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AP Econ > Unit 2 Economic Indicators and the Business Cycle > Flashcards

Unit 2 Economic Indicators and the Business Cycle Flashcards

1
Q

gdp

A

total value of all final goods and services prodiced w/in a country in a specific time period

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2
Q

circular flow model

A

graphic representation of how differnert units of the economy interact
goes as wages from producers to workers and back to producers in form of payment
product market
factor market

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3
Q

GDP history

A

19th and 20th centuries: no refulated wat to measure economy
new tools prompted by great depression
wwii: GNP created (measure of value of g and s produced by countried residents)
changed to gdp to not account for things produced abroud

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4
Q

two sector model circular flow

A

businesses and households
households have all factors of produciton
businesses produce and sell g + s to make profit and employ hh

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5
Q

producer market

A

consumers exchange g and s with producers
includes goods and services and money payed for them

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6
Q

resource/factor market

A

where businesses purchase the resources for what they desire to produce
includes productive reasourches, and income payments

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7
Q

consumption

A

money people psy for g or s flows b/w hosuehold and product market (value of all ga and s purchased by hh)

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8
Q

three sector model

A

includes gob
takes taxes into account but not money transfers
tazes flor from hh and bus to gov
revuene generated from taxesflows back through sunsidies, payment trasgers, and payment for g and s

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9
Q

four sector model

A

includes gobs, bus, and hh in foreign ocuntries
if country exports than more imports, then the factor payments to domenstic enconmy and value of g and s are big - more income for hh, bys and gove and vise versa

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10
Q

five sector model

A

inclides all financial markets (stocks, bonds, ect)
investors make these funds available to borrrowers, putting money into economuy

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11
Q

expenditure approach

A

focuses on demand for g and s calculated by the four types of spending
C + I + G + Xn

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12
Q

income approach

A

measures total income through the factors of production
W + R + I + PR
wages, reent for land, interet on capital, profits from entrepreneurship

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13
Q

value added approach

A

determines the value of g and s and subtracting the g and s used in generating that output
value of production - value of intermediate goods

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14
Q

capital goods

A

final goods the produced uses in the process of production
depreciate over time

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15
Q

intermediate goods

A

goods that are used up in the proces of production
dont ount in gdp

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16
Q

investment

A

when a girm purchases capital goods in order to increase produciton
ie inventiry, houeses and homes

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17
Q

economic wellbeing

A

the material living conditions that people experience and their access to resources

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18
Q

final goods

A

goods sold to a consumer who will actually use it

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19
Q

monetary limits of gdp

A

intermediate goods
underground economy
non market transactions
unreported activities
illegal activiteis

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20
Q

underground economy

A

activities generating essential economic activities that arent included in GDP bc they are difficult to put monetary value on them
can be legal or illegal

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21
Q

non market transactions

A

domestic activities that make up a large share of economic activities that have no assigned monetry value
ie cooking and cleaning

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22
Q

unreported activities

A

legal activities that arent included in gpd
ie tips

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23
Q

general progress indicator (gpi)

A

assigns values to the indespensable functions of households, communities, and enviro
accounts for the negative consequences of economic growth
ie pollution

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24
Q

human development index (HDI)

A

takes in to account more than production and wealth (life expectancy, knowledge/education, stnadard of living)

25
gdp as a measure of economiv wellbeing
not very good ignores: income inequality negative outputs (ie insustainaibility) quality of life (housing, eduction, lofe expectancy, ect) created HDI and GPI instead
26
nominal gdp
quantifies the total value in $ rather than units of production Pcurrent * Qcurrent quantifies how much is spent rather than how much is produced could mean inc of prices not production
27
real gdp
nominal gdp adjusted for inflation Pbaseyr * Q current
28
gdp deflator
determines price of deflation or inflation in relation to a specific yr (nominal gdp/real gdp)(100)
29
gdp per capita
calculated by dividing real gdp per capita functions as a univeral measure of prosperity if pop is growing faster than gdp, change will be negative rough estimate for standard of livjng
30
unemployment rate
percent of labor force who are not working who are looking for job (number unemployed/ Number civilian labor force)(100)
31
frictional unemployment
results from a transaction and is temporary ie move from school to work occurs when workers are searching for jobs is expected and not worrisome
32
structural unemployment
results from shifts in the economu due to tech or outsorucing worst for individual characterized by a mismatch b/w an employees skills and employers needs difficult to address
33
cylical unemployment
occurs as a consequence of a downturn in the economu worst for overall economy connected to a surplus or a dive in demand unemployment goes up 7 or 8%
34
seasonal unemployment
occurs during times of the yr when demand for certain types of labor is low ie agriculture
35
labor force
consists of everyone 16+ who is employed, able and wiling to work, or uneployed not institutionalized or in military
36
labor force participation rate
labor force/total pop
37
full employment
ideal employment rate w.in an economy, when everyone who wats to work can get work not 0% has frictional an voluntary but not structural and cylical
38
natural unemployment
the expected and acceptanle unemploument rate (frictional and structural) FU + SU/ LF difference b/w the actual and natural rate of unemployment is cylical (actual - natural)
39
limitations of the unemployment rate
doesnt accoutn for: discouraged workers underemployed part time chronically unemployed stay at home parents disabled inmates under 16 retieres makes UR seem lower than actually is
40
aggregate demand
total demand for all finished g and s that consumers want at current price
41
aggregate supply
total amount of g and s supplies want to supply at those prices
42
demand pull inflation
when aggregate demand increasing faster than aggregate supply sonsumers spend kess and save more
43
cost push inflation
when aggreagre supply decreases; anything that increases the cost of production
44
effects of inflation
cost of g and s increasins power of money decreases if inflation is higher than expected, banks make less money and vise versa helps borowwers bc money is worth oess reduces value of interest people reluctant to save hard on retirement savigs reallocatuoin of reasiyrces menu costs (bus prices go up) dereses exports
45
inflationary spiral
inflation leading to more inflation
46
responses to inflation
reduve aggregate demand by cutting expeditures rasing taxes dec amount of money in circulation = less borrowing higher interest rates changes in banking regulations
47
inflation rate formula
CP!2-CPI1/CPI1(100)
48
cause of inflation
low unemployment
49
consumer price index (CPI)
measure that tracks the change in the average price of a group of consumer g and s used by tracking a market basket of common goods used to make financial decisions and adjust income payment for social security, military, SNAP, ect
50
CPI formuka
MBcurrent/MBbase (100)
51
inflation rate
the measure of the change in purchasing power
52
real wage formula
nominal wage/CPI (100)
53
deflation
price of g and s drops repreents severe economic problems ie surplus
54
disinflation
a marginal reduction to the inflation rate over a short period reflects a slowdown in economic growth, but not rouble
55
CPI limits
inadequate representation of novelty no ackknlowdgement of changes in product quality subsitutiton bias lack of inclusion of buyer habits
56
producer price index
measure average change in the selling prices received domsstic priducers of g and s price cnage of sellers
57
real gdp calculation
nominal gdp/(price index/100)
58
output growth
readgdp2 - realgdp1/ real gdp 1 (100)
59

AP Econ (5 decks)

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