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ECO2013 > Unit 2: Ch 9, 10, 12 > Flashcards

Unit 2: Ch 9, 10, 12 Flashcards

1
Q

Nation’s standard of living depends on

A

its ability to produce and distribute goods and services

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2
Q

Economic growth

A

Increase in real GDP or real GDP per capita over time (long run)

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3
Q

Rule of 70

A

Number of years to double:

70/annual % rate growth

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4
Q

Productive efficiency:

A

Producing goods and services using the least-costly methods and the latest technology.

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5
Q

Allocative efficiency:

A

Producing those goods and services most highly valued by society.

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6
Q

Efficency factor: To attain potential real GDP,

A

an economy must achieve full employment and economic efficiency.

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7
Q

Economic growth refers to

A

the increase in potential real GDP over time (long run).

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8
Q

Real GDP indicates

A

the quantity of goods and services a nation can produce.

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9
Q

Labor-force participation rate =

A

Labor force/Working-age population

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10
Q

Labor input (L) as measured by —- —- depends on the (1) and (2)

A

worker-hours; (1)size of the employed labor force (2)length of the average workweek.

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11
Q

Increases in —– —— is the primary source of economic growth

A

labor productivity

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12
Q

Real GDP =

A

Hours of work × Labor productivity

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13
Q

Real GDP indicates

A

the quantity of goods and services a nation can produce.

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14
Q

Over time a nation’s standard of living depends on

A

its ability to produce and distribute goods and services.

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15
Q

Increase in labor productivity

A

(accounts for about 67% of total economic growth)

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16
Q

Capital

A

Stock of structures and equipment used to produce goods and services

a. New private investment
b. New public investment in infrastructure

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17
Q

Human capital

A

Knowledge and skills workers acquire through education, on-the-job training, and experience.

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18
Q

In a recession the economy suffers ________ unemployment and ________ real GDP

A

Increased; decreased

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19
Q

Shocks

A

Unexpected event that people and the economy have trouble adjusting to

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20
Q

Many economists believe that the immediate cause of cyclical changes in the levels of real output and employment is a demand shock or unexpected changes in ____________________

A

Aggregate spending

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21
Q

Measure of unemployment:

A

1) institutionalized and under 16
2) not in the labor force (NLF)
3) labor force

22
Q

Not in the labor force (NLF)

A

a. Potential workers age 16 and older who are:
i. Not employed
ii. Not officially unemployed or not actively seeking a job
b. Includes discouraged workers, house spouses, retirees, full-time students, and beach bums.

23
Q

Labor force (LF)

A

a. Employed- Note that voluntary and involuntary part-time workers are classified as “fully” employed]
b. Unemployed: Those who did not work at all during the survey week, but were actively looking for work and were available to work.

24
Q

Frictional unemployment:

A

Marketable skills. Always exists.

25
Q

Structural unemployment:

A

Obsolete skills- technological advance. geographic mismatch- marketable skills; reign part of the country

26
Q

Cyclical unemployment:

A

Business cycle, recession- lose jobs

27
Q

“Full-employment” unemployment rate or the natural rate of unemployment

A

A. At the natural rate of unemployment

	1. Only frictional unemployment and structural 	unemployment exists
	1. Cyclical unemployment is zero
	2. The economy is producing at its potential real GDP
	3. The economy is producing on its production possibilities frontier [chapter 1]
28
Q

GDP gap

A

the difference between actual real GDP and potential real GDP

29
Q

An inflationary gap (economic boom, positive GDP gap) exists when:

	1. Actual real GDP \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ potential real GDP.
	2. Actual unemployment rate \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ the natural rate (5%)
A

Greater than; less than

30
Q

At potential real GDP:

	1. Actual real GDP \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ potential real GDP.
	2. Actual unemployment rate \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ the natural rate (5%)

Cyclical unemployment is

A

Equals; equal; 0

31
Q

Recessionary gap (recession, negative GDP gap) exists when:

	1.	Actual real GDP \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ potential real GDP.

	2. Actual unemployment rate \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ the natural rate (5%)
	3. Cyclical unemployment is \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.
A

Less than; exceeds; a positive number

32
Q

Inflation

A

A(n) increase in the average level of prices (some particular prices may be falling)

33
Q

For inflation GDP price index

A

or consumer price index (CPI) increases over time

34
Q

Deflation

A

A(n) decrease_ in the general level of prices (some particular prices may be rising)

35
Q

For deflation

A

GDP price index or consumer price index (CPI) decreases over time

36
Q

Percentage rate of growth of any variable

A

N-O/O

37
Q

GDP price index

A

Market basket includes all final goods and services (C + IG + XN + G)

38
Q

Consumer price index (CPI)

A

Market basket includes goods and services purchased by the typical urban consumer including used cars and trucks

39
Q

Demand-pull inflation (demand-side inflation)

A

Caused by an excess of total spending beyond the economy’s capacity to produce

40
Q

Demand pull inflation results in

A

an inflationary gap or economic boom

41
Q

Cost-push inflation (supply-side inflation)

A

Increase in per unit production costs caused by a negative or adverse supply shock; Results in stagflation

42
Q

Inflation —– —– the purchasing power or real value of money

A

always reduces

43
Q

Deflation —– —– the purchasing power or real value of money

A

always increases

44
Q

Real value is

A

the nominal value adjusted for changes in the price level

45
Q

Nominal or money income is

A

the amount of dollars received.

46
Q

Real income is

A

money income adjusted for changes in the price level or the quantity of goods and services that can purchased with the dollars received.

47
Q

Nominal interest rate is

A

the annual percentage increase in the money or dollar value of a financial instrument.

48
Q

Real interest rate is

A

the nominal interest rate adjusted for changes in the price level or the annual percentage change in the purchasing power of a financial instrument.

49
Q

Real interest rate =

A

Nominal interest rate − Inflation rate

50
Q

People who lose or suffer an unexpected theft of purchasing power from an unanticipated increase in the inflation rate

A
  1. Households on fixed incomes
  2. Savers
  3. Creditors or lenders
51
Q

People who benefit or receive an unexpected gain in purchasing power from an unanticipated increase in the rate of inflation.

A
  1. Households and businesses that have flexible incomes.

2. Debtors or borrowers

ECO2013 (3 decks)

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