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Macroeconomics > Topic 1: Macro Data and Performance Metrics > Flashcards

Topic 1: Macro Data and Performance Metrics Flashcards

1
Q

GDP (formal definition)

A

market value of final goods and services newly produced within a nation during a fixed period of time

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2
Q

Value Added approach (GDP)

A

revenue less costs of non-labor inputs

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3
Q

Income approach (GDP)

A

Sum the returns to all productive factors (returns = wages and salaries to labor and interest, dividends, rents and royalties paid to investors)

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4
Q

Expenditure approach (GDP)

A

sum spending on all final goods and services (final goods and services are not used to product other goods or services)

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5
Q

Which GDP approach is used in practice?

A

Expenditure

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6
Q

GDP equation

A

Y = C + I + G + NX

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7
Q

GDP equation - C

A

consumptions

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8
Q

GDP equation - I

A

investment

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9
Q

GDP equation - G

A

governments consumption and gross investment (does not include transfer payments)

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10
Q

GDP equation - NX

A

net exports of goods and services

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11
Q

types of consumption expenditure

A

durable goods, non durable goods, services

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12
Q

types of investment expenditure

A

residential, business structures, business equipment and software, change in private inventories

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13
Q

types of government expenditure

A

national defense, non defense, state and local

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14
Q

difference between GDP and GNP

A

GNP is output produced by domestically owned factors of production and GDP is output produced within a nation

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15
Q

NFP

A

net factor payments from abroad, payments to domestically owned factors located abroad minus payments to foreign factors located domestically.

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16
Q

GDP as related to GNP

A

GDP = GNP - NFP

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17
Q

real GDP

A

adjust for price changes to reflect only quantity changes

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18
Q

GDP Deflator

A

price index that applies fixed base year prices to value current year quantities consumed - nominal/real

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19
Q

CPI

A

weighted average of price changes where the weights reflect consumer purchasing patterns

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20
Q

how is production a circular process?

A

households provide factors of production to firms through labor and savings, production earns the funds needed to pay off the factors of production (revenue is what is above and beyond cogs, therefore must include wages, salaries, dividends, profits, etc in income approach for GDP)

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21
Q

what household factor(s) is included in I in the GDP equation?

A

residential construction, only new homes because “used goods” don’t count

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22
Q

consumption smoothing

A

changes in consumption do not fluctuate in line with GDP. When income is low, consumption stays about the same and less is saved, leading to more volatile fluctuations in investment.

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23
Q

how are private inventories calculated into GDP?

A

firm produces in Q1 and doesn’t sell - gets sold into private inventory. in Q2 someone buys it so it is part of C and needs to be deducted from private inventory

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24
Q

how to denote nominal GDP

A

YP(p is average price level for all goods and services included in GDP)

25
Q

two ways GDP can go up

A

Y goes up (good), P goes up (bad - inflation) – if P goes up and Y stays constant, country is not better off

26
Q

CPI-u

A

CPI-u(urban consumer), weighted average of price changes where the weights reflect consumer purchasing patterns

27
Q

what is in GDP deflator that isn’t in CPI-u

A

GDP deflator includes everything that is in GDP while CPI-u is just a basket of goods that represent general consumption

28
Q

problems with CPI

A

substitution bias - something in basket skyrockets in price, consumers will find a substitute, therefore actually buying patters may not match - leads to overstatement of cost of living AND introduction of new goods example- a computer sold 10 year ago does less than now but prices about the same - cost of living in reference to this has gone down

29
Q

example: 1981 CPI-u=90.5 and min wage = 3.35 AND 2012 CPI-u=228.61, what is real value of min wage now?

A

8.42

30
Q

name 3 price indexes

A

GDP deflator, PCE and CPI-u

31
Q

inflation rate (equation)

A

(Pt+1 - Pt)/Pt

32
Q

disinflation

A

declining inflation rate

33
Q

deflation

A

declining price level (negative inflation rate)

34
Q

Feds prefer which price index and why?

A

PCE because it avoids substitution bias, coverage of more items and weights given to items

35
Q

labor force

A

unemployed + employed

36
Q

unemployment rate

A

unemployed/labor force

37
Q

participation rate

A

labor force/adult population

38
Q

employment ratio

A

employed/adult population

39
Q

civilian labor force

A

>16 yrs old, employed or searching

40
Q

adult population does not include

A

military or institutionalized (schools, prison, etc)

41
Q

recession

A

2 consecutive quarters of declining GDP

42
Q

PCE doesn’t include

A

agriculture and energy, etc. things with volatile prices

43
Q

PPP

A

Purchasing Power Parity - adjustment to evaluate other countries GDP using Am prices, corrects for differences in cost of living

44
Q

Gini coefficient

A

measures inequality 0<100, 0 perfect equality and 100 perfect inequality

45
Q

Okuns Law

A

predicted unemployment Δu = -.5(%change in realgdp - 3)

u =civilian unemployment rate

46
Q

when does unemployment peak?

A

recessions

47
Q

underemployment

A

involuntary part time

48
Q

marginally attached

A

haven’t sought work in the last 4 weeks, but have in the last year (“discouraged workers”)

49
Q

long term unemployment

A

6mo or longer

50
Q

interest rate

A

rate of return promised by borrower to lender

51
Q

nominal interest rate

A

rate at which nominal value of an asset increases over time

52
Q

real interest rate

A

rate at which the real value of an asset increases over time

53
Q

real vs. nominal interest rates

A

real = i - inflation

54
Q

ex ante

A

expected real interest rate (never negative)

55
Q

ex post

A

realized real interest rates (could be negative)

56
Q

household wealth

A

household assets-liabilities

57
Q

national wealth

A

sum of all households’, firms’ and governments’ wealth within a nation

58
Q

wealth determined by

A

savings by individuals, businesses and government

Macroeconomics (4 decks)

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