question
business cycle
answer
expansion, recession, trough, peak
question
Real GDP
answer
corrects for price changes
question
Nominal GDP
answer
GDP measured in current prices
question
Inflation
answer
increase in the general level of prices
question
financial investment
answer
expectation of financial gain
question
economic investement
answer
purchases of new capital goods
question
shock
answer
what happens is not what is expected
question
demand shocks with sticky prices
answer
maintain inventory and sales change
question
demand shocks with flexible prices
answer
price falls if demand is low, sales unchanged
question
stimulus solution
answer
lowering interest rates and increase government spending
question
structural solution
answer
shift in the basic way the economy operates
question
market failure
answer
market fails to produce the efficient level of output
question
demand-side market failures
answer
too much of a product
question
supply-side market failures
answer
Overallocations of resources that occur when private supply curves understate the full cost of producing a good or service.
question
consumer surplus
answer
extra benefit from paying less than the maximum price
question
producer surplus
answer
extra benefit from receiving a higher price
question
efficiency losses (deadweight losses)
answer
right of intersection - overproduction
left of intersection- underproduction
left of intersection- underproduction
question
excludability
answer
producers can prevent some people from consuming the good or service
question
public goods
answer
free, nonrivalry, no excludability, free rider problem
question
quasi-public goods
answer
A good or service to which excludability could apply but that has such a large positive externality that government sponsors its production to prevent an underallocation of resources.
question
Reallocation Process
answer
government taxes individuals and businesses, takes the money and spends on production of public goods
question
externality
answer
the impact of one person's actions on the well-being of a bystander
question
positive externality
answer
too little is produced
question
negative externality
answer
too much is produced
question
Gross Domestic Product (GDP)
answer
A measurement of the total goods and services produced within a country.
question
Income Approach to GDP
answer
calculating GDP by adding up all earnings from resources used to produce output in the nation during the year
question
Expenditure Approach to GDP
answer
Calculating GDP by adding up spending on all final goods and services produced in the nation during the year
question
durable goods
answer
goods that do not wear out quickly
question
nondurable goods
answer
goods used in a short period of time
question
nominal GDP
answer
the production of goods and services valued at current prices
question
real GDP
answer
the production of goods and services valued at constant price
question
Real GDP formula
answer
(Nominal GDP/Price Index) x 100
question
Sources of Bureau of Economic Analysis (BEA)
answer
consumption, investment, government purchases, net exports
question
Rule of 70
answer
Doubling time for GDP (in years) = 70/(percentage growth rate).
question
modern economic growth began
answer
with the industrial revolution
question
structures of growth
answer
property rights, patents, education, free trade
question
supply factors
answer
An increase in the availability of a resource, an improvement in its quality, or an expansion of technological knowledge that makes it possible for an economy to produce a greater output of goods and services.
question
Demand factor
answer
The increase in the level of aggregate demand that brings about the economic growth made possible by an increase in the production potential of the economy.
question
efficiency factor
answer
the capacity of an economy to combine resources effectively to achieve growth of real output that the supply factors make possible
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antigrowth view
answer
Environmental and resource issues
question
defense of growth
answer
higher standard of living
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