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33 Cards in this Set
- Front
- Back
Macroeconomics focuses on
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1. Macroeconomics Problems
2. Macroeconomics Theories 3. Macroeconomics Policies 4. Different Views On How the Economy Works |
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Macroeconomic Problems
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1. High inflation rate
2. High unemployment rate 3. High interest rates 4. Low economic growth |
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Three Macroeconomic Organizational Categories
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1. P-Q category
2. Self-regulating-Economic Instability category 3. Effective-Ineffective category |
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Three Macroeconomic Organizational Categories
1. P-Q category |
the relationship between price level (P) and the real GDP (Q).
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Three Macroeconomic Organizational Categories
2. Self-Regulating-Economic Instability category |
how well, or badly, the economy performs when left to it's own mechanisms.
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Three Macroeconomic Organizational Categories
3. Effective-Ineffective category |
the effectiveness or ineffectiveness of fiscal policy and monetary policy.
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Real GDP
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the value of the entire output produced annually within a country's borders, adjusted for price changes.
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Fiscal Policy
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changes in government expenditures and/or changes in taxes to achieve particular macroeconomic goals.
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Monetary Policy
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changes in the money supply, or the rate of growth of the money supply, to achieve particular macroeconomic goals.
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Price Level
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a weighted average of the prices of all goods and services.
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Price Index
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a measure of the price level.
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Consumer Price Index (CPI)
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a widely cited index number for the price level; the weighted average of the prices of specific set of goods and services purchased by a typical household.
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Consumer Price Index (CPI):
Base Year |
the year chosen as a point of reference or basis of comparison for prices in other years; a benchmark year.
The base year always has a CPI of 100. |
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Consumer Price Index (CPI):
equation |
CPI = (total dollar expenditure on market basket in current year / total dollar expenditure on market basket in base year) x 100
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Consumer Price Index (CPI):
equation for percentage change in prices |
percentage change in prices = [(CPI later year - CPI earlier) / CPI earlier year] x 100
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Inflation
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an increase in the price level.
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Nominal Income
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the current-dollar amount of a person's income.
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Real Income
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nominal income adjusted for price changes.
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Real Income equation
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Real Income = (Nominal Income / CPI) x 100
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Today's Salary equation
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Salary in today's (current) dollars = Salary earlier year x (CPI current year / CPI earlier year)
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For purposes of employment, the United States can be divided into two groups:
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1. Those who are a) under 16 years of age; b) in the armed forces; c) institutionalized--in a prison, mental institution, or home for the aged.
2. All others in the population, which is called the civilian non-institutionalized population. |
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The civilian non-institutionalized population can be divided into two groups:
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1. those in the civilian labor force
2. those not in the civilian labor force |
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Unemployment Rate
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the percentage of the civilian force that is unemployed.
Unemployment rate = number of unemployed persons / civilian labor force |
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Employment Rate
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the percentage of civilian non-institutional population that is employed.
Employment rate = number of employed persons/civilian non-institutional population |
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Labor Force Participation Rate
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the percentage of the civilian non-institutional population that is in the civilian labor force.
Labor force participation rate = civilian labor force/civilian non-institutional population. |
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Reasons For Unemployment
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1. Job Loser - fired or laid off
2. Job Leaver - quit 3. Reentrant - hasn't worked for some time and is reentering the labor force 4. New Entrant - never had a job, is looking for a job |
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Discouraged Worker
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an unemployed individual who gives up looking for a new job and is no longer counted as part of the civilian work force and thus not considered unemployed.
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Types of Unemployment
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1. Frictional Unemployment
2. Structural Unemployment 3. Natural Unemployment |
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Types of Unemployment
1. Frictional Unemployment |
unemployment owing to the natural frictions of the economy, which is changed by changing market conditions and is represented by qualified individuals with transferable skills who change jobs.
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Types of Unemployment
2. Structural Unemployment |
unemployment due to structural changes in the economy that eliminate some jobs and create other jobs for which the unemployed are unqualified.
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Types of Unemployment
3. Natural Unemployment |
Unemployment caused by frictional and structural factors in the economy.
Natural unemployment rate = Frictional unemployment rate + Structural unemployment rate. |
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Full Employment
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the condition that exists when the unemployment rate is equal to the natural employment rate.
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Cyclical Unemployment
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the difference between the unemployment rate and the natural unemployment rate.
Cyclical unemployment rate = unemployment rate - natural unemployment rate. |