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52 Cards in this Set
- Front
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measures the value of final goods and services produced within borders of a country during a period of time, typically a year
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real GDP
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totals the dollar value of all goods and services produced within the borders of a country using their current prices during the yea that they were produced
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nominal GDP
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modern economic growth is measured by what?
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output per person
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purchase of assets such as stocks,bonds, and real estate in the hope of reaping financial gain
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financial investment
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creation/expansion of business enterprises by purchasing newly created capital goods such as machinery, tools, factories, and warehouses
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economic investment
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situations in which firms expect one thing and something else happens
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shock
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how does the economy respond to demand shocks?
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by changing output, because prices are inflexible, or "sticky"
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techniques used to measure overall production of the economy and other related variables for nation as a whole
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national income accounting
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these commodities are purchased for resale or for further processing; not included in GDP
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intermediate goods
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these commodities are consumed by final users; included in GDP
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final goods
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market value of a firm's output minus the value of inputs the firm bought from others
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value added
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amount of capital used up over the course of a year
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depreciation
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total of all sources of private income plus government revenue form taxes on production and imports
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national income
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difference in profits made from domestic resources and foreign-owned resources; not part of domestic income
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net foreign factor income
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depreciation change made against private and publicly owned capital each year; not included in capital income
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consumption of fixed capital
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what is the formula for net domestic product?
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NDP = GDP - consumption of fixed capital
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what is the formula for national income?
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NI = national domestic product - statistical discrepancy + net foreign factor income
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how is inflation dealt with in terms of GDP?
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inflation is dealt with by inflating or deflating GDP
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measure of the price of a specified collection of goods/services in a given year as compared to the price of an identical collection in a reference year
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price index
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what kind of price index is used in the U.S.?
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chain-type annual-weights price index
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what are the shortcomings of GDP?
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1. nonmarket activities
2. leisure/well-being 3. improved product quality 4. underground economy 5. gross domestic "by-products" 6. composition and distribution of outputs |
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an increase in real GDP or in real GDP per capita, calculated as a percentage rate of growth per quarter
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economic growth
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how do you calculate real GDP per capita?
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dividing real GDP by population
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what is the main cause for uneven distribution of growth?
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different starting dates
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bookkeeping of supply-side elements that contribute to changes in real GDP
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growth accounting
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knowledge/skills that make a worker productive
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human capital
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reductions in per-unit production costs that result from increases in output levels that results in greater GDP
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economies of scale
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what determines the average real hourly wage?
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economy's labor productivity
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new firm focused on creating and introducing new product or employing a specific new production/distribution method
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start-up firm
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situation in which a given % increase in amounts of input leads to an even large % increase in amount of output produced (ex. economies of scale... highways, internet, etc)
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increasing returns
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increases in the value of the product for each user, including existing users, as the total # of users rises
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network effects
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alternating rises and declines in the level of economic activity
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the business cycle
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temporary maximum in the business cycle in which the price levels usually rise
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peak
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period of decline in total output, income, and employment in the business cycle (must last 6 months or longer)
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recession
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part of the business cycle in which output and employment bottom out at their lowest levels
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trough
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rise in GDP, income, and employment in the business cycle
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expansion
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what are fluctuations in the business cycle driven by?
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shocks
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who is affected most by the business cycle?
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firms that produce capital goods and consumer durables
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how is unemployment measured?
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the BLS conducts a random survey of 60,000 people
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workers who are either searching for jobs or waiting to take jobs in the near future
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frictional unemployment
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workers whose skills are not demanded by employer, lack sufficient skill, or cannot easily move to locations where jobs are available
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structural unemployment
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caused by a decline in total spending
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cyclical unemployment
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this occurs when the economy is said to be producing its potential output
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natural rate of unemployment
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difference between actual and potential GDP
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GDP gap
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rule that says for every 1 % point by which the actual unemployment rate exceeds the natural rate, a negative GDP gap of about 2% occurs
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Okin's Law
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this reports price of a "market basket," comprised of typical urban consumer goods (updated every 2 years)
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consumer price index
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this occurs when excess demands bids up the prices of limited output
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demand-pull inflation
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this occurs when rising prices caused by factors that raise per-unit production costs at each level of spending (generally caused by supply shocks)
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cost-push inflation
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what are the differences between cost-push and demand-pull inflation?
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1. cost-push will die out on its own, while demand-pull will continue as long as there is excess total spending
2. cost-push generates a recession |
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who is hurt by inflation?
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1. fixed-income receivers
2. savers 3. creditors |
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percentage increase in purchasing power that the borrower pays the lender
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real interest rate
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% increase in money that the borrow pays the lender
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nominal interest rate
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