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Macroecons > Unemployment > Flashcards

Unemployment Flashcards

1
Q

Formula for Unemployment rate

A

Unemployment rate
= (Number of unemployed/Labor Force)*100%

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2
Q

Formula for GDP growth rate

A

= (GDP current year - GDP previous year) / GDP previous year X 100%

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3
Q

Formula for Expenditure Multiplier for CLOSED economy

A

K = 1/[1 – b(1- t) + m]

where b is MPC
t is marginal tax rate
m is the marginal propensity to import

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4
Q

Costs of Unemployment

A
  • Loss of income and skills
  • Loss of self-respect, hope and morale
  • Suicide and mental illness rises
  • Social problems like family disintegration and rise divorce rate and fall
    in birth rate
  • Can lead to violent social and political change
  • Heightened racial and ethnic tensions
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5
Q

Formula for Labor force participation rate

A

Labor force participation rate =
(Labor force/Working age population) x 100%

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6
Q

Factors shifting LAS curve

A
  1. Changes in quantity of Labor
  2. Changes in quantity of Capital
  3. Improvement in Technology
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7
Q

Nominal GDP uses __________ year price.

A

Current year price

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8
Q

A change in consumption, investment, government purchases or net
exports will cause a ___________ in AE.

A. Movement
B. Shift

A

B. Shift

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9
Q

Formula for Expenditure Multiplier for OPEN economy

A

K = 1/(1-MPC) = 1/MPS

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10
Q

Is AD curve:

A. Upwards sloping
B. Downwards sloping

A

B. Downwards sloping

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11
Q

The LAS curve is _________.

A

Vertical

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12
Q

2 Factors affecting IMPORT

A
  1. Domestic country real GDP
  2. Foreign Exchange rate
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13
Q

4 Factors affecting CONSUMPTION

A
  1. Disposable income (Yd)
    - Income Tax
  2. Wealth
  3. Future income
  4. Interest rates on loans
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14
Q

Inflationary Gap

A
  • Economy is producing above full employment equilibrium.
  • Is an equilibrium where actual real GDP is more than potential real GDP.
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15
Q

Recessionary Gap

A
  • Economy is producing BELOW full employment equilibrium.
  • Is an equilibrium where actual real GDP is LESS than potential real GDP.
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16
Q

Graphically, Equilibrium occurs where AE cuts the ___ line.

A

45°

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17
Q

At equilibrium, Real GDP ≠ AE

A. True
B. False

A

B. False

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18
Q

What is an economic indicator used by government to measure its national income?

A

Gross Domestic Product (GDP)

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19
Q

The SAS curve is:

A. Upward Sloping
B. Downward Sloping

A

A. Upward Sloping

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20
Q

3 factors contributing to Economic Growth

A
  1. Technological advance
  2. Rise in quantity of capital
  3. Invest in education and training
21
Q

Real GDP = (Nominal GDP/Price Index)*100

A. True
B. False

A

A. True

22
Q

Long-run Macroeconomic Equilibrium

A

D = SAS = LAS

23
Q

Limitations of using real GDP to measure standard of living

A
  1. Household production are not included
  2. Does not consider leisure time
  3. Does not consider health and life expectancy
  4. The underground economy are not included
  5. Does not consider environment issues
  6. Does not consider the distribution of the output/income
  7. Does not consider political freedom and social justice
24
Q

Factors shifting SAS curve

A
  1. Changes in Resource/Input prices:
    * Wages, Rent, Price of raw materials or Price of oil
    - Increase in the price of resources raises the cost of production and reduces
    profit.
    - Input Prices ↑ = Profit ↓ = SAS ↓
    - SAS falls and the SAS curve shifts to the left.
  2. Natural Disasters (i.e. flood, drought, earthquake)
    - Earthquake destroys office buildings and factory and production will fall.
    - Natural Disasters ↑ = Profit ↓ = SAS ↓
    Hence, SAS falls and SAS curve shifts to the left.
25
Q

Real GDP uses __________ year price.

A

Base year price

26
Q

Expenditure approach to calculate GDP

A

GDP = AE
= C + I + G + (X – M)

27
Q

Short-run Macroeconomic Equilibrium exists when

A

AD = SAS

28
Q

Cyclical unemployment

A
  • Caused by the recession phase of the business cycle.
  • Fall in AD will reduce production level and hence increases cyclical
    unemployment.
29
Q

2 Factors affecting EXPORT

A
  1. Foreign countries real GDP
    Foreign countries real GDP ↑ = X ↑
  2. Foreign Exchange rate
    Foreign Exchange rate ↑ =
    Price of Foreign Goods ↑ = Price of Domestic Goods ↓
    = X ↑
30
Q

Formula for Change in real GDP

A

Change in real GDP
= expenditure multiplier x initial change in spending

31
Q

Changes in price will cause _________ along the AD curve:

A. Movement
B. Shift

A

A. Movement

32
Q

Income approach to calculate GDP

A

GDP = Total Income
= Wages + rental income + interest income + profit

33
Q

Increase in AE is a vertical _________________ of the AE curve.

A. Upward Movement
B. Downward Movement
C. Upward Shift
D. Downward Shift

A

C. Upward Shift

34
Q

Factors shifting AD curve

A
  1. The world economy
    i. Changes in exchange rate (X,M)
    ii. Changes in foreign countries real GDP (X)
  2. Fiscal Policy (Changes in 2 Fiscal tools: G and Taxes) and
    Monetary Policy (Changes in money supply which lead to changes in interest
    rates [C, I])
  3. Expectations
    i. Changes in future income (C)
    ii. Changes in future profits (I)
  4. Other factors:
    i. Changes in wealth (C)
    ii. Changes in stock of capital (I)
    iii. Changes in inventory level (I)
    iv. Changes in domestic country real GDP (M)
35
Q

Increase in LSL will _______ the curve to the ________.

A. Shift, Left
B. Shift, Right
C. Move, Left
D. Move, Right

A

B. Shift, Right

36
Q

Formula for Labor Force

A

Labor Force = Number of unemployed + Number of Employed

37
Q

6 Factors affecting INVESTMENT

A
  1. Interest rate on loans
    Interest Rate ↑ = I ↓
  2. Acquisition, maintenance, and operating costs
    Operating Costs ↑ = I ↓
  3. Business taxes
    Business Tax ↑ = I ↓
  4. Stock of capital goods on hand
    Stock of capital goods ↑ = I ↓
  5. Inventory (unsold goods)
    Inventory ↑ = I ↓
  6. Future profit
    Future profit ↑ = = I ↑
38
Q

LAS is the relationship between the quantity of real GDP supplied and the price level at __________________

A

Full employment

39
Q

The quantity of real GDP supplied at full employment is ________, which is independent on price level.

A. Real GDP
B. Potential GDP
C. Expected GDP
D. Ideal GDP

A

B. Potential GDP

40
Q

Structural unemployment

A
  • Arises when changes in technology or international competition change
    the skills needed to perform jobs or change locations of jobs.
  • Due to mismatch of skills or knowledge of the labor and the current
    available jobs in the labor market.
41
Q

Frictional unemployment

A
  • Refers to individuals searching for jobs (in-between jobs) or waiting to
    take jobs soon.
  • Due to normal labor market turnover
  • Includes fresh graduates seeking employment.
42
Q

Changes in LAS = Changes in SAS

A. True
B. False

A

A. True

43
Q

How can the central bank increase money supply?

A. Buy government bonds
B. Sell government bonds

A

A. Buy government bonds

44
Q

How can the central bank decrease money supply?

A. Decrease Required Reserve Ratio
B. Increase Required Reserve Ratio

A

B. Increase Required Reserve Ratio

45
Q

How can the central bank increase money supply?

A. Increase Discount Rate
B. Decrease Discount Rate

A

B. Decrease Discount Rate

46
Q

3 Factors affecting Money Demand (md) curve

A
  1. Changes in Real GDP
    Real GDP ↑ = Demand for Money ↑
  2. Changes in Price Level
    Price Level ↑ = Demand for Money ↑
  3. Financial Innovation
    Financial Innovation ↑ = Demand for Money ↓
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Q
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Q
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Macroecons (1 decks)

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