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Econ 101 > Unit 2 > Flashcards

Unit 2 Flashcards

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1
Q

Per Capita GDP

A

Takes a nation’s population and divides it into the GDP

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2
Q

Do non-market transactions (underground economy) count in GDP?

A

NO; it is estimated that 5% to 10% could be added to the US GDP if these markets counted

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3
Q

Three sections of Per capita GDP

A
  1. High Income- US, Japan, Germany
  2. Middle Income- China, South Africa, Brazil
  3. Low Income- Haiti, Afghanistan, Sudan
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4
Q

Should median or mean be used to see the average of a nations GDP

A

Median because the mean can be skewed by billionaire companies and people

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5
Q

Non-Market transactions are…

A

illegal activities and legal activities not reported to the government

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6
Q

Law of increasing opportunity cost

A

As production moves towards the extreme ( either axis) at some point, the additional opportunity cost increase

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7
Q

Deflation

A

A decrease in the average price level

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8
Q

Unemployment

A

Anyone 16 years old or older who is actively seeking employment and does not have a job

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9
Q

Business Cycle

A

The changes in business activity over time

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10
Q

Who makes up the Non-Labor force

A

disabled, stay-at-home parents, retirees, and students

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11
Q

Frictional unemployment

A

Fired/ Quit

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12
Q

Structural Unemployment

A

Structure of the economy changes causing a mismatch between job skills and available jobs

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13
Q

Cyclical Unemployment

A

Due toa recession/ sales decrease

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14
Q

Seasonal Unemployment

A

Due to weather and season changes

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15
Q

Induced unemployment

A

Due to government law/regulations

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16
Q

Law of increasing opportunity cost

A

As production moves towards the extremes(either axis) at some point, the additional opportunity cost increases

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17
Q

Unemployment rate for the US

A

3.7%

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18
Q

Unemployment rate for Illinois

A

4.8%

19
Q

Natural rate of unemployment

A

4%-6%
unemployment consist only frictional and structural unemployment

20
Q

2 monthly methods to measure unemployment

A
  1. Household survey
  2. Non-farm payroll survey
21
Q

2 Adjustments to the household survey number

A
  1. Discouraged workers
  2. part time workers who want full time
22
Q

What statements about the CPI and PCE are correct?

A

The CPI makes substitutions every year and the PCE makes substitutions four times a year

23
Q

What factors will cause AD(Aggregate demand) to shift

A

Shift with
1. consumption
2. investments
3. gov’t spending
4. Exports

shift against
1. imports
so imports increase AD decreases

24
Q

The SRAS and LRAS curves show which perspective

A

SRAS uses current production choices
LRAS is the ideal production level investment

25
Q

demand-pull inflation

A

a. AD in economy increases
b. The increasing AD causes shortage
c. The shortage in those markers lead to price rise
d. If people/buisnesses respond to those price increase by raising prices then prices increase throughout the economy

26
Q

Cosh-Push Inflation

A

a. key resource cost rise
b.SRAS in economy decreases
c. The decreasing SRAS causes shortage
d. The shortage in those markets lead to price increase in those markets
e. If people businesses respond to those price increases by raising their prices then prices throughout the economy increase

27
Q

Why is demand pull inflation better than cost push inflation

A

With Demand Pull GDP increases with the shift of AD right. Meaning that even though inflation is rising GDP is also increasing. If GDP is increasing it can be assumed that unemployment is decreasing

But with cost push GDP decreases and if GDP is decreasing then it can be assumed unemployment is increasing,

28
Q

Five parts of the Business Cycle

A
  1. Peak
  2. Recession
  3. Trough
  4. Recovery
  5. Expansion
29
Q

Specialiation

A

occurs when a nation produces what it has the greatest comparative advantage in

30
Q

Comparative advantage

A

An advantage a nation has when it can produce a good at a lower opportunity cost

31
Q

Terms of Trade

A

The rate at which nations exchange/ trade goods

32
Q

how do people loose from trade?

A

imports replace the work they do. Those with higher education or training adjust better than those with a high school education or less in the US

33
Q

What factors cause an increase in income inequality?

A
  1. technology
  2. education
  3. tax policy
  4. trade
34
Q

Inflation

A

a rise in the average price level

35
Q

Deflation

A

A decline in the average price level

36
Q

Hyper inflation

A

An unpredictable fast upward movement in the price levels

37
Q

Rule of 70

A

divide 70 by the inflation rate and it will tell you how many years it will take for prices to double

38
Q

highest grossing movie of all time?

A

Gone with the Wind

39
Q

Ways to measure inflation

A

CPI- consumer price index and PCE- personal consumption expenditure index

40
Q

Cost of Unanticipated inflation

A
  1. decline in economic efficiency
  2. shifts in investment to protect against inflation that would not occur otherwise
  3. shift of wealth from poorer group sto wealthier groups as the wealthier can afford the time and money to catch up
41
Q

How do borrowers benefit from inflation ?

A

If a borrower borrows 1000 to produce pens and pens at the time are $2 but then increase to $4 the borrower can make a quicker profit to pay off the loan

42
Q

Winners of inflation

A

Borrowers
Adjustable incomes
Speculators
Wealthy

43
Q

Losers of inflation

A

Lenders
Fixed income
Basic savers
Poorer individuals

Econ 101 (10 decks)

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