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scarcity
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arguably the most important concept in all of economics; there wouldn't be enough if it was free
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avg level of consumption of goods/services enjoyed by population
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what affects a country's standard of living?
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demand
answer
the buyers
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suppply
answer
the sellers
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demand factors
answer
price of good/service
consumer income
prices of related goods
consumers expectations
consumer income
prices of related goods
consumers expectations
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quantity demanded
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amt of a good or service that people are willing and able to buy at various prices
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law of demand
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price and quantity demanded are negatively related
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market demand (graphically)
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the horizontal summation of all individual demand curves
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horisontal summation
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adding the number of units of product that will be purchased at each price
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CAN shift demand curve
answer
1. change in buyers income
2. change in price of related goods(subs/constit)
3. consumer expectations
4. consumer taste/pref
2. change in price of related goods(subs/constit)
3. consumer expectations
4. consumer taste/pref
question
CAN NOT shift demand demand curve
answer
1. change in price of item(moves along demand curve)
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change in demand =
answer
shift of the demand curve
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change in quantity demanded=
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change in price/movement along curve
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suppply shifters
answer
1. price of inputs used to produce final product
2. producer expectations
3. change in production tech
4. price of related commodities
5. gov factors
2. producer expectations
3. change in production tech
4. price of related commodities
5. gov factors
question
quantity supplied
answer
the amt of a good or service that sellers are willing and able to supply at various prices
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law of supply
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price and quantity supplied are positively related
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market equilibrium
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the price where quantity demanded is equal to quantity supplied
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sellers unhappy->
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not enough demand to meet supply
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buyers unhappy->
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not enough supply to meet demand
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shortage
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more demand than supply
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surplus
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more supply than demand
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P and Q would fall
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market for coffee if price of red bull fell
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consumer surplus
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price a buyer is willing to pay for a good/service minus the actual price paid
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surplus
answer
everyone above P* is in...
question
increases CS
answer
decrease in price ->
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decreases CS
answer
increase in price->
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calculate CS
answer
(1/2)(bxh)
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producer surplus
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the actual price received by a seller for a good minus the price
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increase in PS
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increase in price
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below price and above supply
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producer surplus is...
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total surplus
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TS=CS+PS
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companies have to start letting people go
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if GDP slows
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real GDP
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takes out inflation
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NBER
answer
national bureau of economic research
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the NBER...
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tracks business cycles after they occur
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National Activity Index
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weighted average of 85 indicators of economic activity
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normal NAI
answer
0
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NAI when moving into recession
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below -.7
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Leading Economic Index
answer
Measures 10 important leading indicators. Recession likely if index falls three months in a row
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Yield Curve
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relationship between bond interest rates and dates of maturity
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inverted yield curve
answer
w yield curve you're looking for...
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GDP (Gross Domestic Product)
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all the economic activity that occurs within a country; calculating total value created in a country over a year
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counts toward GDP
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toyota made in America
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counts toward GNP
answer
american shoes made in china
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Product Market
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where finished goods are bought and sold (GDP)
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resource market
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where intermediate goods are bought and sold
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Expenditure approach
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calculating GDP by adding the value of all final goods and services purchased by each type of final user
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adding up how much is spent on US produced goods
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expenditure approach works by
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GDP components
answer
GDP=C+I+G+X-M
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income (GDP)
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Y=
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C: consumption spending
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spending by US household on all new goods and services
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I: investment spending
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investment in economics means purchasing a good that will provide services/benefits in the future
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investment spending
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most volatile of all GDP components
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G:government spending
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things that government buys/sells
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NX: net exports (X-M)
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exports are added to GDP, imports are subtracted`
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service exported
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someone from Japan going to Disney World is a..
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income approach:
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GDP calculated as compensation to factors of production
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GDP PPP
answer
adjusts for regional price differences across countries
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GDP per capita
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adjusts for population
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inflation
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sustained increase in the overall price level has occurred
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hyperinflation
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extreme inflation, destabilizes economy
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CPI(consumer price index)
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measures weighted average change of prices for goods and services bought by a typical family (most commonly used)
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core inflation
answer
take out food and energy for a smaller set
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PPI (producer price index)
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measures weighted average change of prices of common inputs bought by producers (firms)
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to see what CPI will do
answer
look at PPI
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GDP chain price index
answer
measure weighted average change of prices of all new final goods and services produced in US (more broad than CPI)
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PCE (personal consumption expenditures index)
answer
Measures the weighted average change of prices of all goods/services in the 'C' component of GDP
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CPI-U
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what common URBAN wage earners buy
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COLA clause
answer
income raise automatically adjusts to adjusted cost of living
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deflation
answer
aggregate price level is declining
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=Salary year Y (CPI year X/ CPI year Y)
answer
calculate deflation
question
nominal interest rate
answer
quoted interest rate
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real interest rate
answer
rate adjusted for inflation
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nominal interest rate, inflation rate
answer
Real Interest Rate = ________ - _____________
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nominal wage(money wage)
answer
your quoted dollar wage
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real wage
answer
your nominal wage adjusted for inflation
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it's unexpected
answer
biggest problem with inflation is when
question
helps lender, hurts borrower
answer
if inflation is lower thane expected
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hurts lender, helps borrower
answer
if inflation is higher than expected
question
demand factors, supply shocks, gov policy
answer
what causes inflation?
question
demand-pull inflation
answer
rise in price due to increase in demand
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cost-push inflation
answer
rise in price due to supply decrease
question
employed
answer
anyone working full or part time
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unemployed
answer
not working but willing and able to work actively
question
not in labor force
answer
not working and not looking for work
question
civilian adult noninstitutional population
answer
E+U+NILF
question
civilian labor force
answer
E+U
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unemployment rate
answer
(U/E+U) x 100
question
labor force participation rate
answer
(E+U/E+U+NILF) x 100
question
frictional unemployment
answer
unemployed searching for a game
question
structural unemployment
answer
unemployed bc their skills are no longer needed
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natural rate of unemployment
answer
expected/normal rate
question
natural rate=
answer
frictional+structural
question
cyclical unemployment
answer
caused by fluctuations in business cycles; no jobs; what gov worries about
question
discouraged workers
answer
want a job but have given up looking; moved from unemployment to not in labor force
question
underemployed
answer
want a full time job but can only get part time; can only find employment that doesn't fully utilize their skills
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to measure economic growth and economic progress
answer
real GDP/capita
question
rule of 70
answer
70/annual growth rate=#of years to double
question
labor productivity is...
answer
the main driver of economic growth
question
factors of production
answer
-Land and Natural Resources (N)
-Labor (L)--human capital (H)
-Physical Capital (K)
-Entrepreneurship/Technology (A)
-Labor (L)--human capital (H)
-Physical Capital (K)
-Entrepreneurship/Technology (A)
question
production function
answer
OUTPUT= A x f(L,K,H,N)
question
lct
answer
...
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