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Macroeconomics > Test 2 Prep > Flashcards

Test 2 Prep Flashcards

1
Q

What is a summary measure of a country’s aggregate economic activity (total output of goods and services)?

A

GDP

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2
Q

The definition “total value of all final goods and services produced within a country during a particular year” defines:

A

GDP

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3
Q

What are the 5 limitations of GDP?

A

1 - exclusion of non-market transactions from the GDP
2 - does not account for inequality of income and wealth
3 - GDP rises with each environmental disaster, pollution, repair expenditure
4 - does not account for the depletion of natural resources
5 - GDP increases with war expenditures and postwar rebuilding activities

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4
Q

The Human Development Index ranks countries on a scale of _ to _

A

0 to 1

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5
Q

The low scale of HDI is from _ to _

A

0 - 0.499

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6
Q

The medium scale of HDI is from _ to _

A

0.5 - 0.699

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7
Q

The high scale of HDI is from _ to _

A

0.7 - 0.799

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8
Q

The very high scale of HDI is from _ to _

A

0.8 - 1

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9
Q

How are countries ranked in the HDI (3 developmental goals)?

A

1 - Standard of living (measured by real per capita income)
2 - longevity (measured by life expectancy at birth)
3 - knowledge or education (measured by the weighted average of adult literacy and mean years of schooling)

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10
Q

What is defined by the equal-weighted average of the 3 developmental goals?

A

HDI

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11
Q

How is HDI calculated?

A

1/3 (income index) + 1/3 (expectancy index) + 1/3 (education index)

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12
Q

______ is included in the GDP, whereas ______ and ______ is not included in the GDP

A
  • Financial transactions
  • Transfer of secondhand goods
  • Other excluded transactions
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13
Q

What are the three types of transactions included in financial transactions?

A

1 - securities
2 - government transfer payments
3 - private transfer payments

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14
Q

What is the formula that measures the GDP in the expenditure approach?

A

GDP = C + I + G + NX

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15
Q

What defines spending on goods and services but my household for immediate use?

A

Personal consumption

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16
Q

3 types of C:

A

1 - durable or hard goods
2 - nondurable or soft goods
3 - services

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17
Q

What defines spending on goods but for future use?

A

Gross domestic private investment

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18
Q

3 types of I:

A

1 - Business fixed investment (investment by firms in physical assets)
2 - new residential construction by households and landlords (privately owned)
3 - inventory investment by firms (unsold goods)

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19
Q

What defines spending on goods and services by the government?

A

Government purchases (military, equipment, public roads, civil services)

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20
Q

What is the formula for net exports?

A

Exports – imports

21
Q

When the net export is bigger than zero, there is a ______

A

Trade surplus

22
Q

When the net export is smaller than zero, there is a ______

A

Trade deficit

23
Q

When the net export = zero, there is a ______

A

Balanced trade

24
Q

What is the formula that measures the GDP from an income approach?

A

GDP = NDI + Indirect taxes – Subsidies + Depreciation

25
Q

What does NDI stand for?

A

Net domestic income at factor cost

26
Q

How do we calculate the NDI?

A

Wages + corporate profit + farm and unincorporated business income + interest and investment income

27
Q

What is defined as money earned by employees?

A

Wages and salaries

28
Q

What is defined as money of corporations and government enterprises before taxes (paid out profits or dividends and on distributed or retained earnings)?

A

Gros corporate profit

29
Q

What is defined as wages, rent, profit, interest income earned by farmers and unincorporated businesses?

A

Farm and unincorporated business income

30
Q

What is defined as money earned on bank deposits, corporate bond holdings, and other incomes from financial assets?

A

Interest and investment income

31
Q

What is defined as sales taxes paid by consumers on their purchases of goods and services (GST)?

A

Indirect taxes

32
Q

What is defined as financial aid and grants given to private corporations by the government to reduce their production costs?

A

Subsidies

33
Q

What is defined as the amount of money private firms spent on repairing their used for depreciated physical capital during the year?

A

Depreciation

34
Q

Depreciation is also known as:

A

Capital consumption allowance

35
Q

What does NDP stand for?

A

Net domestic product at market prices

36
Q

How is the NDP calculated?

A

NDI + indirect taxes – subsidies

37
Q

Income earned within Canada by Canada’s workers and investors defines both ____ and ____

A

GDP and GNP

38
Q

What includes income earned within Canada by foreign workers and investors? It is excluded in what?

A

included in GDP; excluded in GNP

39
Q

What includes income earned abroad by Canadian workers and investors? It is excluded in what?

A

included in GNP; excluded in GDP

40
Q

What is the formula to calculate GNP?

A

GDP + net income from abroad

41
Q

Net income from abroad =

A

income – outcome = abroad money – country money

42
Q

When NIA = 0

A

GDP = GNP

43
Q

When NIA > 0

A

GDP < GNP

44
Q

When NIA < 0

A

GDP > GNP

45
Q

What is defined as the value of current output measured in terms of current prices?

A

Nominal GDP

46
Q

What formula calculates nominal GDP?

A

Σ (Current year Price x Current year quantity) = Σ (P • Q)

47
Q

What is defined as the value of current output measured in terms of some base year constant prices?

A

Real GDP

48
Q

What formula calculates real GDP?

A

Σ (Base year Price x Current year quantity) = Σ (BP • Q)

Macroeconomics (2 decks)

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