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ECON 102 > Module 3 > Flashcards

Module 3 Flashcards

1
Q

Macroeconomics

A

The study of aggregate behavior

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2
Q

3 Major Issues in Macro

A

growth (output)
• unemployment
• inflation

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3
Q

GDP

A

The market value of all final goods and services produced domestically in one year.

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4
Q

Market Value

A

must be transacted in a formal market to be included in GDP.

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5
Q

Value

A

To measure value, we lookat the expenditures (spending)that occur in the markets thatwe are interested in

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6
Q

Gross National Product

A

The market value of all final goods and services produced by domestically owned factors of production in one year.

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7
Q

The 3 Macroeconomic Philosophies

A

Classical Economist
Keynesian Economist
Monetariest

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8
Q

Classical Economist

A

Free markets
little gov involvement
prior to great depression

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9
Q

Keynesian Economist

A

By John Maynard Keynes
during great depression
active gov involvement
led to devolopment of of macro

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10
Q

Monestarist

A

Milton Friedman
Control money supply
influence inflation and interest rates

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11
Q

Fiscal Policy

A

using taxing and gov spending to shape economic conditions

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12
Q

Monetary Policy

A

Involves using the money supply to change interest rates to increaser decrease consumption. A temporary rise in interest rates

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13
Q

4 groups of expenditures

A

Consumption
Investment
Government
Net Exports

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14
Q

GDP Formula

A

=Consumption+Investemnts+Gov purchases+ Net Exports

aka; C+I+G+N

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15
Q

Nation income

A

the sumof all of the income earnedby domestic factors of productionin an economy in one year.

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16
Q

Circular flow Model Outer Loop Top

A

Expenditures

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17
Q

Circular flow Model Outer Loop Bottom

A

Income

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18
Q

Expenditure Approach GDP formula

A

=C+I+G+(X-M)

19
Q

Inflation

A

An increase in the averagelevel of prices

20
Q

Relative Price

A

the priceof a single good

21
Q

Average price

A

aggregatingprices to measure changesin all prices together

22
Q

Measures of inflation

A

Consumer Price Index

-Implicit Price Deflator

23
Q

CPI

A

Measures the changein the cost of a marketbasket of goods for thetypical urban consumer

24
Q

Steps to calculate CPI

A
  1. Survey consumers to determine their spending habits
  2. Determine the cost of themarket basket of the typical consumer in the year of the survey. That year is the “base” year.
  3. Calculate the cost of the same basket in other years.
  4. Take the ratio of the “current” year to the “base” year, multiplied by 100, to determine the change in the cost of the basket.
25
Q

Implicit Price Deflator(GDP Deflator)

A

Measures the change inthe prices of all of the final goods and services produced

26
Q

CPI vs. GDP Deflator

A

CPI based on “typical urban consumer
•CPI is a fixed basket
•GDP does not include imports

27
Q

The cost of inflation

A

Distorts Information Flows

•Redistributes Income

28
Q

Losers With anUnexpected Inflation

A
  • Creditors (lenders)
  • Pensioners
  • Workers on Fixed Wages
29
Q

Winners with an unexpected inflation

A
  • Borrowers
  • Pension Providers
  • Employers
30
Q

Nominal interest rate

A

% by which money paid backexceeds the money borrowed,making no adjustment forchanges in the purchasingpower of the money

31
Q

Real interest rate

A

% change in the purchasingpower of the money that is borrowed

32
Q

Implicit price defaltor

A

Measures the change inthe prices of all of the final goods and servicesproduced domestically

33
Q

Nominal GDP

A

GDP calculated using the current year’s prices and quantities.

34
Q

Real GDP

A

GDP calculated usingthe baseyear’s prices and the current year’squantities.

35
Q

Unemployment rate formula

A

Total Number Unemployed/Labor Force

36
Q

3Types of unemployment

A

Frictional
•Structural
•Cyclical

37
Q

COLA

A

“clause” in a contract tying a monetary payment to some agreed upon rate of inflation

38
Q

Size of labor force formula

A

unemployed+employed

39
Q

labor force participation rate formula

A

size of labor force/total adult non institutional

40
Q

Frictional unemployment

A

normalturnover in the labor market.It includes new entrants andre-entrants in the labor force

41
Q

Structural unemployment

A

workershaving inappropriate skills forthe available jobs, or due toworkers being in the wronglocation for the available jobs

42
Q

Cyclical unemployment

A

decline in the economy’s total production.rises during recessions and falls during periods of prosperity.

43
Q

Natural rate of unemployment

A

The rate of unemployment whenthere is only frictional andstructural unemployment.

ECON 102 (2 decks)

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