Unit 1 & 2 Flashcards
unit 1: 5-10% unit 2: 12-17%
Economics (def)
the study of how to allocate scare resources along compettiton
Macroeconomics (def)
branch of economics that deals with overall society issues
what does macroeconomics issues apply to?
include inflation, unemployment, GDP, national income, interest rates. exchange rates
GDP
is the total value of all final goods and services produced that year
What are excluded from the equation of GDP?
intermediate goods of production/repurchase of tools, financial transactions
National Income
sum of income earned by factors of production owned by its citizens
Personal Income
money receives by households before personal income taxes are subtracted
Disposable income
personal income minus personal income taxes
Income approach
makes use that expenditures on GDP become income, national income can be modified (EX: depreciation must be added to national income)
Depreciation
decline in value of capital over time due to wear or obsolescence’s (expenses are subtracted from corpate before NI calculation )
Subsidy payments
made by governments to farmers (ex: they are part of the income but not made in exchange for goods so they are not part of the GDP can be subtracted from IN)
Net income of foreign workers
accounts that NI includes income of all citizens everywhere, where GDP includes value of goods produced domestically by anyone
Net domestic product
GDP minutes depreciation, how much output is left over for consumption and additions to capital stock
Okun’s law
estimate that every one percentage point increase in umployment rate output falls to 2-3 percentage points
Inflation
sustained increase in overall price, its not nesscarily inflation
deflation
sustained decrease in general price level
nominal salary
the actual number of dollars
what are effects of inflation
stores must change price listings and the cost of these changes are called menu cost, unit of account (standard monetary unit of goods), social tensions, value of interest payment decreases hurting lenders, savers
who benefits from inflation
borrowed money at fixed interest rates pay worth less
Business cycle
fluctuations in aggregate output and employment// functions are caused by change in aggregate supply and aggregate demand
what are the phases of the business cycle
recession and expansion, and turning points are known as peaks and toughs
potential output
when an economy’s unemployment rate equals its natural rate of unemployment
Say’s Law
idea to supply creates its own demand, when supplying goods workers earn money to spend or save
