Economics Chapter 13 and 14 - Assignment Essays

question

gross domestic product

answer

the total dollar value of all final goods and services produced within a country's borders in a given year

question

final good or service

answer

a good or service that is sold to its final user, rather than to a firm that will use it to make something else

question

intermediate product

answer

a product that becomes part of a final good or service, or is used up in the production process

question

expenditure approach

answer

an approach to calculating GDP by adding up the spending on everything included in GDP

question

consumption

answer

the largest component of GDP and includes all the household purchases of consumers

question

government purchases

answer

the goods and services bought by any level of government

question

investment

answer

business spending on physical capital, new homes, and inventories

question

exports

answer

goods, services, and intermediate products bought by people in other countries

question

imports

answer

goods, services, and intermediate products produced in other countries

question

income approach

answer

an approach to calculating GDP by adding up all the income earned during the year by people who are involved in the production of goods and services

question

underground economy

answer

represents business activity conducted without the knowledge of the government

question

nominal GDP

answer

an approach to GDP which values each good at the dollar price it actually sold for in the year in which it was produced

question

real GDP

answer

an approach to GDP which measures total production in dollars after removing the distorting effect of price changes

question

standard of living

answer

the level of material wealth as measures by the consumption of goods and services

question

economic growth

answer

a sustained increase in real GDP over time

question

real GDP per capita

answer

output per person, calculated as real GDP divided by the total population

question

productivity

answer

the amount of output the average worker can produce in an hour

question

capital stock

answer

the total amount of physical capital in a country

question

capital deepening

answer

an increase in a country's capital per worker

question

the rule of 70

answer

a calculation that shows the number of years it takes for an economy's real GDP to double

question

economic infrastructure

answer

physical capital, such as communications systems and power systems, that provides a basic foundation that users share for many types of economic activity

question

research and development

answer

activities conducted by firms to discover or improve products or procedures

question

rule of law

answer

the principle that no person is above the law

question

business cycles

answer

alternating periods of rising and falling real GDP

question

expansion

answer

a phase of the business cycle during which real GDP rises

question

contraction

answer

a phase of the business cycle during which real GDP falls

question

recession

answer

a contraction severe enough to last several months or longer and have widespread effects on production, real income, employment, and sales across the economy

question

aggregate supply

answer

total output a country's firms are willing and able to produce, contingent on the price level

question

depression

answer

an extremely severe recession

question

aggregate demand

answer

total amount of domestic output purchased by all sectors of a country's economy, contingent on the price level

question

wealth

answer

made up of everything a person owns minus what they owe to others

question

bubble

answer

a rapid and unsustainable increased in the price of certain assets, such as homes, gold, or stocks

question

asset

answer

anything of value that is owned or controlled with the expectation that it will provide benefits in the future

question

unemployment rate

answer

the percent of the total number of people in the labor force who are unemployed; can sometimes mislead the actual unemployment rate

question

labor force

answer

all workers; employed + unemployed

question

labor force participation rate

answer

the percentage of adults in the labor force that are at least 16, non in an institution, and actively seeking work

question

calculating the labor force participation rate

answer

(number of unemployed workers + number of employed workers)/adult population x 100%

question

calculating the unemployment rate

answer

number of unemployed workers / labor force x 100%

question

significance of the unemployment rate

answer

it is a good indicator of how easy or difficult it is to find a job given the current state of the economy

question

problems with unemployment statistics

answer

1. discouraged workers
2. marginally attached workers
3. underemployed workers

question

discouraged workers

answer

nonworking people who have GIVEN UP looking for work (not considered unemployed); the deeper the recession, the more discouraged workers there are

question

marginally attached workers

answer

those who were available and actively looked for work recently, but are not currently looking (they have in the past year, but NOT in the past month)

question

underemployed workers

answer

people who work part time because they cannot find full-time jobs (a GT engineer working at Wendy's)

question

other factors of unemployment

answer

1. labor force participation rate
2. number of full-time jobs
3. average wages

question

jobless recovery

answer

a period in which the real GDP growth rate is positive, but unemployment is still RISING

question

3 types of unemployment

answer

1. frictional
2. structural
3. cyclical

question

frictional unemployment

answer

unemployment due to the TIME workers spend job searching, scarcity of information creates this (matching people to jobs takes time, sometimes in between jobs)

question

structural unemployment

answer

more people are seeking jobs in a particular labor market than there are jobs available at the current wage rate

question

causes of structural unemployment

answer

labor unions, side effects of government policies, mismatches between employees and employers, efficiency wages

question

efficiency wages

answer

wages that employers set above the equilibrium rate as incentive for better employee performance

question

union

answer

an association of workers that bargains collectively with employers over wages, benefits, and working conditions

question

cyclical unemployment

answer

unemployment correlated with the business cycle; the deviation from the natural rate

question

why does lower growth = higher unemployment?

answer

when GDP falls, firms lay off workers, which then leads to idle labor and capital which causes economic growth NOT being maximized and a decrease in the ability of the economy to create more jobs

question

natural unemployment

answer

unemployment that is always present; frictional + structural; used to make forecasts and conduct policy analyses; if this is the only unemployment then there is nothing to fix with macroeconomic policy

question

actual unemployment

answer

natural unemployment + cyclical unemployment

question

causes of change in the natural rate of unemployment

answer

1. changes in characteristics of labor force (changing demographics)
2. changes in labor market institutions (stronger unions = higher structural, temp agencies, new technology)
3. changes in government policies (job training programs)

question

real wages

answer

nominal wage rate / price level

question

real income

answer

nominal income / price level

question

shoe-leather costs

answer

the increased cost of transactions caused by inflation (the wasted time dealing with inflation)

question

menu cost

answer

the real cost of changing a listed price (like reprinting menus)

question

unit of account costs

answer

costs arising from the way inflation makes money a less reliable unit of measurement (if inflation is different from predictions, some will lose and some will benefit)

question

interest rate

answer

the price (calculated as a percentage) that a lender charges for the use of their savings for one year

question

nominal interest rate

answer

the interest rate expressed in dollar terms

question

real interest rate

answer

nominal interest rate - inflation rate

1 of 64

question

gross domestic product

answer

the total dollar value of all final goods and services produced within a country's borders in a given year

question

final good or service

answer

a good or service that is sold to its final user, rather than to a firm that will use it to make something else

question

intermediate product

answer

a product that becomes part of a final good or service, or is used up in the production process

question

expenditure approach

answer

an approach to calculating GDP by adding up the spending on everything included in GDP

question

consumption

answer

the largest component of GDP and includes all the household purchases of consumers

question

government purchases

answer

the goods and services bought by any level of government

question

investment

answer

business spending on physical capital, new homes, and inventories

question

exports

answer

goods, services, and intermediate products bought by people in other countries

question

imports

answer

goods, services, and intermediate products produced in other countries

question

income approach

answer

an approach to calculating GDP by adding up all the income earned during the year by people who are involved in the production of goods and services

question

underground economy

answer

represents business activity conducted without the knowledge of the government

question

nominal GDP

answer

an approach to GDP which values each good at the dollar price it actually sold for in the year in which it was produced

question

real GDP

answer

an approach to GDP which measures total production in dollars after removing the distorting effect of price changes

question

standard of living

answer

the level of material wealth as measures by the consumption of goods and services

question

economic growth

answer

a sustained increase in real GDP over time

question

real GDP per capita

answer

output per person, calculated as real GDP divided by the total population

question

productivity

answer

the amount of output the average worker can produce in an hour

question

capital stock

answer

the total amount of physical capital in a country

question

capital deepening

answer

an increase in a country's capital per worker

question

the rule of 70

answer

a calculation that shows the number of years it takes for an economy's real GDP to double

question

economic infrastructure

answer

physical capital, such as communications systems and power systems, that provides a basic foundation that users share for many types of economic activity

question

research and development

answer

activities conducted by firms to discover or improve products or procedures

question

rule of law

answer

the principle that no person is above the law

question

business cycles

answer

alternating periods of rising and falling real GDP

question

expansion

answer

a phase of the business cycle during which real GDP rises

question

contraction

answer

a phase of the business cycle during which real GDP falls

question

recession

answer

a contraction severe enough to last several months or longer and have widespread effects on production, real income, employment, and sales across the economy

question

aggregate supply

answer

total output a country's firms are willing and able to produce, contingent on the price level

question

depression

answer

an extremely severe recession

question

aggregate demand

answer

total amount of domestic output purchased by all sectors of a country's economy, contingent on the price level

question

wealth

answer

made up of everything a person owns minus what they owe to others

question

bubble

answer

a rapid and unsustainable increased in the price of certain assets, such as homes, gold, or stocks

question

asset

answer

anything of value that is owned or controlled with the expectation that it will provide benefits in the future

question

unemployment rate

answer

the percent of the total number of people in the labor force who are unemployed; can sometimes mislead the actual unemployment rate

question

labor force

answer

all workers; employed + unemployed

question

labor force participation rate

answer

the percentage of adults in the labor force that are at least 16, non in an institution, and actively seeking work

question

calculating the labor force participation rate

answer

(number of unemployed workers + number of employed workers)/adult population x 100%

question

calculating the unemployment rate

answer

number of unemployed workers / labor force x 100%

question

significance of the unemployment rate

answer

it is a good indicator of how easy or difficult it is to find a job given the current state of the economy

question

problems with unemployment statistics

answer

1. discouraged workers
2. marginally attached workers
3. underemployed workers

question

discouraged workers

answer

nonworking people who have GIVEN UP looking for work (not considered unemployed); the deeper the recession, the more discouraged workers there are

question

marginally attached workers

answer

those who were available and actively looked for work recently, but are not currently looking (they have in the past year, but NOT in the past month)

question

underemployed workers

answer

people who work part time because they cannot find full-time jobs (a GT engineer working at Wendy's)

question

other factors of unemployment

answer

1. labor force participation rate
2. number of full-time jobs
3. average wages

question

jobless recovery

answer

a period in which the real GDP growth rate is positive, but unemployment is still RISING

question

3 types of unemployment

answer

1. frictional
2. structural
3. cyclical

question

frictional unemployment

answer

unemployment due to the TIME workers spend job searching, scarcity of information creates this (matching people to jobs takes time, sometimes in between jobs)

question

structural unemployment

answer

more people are seeking jobs in a particular labor market than there are jobs available at the current wage rate

question

causes of structural unemployment

answer

labor unions, side effects of government policies, mismatches between employees and employers, efficiency wages

question

efficiency wages

answer

wages that employers set above the equilibrium rate as incentive for better employee performance

question

union

answer

an association of workers that bargains collectively with employers over wages, benefits, and working conditions

question

cyclical unemployment

answer

unemployment correlated with the business cycle; the deviation from the natural rate

question

why does lower growth = higher unemployment?

answer

when GDP falls, firms lay off workers, which then leads to idle labor and capital which causes economic growth NOT being maximized and a decrease in the ability of the economy to create more jobs

question

natural unemployment

answer

question

actual unemployment

answer

natural unemployment + cyclical unemployment

question

causes of change in the natural rate of unemployment

answer

question

real wages

answer

nominal wage rate / price level

question

real income

answer

nominal income / price level

question

shoe-leather costs

answer

the increased cost of transactions caused by inflation (the wasted time dealing with inflation)

question

menu cost

answer

the real cost of changing a listed price (like reprinting menus)

question

unit of account costs

answer

costs arising from the way inflation makes money a less reliable unit of measurement (if inflation is different from predictions, some will lose and some will benefit)

question

interest rate

answer

the price (calculated as a percentage) that a lender charges for the use of their savings for one year

question

nominal interest rate

answer

the interest rate expressed in dollar terms

question

real interest rate

answer

nominal interest rate - inflation rate

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