

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30
Q

Are net exports included in GDP

A

Yes

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31
Q

Are intermediate goods in GDP

A

No

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32
Q

Financial assets and transfer payments in GDP

A

No

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33
Q

Are inputs in production included in GDP

A

No

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34
Q

Are foreign goods included in GDP

A

No

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35
Q

Are used goods in GDP

A

No

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36
Q

GDP per capita

A

GDP divided by population

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37
Q

Nominal GDP

A

Total value of all goods and services produced in an economy in a given year, with current prices

38
Q

Real GDP

A

Total value of all goods and services produced in an economy in a given year, with base year prices

39
Q

Four components of income

A
  1. labor income
  2. Rental income
  3. Interest income
  4. Profit
40
Q

Employed

A

People currently holding a job in the economy

41
Q

Unemployed

A

People with no work but looking for it

42
Q

Labor force

A

Sum of employed and unemployed

43
Q

Low unemployment means

A

It’s easy to find jobs

44
Q

High unemployment means

A

It’s hard to find jobs

45
Q

Discouraged workers

A

Not working, but given up on job search due to market

46
Q

Marginally unemployed workers

A

Those who want a job, but looked in past and gave up now

47
Q

Underemployed workers

A

Overqualified workers or workers who want more hours

48
Q

Unemployment ________ during recessions

A

Rising

49
Q

Unemployment ________ during expansions

A

Falls

50
Q

Frictional unemployment

A

Unemployment due to time in apt he job search

51
Q

Structural unemployment

A

Unemployment due to a lack of necessary skills

52
Q

Minimum wage

A

Government mandated price floor on wages

53
Q

Labor unions

A

Work together to gain higher minimum wages

54
Q

Efficiency wages

A

Wages employers set above equilibrium as an incentive for better performance

55
Q

Natural rate of unemployment

A

Rate that arises from effects of frictional plus structural unemployment

56
Q

Cyclical unemployment

A

When there are not enough jobs for those who want them.

57
Q

Actual rate of unemployment

A

Natural + cyclical rate of unemployment

58
Q

Real wage

A

Wage rate divided by price level to adjust affects of inflation

59
Q

Real income

A

Income divided by price level to adjust for income

60
Q

Inflation rate

A

Percentage increase in price from year to year.

61
Q

Inflation rate formula

A

(Year 2-year 1)/year 1

62
Q

Shoe leather costs

A

Increased costs of transactions due to inflation

63
Q

Menu costs

A

The cost of changing prices listed on a menu

64
Q

Unit of account costs

A

Arises because money is a less reliable source of payment

65
Q

Unexpected inflation

A

Borrowers benefit lenders lose

66
Q

Unexpected deflation

A

Borrowers lose, lenders benefit

67
Q

Nominal interest rate

A

Rate actually paid for a loan

68
Q

Real interest rate,

A

Nominal interest rate minus the rate of inflation

69
Q

If deadpool has a nominal interest rate of 6% but inflation rate is 3% what is his real interest rate

A

3%

70
Q

Savers _______ with inflation

A

Lose

71
Q

Spenders _____ with inflation

A

Win

72
Q

Calculate nominal GDP

A

Cost of good times amount of it

73
Q

Calculate real GDP

A

Cost of good (of a base year) times the quantity of the good in a current year

74
Q

CPI calculations.

A

Take the nominal GDP of a current year and divide it by the previous. Multiply this by 100:)

75
Q

Calculating inflation rate based on nominal GDP

A

Year 2- year 1 over year 1 x 100

76
Q

Aggregate price level

A

A measure of the overall price of goods in an economy

77
Q

Market basket

A

A hypothetical set of consumer goods and purchases

78
Q

Price of a market basket is gotten by

A

Adding… Yup… Just adding

79
Q

Price index

A

Cost of market basket in current year divided by cost of a market basket in base year

80
Q

CPI

A

Consumer price index: measures the cost of s market basket in a typical urban family

81
Q

Why inflation isn’t always accurate, and what it makes it so that spending x amount of money is nesisary To be just as happy

A
  1. People’s tastes change (choose different goods)
  2. We buy improved versions(get more for more)
  3. Innovation makes inflation an overstatement
82
Q

PPI

A

Measures the price of goods and services purchased by a producer
Responds to inflation faster

83
Q

GDP deflator

A

Nominal /real x100

84
Q

3 causes of inflation

A
  1. Gov prints too much money
  2. Demand pull
  3. cost push inflation
85
Q

Demand pull

A

Too much money in market. Makes goods cost more

86
Q

Cost push inflation

A

Cost of resource drives prices

87
Q

Quantity of money theory

A

MV=PY

88
Q

M

A

Money

89
Q

V

A

Velocity of money

90
Q

P

A

Price level

91
Q

Y

A

Quantity of output

AP MacroEconomics (5 decks)

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