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Economics > Week 8 - Gross Domestic Product and Economic Growth > Flashcards

Week 8 - Gross Domestic Product and Economic Growth Flashcards

1
Q

What is microeconomics?

A

The study of how households and firms make choices, how they interact in markets and how the government attempts to influence their choices.

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2
Q

What is macroeconomics?

A

The study of the economy as a whole, including topics such as inflation, unemployment and economic growth.

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3
Q

What is inflation rate?

A

The percentage increase in the general price level in the economy from one year to the next.

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4
Q

What is unemployment rate?

A

The percentage of the labour force that is unemployed.

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5
Q

What is economic growth?

A

The expansion of society’s productive potential, usually measured by the rate of growth in real GDP.

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6
Q

What is a business cycle?

A

Alternating periods of economic expansion and economic contraction relative to the trend rate of economic growth.

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7
Q

What is expansion?

A

The period of a business cycle during which total production and total employment are increasing above the trend growth.

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8
Q

What is contraction?

A

The period of a business cycle during which total production and total employment are falling below the trend growth.

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9
Q

What is a recession?

A

The period of a business cycle during which total production and total employment are decreasing.

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10
Q

What is gross domestic product (GDP)?

A

The market value of all final goods and services produced in a country during a period of time.

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11
Q

How is GDP measured?

A

GDP is measured using market values, not quantities. GDP includes only the market value of final goods and services.

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12
Q

What goods are included in GDP?

A

GDP includes only the market value of final goods and services. GDP includes only current production. Current production is that which takes place during the indicated time period; GDP does not include the value of used (second-hand) goods.

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13
Q

What is a final good or service?

A

A new good or service which is the end product of the production process that is purchased by the final user.

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14
Q

What is an intermediate good or service?

A

A good or service that is an input into another good or service.

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15
Q

What is a transfer payment?

A

Payments by the government to individuals for which the government does not receive a good or service in return. Not included in GDP.
- Examples: age pensions, unemployment benefits, family benefit payments.

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16
Q

What is the value added method?

A

An alternative way to calculate GDP. The market value a firm adds to a product.

17
Q

How is GDP calculated using the value added method?

A

GDP can be calculated by adding up the value added by every firm involved in the production process of goods and services.

18
Q

How is net domestic product (NDP) calculated?

A

Calculated by measuring GDP and subtracting the value of depreciation on capital equipment.
- NDP = GDP – Depreciation

19
Q

What is gross national income?

A

Australia’s GDP plus income generated overseas by Australian residents and firms minus the income generated in Australia by non-residents and foreign firms. The total amount of money earned by a nation’s people and businesses.

20
Q

What is the production method?

A

Used to measure GDP. The sum of the value of all goods and services produced by industries in the economy in a year minus the cost of goods and services used in the production process, leaving the value added by the industries.

21
Q

What is the expenditure method?

A

The sum of the total expenditure on goods and services by households, investors, government and net exports (the value of exports minus the value of imports).

22
Q

What is the income method?

A

The sum of the income generated in the production of goods and services, which includes profits, wages and other employee payments, income from rent and interest earned.

23
Q

What are the components of GDP?

A

Consumption (C), investment (I), government purchases (G), net exports (NX).

24
Q

What is consumption (C)?

A

Spending by households on
o Goods and services
o Not including spending on new houses

25
Q

What is investment (I)?

A

Spending by firms on
o New factories, office buildings, machinery and inventories
o Spending by households on new houses

26
Q

What are government purchases (G)?

A

Spending by
o Federal, state and local governments on goods and services
o Not including transfer payments

27
Q

What are net exports (NX)?

A

The expenditure on exports minus the expenditure on imports.

28
Q

What is nominal GDP?

A

The market value of final goods and services evaluated at current year prices.

29
Q

What is real GDP?

A

A measure of the volume of final goods and services, holding prices constant. This adjusts for inflation.

30
Q

What is the point of real GDP?

A

The goal of calculating real GDP is to measure the extent to which total production has increased and to remove the complicating factor of price change.

31
Q

What is the difference between nominal and real GDP?

A

Nominal GDP is the total value of goods and services produced in a given time period using current prices, while real GDP is the total value of goods and services produced using constant prices. Real GDP is adjusted for inflation, while nominal GDP is not.

32
Q

What is the labour force?

A

The sum of employed and unemployed workers in the economy.

33
Q

What are discouraged workers?

A

People who are available for work but have not looked for a job during the previous 4 weeks because they believe no jobs are available for them.

34
Q

To be classified as employed,

A

A person must have worked in paid employment only 1 hour or more in the week before the survey.

35
Q

To be classified as unemployed,

A

Must not have worked at all in the week before the survey, must have been actively looking for work in the past 4 weeks and must be ready to start work immediately.

36
Q

How is the unemployment rate calculated?

A

Number of unemployed / labour force x 100

37
Q

How is labour force participation rate calculated?

A

Labour force participation rate = labour force / working age population x 100

Economics (9 decks)

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