Unit 3 Flashcards
What is Disposable Income (10)?
The total amount of household income available to spend on consumption and save
What is Aggregate Spending (10)?
Total spending on domestically produced g+s in the economy (expenditure approach for calculating GDP)
What is the Value-Added Approach (10)?
Survey Firms and add up their contributions to the value of g+s
What is the Income Approach?
Add up the total factor income earned by households from firms in the economy (i.e. rent, wages, interest, and profit)
What is real GDP vs. nominal GDP adjusted for?
or real wages vs. nominal wages?
changes in prices (i.e. inflation or deflation)
What is Aggregate Output (11)?
The total amount of output produced and supplied in the economy in a given period
How do you calculate the Labor Force Participation Rate?
(Labor Force/Population) x 100
How do you calculate the Unemployment Rate?
(Unemployed/Labor Force) x 100
How do you calculate the Labor Force?
Unemployed+employed
What is Frictional Unemployment?
Unemployment due to the time workers spend in the job search
What is Structural Unemployment?
- workers lack the skills required for the available jobs
- there are more people in a labor market than there are jobs available at the current wage rate
How do you calculate the Natural Rate of Unemployment?
Frictional Un. + Structural Un.
How do you calculate Actual Unemployment?
Natural Un. + Cyclical Un.
What is Collective Bargaining?
Negotiation of wages and other conditions of employment by an organized body of employees.
What affects Natural Employment?
- Unions
- Changes in Gov. Policy
- Labor Force Characteristics
- Job training (reducing)
- Employment subsidies (reducing)
How do you calculate Net Exports?
Exports-Imports
What are Shoe-leather costs?
Increased costs of transactions caused by inflation (people putting wear and tear into their shoes by running around trying to avoid holding money).
- sacrifices you make in time and effort to minimize the effect of inflation on your finances.
What are Menu Costs?
Costs that come from having to change the prices listed on a menu, pamphlet, etc. that is caused by inflation.
What are Unit-of-Account Costs?
Extra costs come from the way inflation makes money a less reliable unit of measurement.
The consumer price index reflects the:
average price of goods and services purchased by consumers.
The inflation or deflation rate is:
(and how do you calculate it?)
the change in a price index divided by the initial value (base year) of the index.
- inflation rate = price index in year 2 - price index in year 1/price index in year 1 x 100
When inflation rises quickly:
lenders will be hurt and those on fixed incomes will benefit.
- lenders will be hurt because the money they get paid back is “worth less” than the money they loaned out.
What is a market basket?
A hypothetical set of consumer purchases of goods & services (ex. oranges, lemons, & limes)
How do you calculate the price index?
Price index in a given year = (cost of the market basket in a given year)/(cost of the market basket in a base year) x 100
What is disinflation?
Reduction in the rate of inflation.
