Economics - Macro Chapter 20-21

question

GDP (C+I+G+X)

answer

Consumption + Investment + Government Spending + Exports and Imports

question

What does GDP do?

answer

Measures growth & standard of living between nations

question

Economic Investment

answer

Spending for the production and accumulation of capital and additions to inventories - New land, factories, machinery, new construction

question

Financial Investment

answer

An asset that you put money into with the hope that it will grow or appreciate into a larger sum of money - purchase of bonds, stocks, gold, diamonds, real estate property (not counted in GDP)

question

Bank Functions

answer

Take in funds—called deposits—from those with money, pool them, and lend them to those who need fund

question

Real GDP

answer

GDP adjusted for inflation - Divide nominal GDP by the GDP deflator

question

Nominal GDP

answer

The value of final goods and services evaluated at current-year prices - Multiply the current year quantity output by the current market price

question

How does expected rate of returns impact investment levels?

answer

If someone thinks the economy isn't gonna do well in the future, people wont invest. If they think it will be good, they will invest.

question

Disposable Income

answer

Income remaining for a person to spend or save after all taxes have been paid

question

Demand Shock

answer

An event that affects the demand for goods and services in the economy

question

Supply Shock

answer

An unexpected event that causes the short-run aggregate supply curve to shift

question

Human Capital

answer

The knowledge and skills a worker gains through education and experience

question

Unemployed

answer

NO Job BUT actively looking

question

Inflation

answer

A general increase in prices and fall in the purchasing value of money

question

Inventories

answer

All the items, goods, merchandise, and materials held by a business for selling in the market to earn a profit

question

Intermediate Goods

answer

Goods used in the production of final goods - lumber, coal, textiles

question

Double Counting

answer

The mistake of including both the value of intermediate products and the value of final products in calculating gross domestic product; counting the same production more than once

question

Value Added

answer

Gross value of the product minus the cost of raw materials and energy

question

Transfer Payments

answer

Money coming your way for doing nothing (not counted as GDP until spent)

question

What makes up most of GDP?

answer

70% - Consumption (consumer spending)

question

Gross Investment

answer

The total amount spent on purchases of NEW capital and on replacing depreciated capital

question

Net Investment

answer

Gross investment minus depreciation

question

Durable Goods

answer

Goods that last for a relatively long time, such as refrigerators, cars, and DVD players (last more than 3 years)

question

Non-durable Goods

answer

Goods that last a short period of time, such as food, light bulbs, sneakers and clothes (last less than 3 years)

question

Impact of underground economy / nonmarket transactions on OFFICIAL GDP

answer

The black market transactions are not a part of GDP since there is no way to calculate and keep track of them but, when drug dealers spend money at stores they are contributing to the economy

question

Positive Shock

answer

Increases the amount of output that can be produced for a given amount of inputs (right shift)

question

Negative Shock

answer

Decreases the amount of output that can be produced for a given input (left shift)

question

Economic Indicators

answer

Inflation, GDP, unemployment

question

Expenditure GDP Approach

answer

GDP = C+I+G+X

question

Income/Earnings GDP Approach

answer

GDP = wages (salaries) + rents + interest + profit

question

Depreciation

answer

Used up capital

question

Monetary Policy

answer

Run by: Federal Reserve

Tools: Interest Rates

question

Fiscal Policy

answer

Run by: Congress

Tools: Taxing and spending

1 of 33

question

GDP (C+I+G+X)

answer

Consumption + Investment + Government Spending + Exports and Imports

question

What does GDP do?

answer

Measures growth & standard of living between nations

question

Economic Investment

answer

Spending for the production and accumulation of capital and additions to inventories - New land, factories, machinery, new construction

question

Financial Investment

answer

An asset that you put money into with the hope that it will grow or appreciate into a larger sum of money - purchase of bonds, stocks, gold, diamonds, real estate property (not counted in GDP)

question

Bank Functions

answer

Take in funds—called deposits—from those with money, pool them, and lend them to those who need fund

question

Real GDP

answer

GDP adjusted for inflation - Divide nominal GDP by the GDP deflator

question

Nominal GDP

answer

The value of final goods and services evaluated at current-year prices - Multiply the current year quantity output by the current market price

question

How does expected rate of returns impact investment levels?

answer

If someone thinks the economy isn't gonna do well in the future, people wont invest. If they think it will be good, they will invest.

question

Disposable Income

answer

Income remaining for a person to spend or save after all taxes have been paid

question

Demand Shock

answer

An event that affects the demand for goods and services in the economy

question

Supply Shock

answer

An unexpected event that causes the short-run aggregate supply curve to shift

question

Human Capital

answer

The knowledge and skills a worker gains through education and experience

question

Unemployed

answer

NO Job BUT actively looking

question

Inflation

answer

A general increase in prices and fall in the purchasing value of money

question

Inventories

answer

All the items, goods, merchandise, and materials held by a business for selling in the market to earn a profit

question

Intermediate Goods

answer

Goods used in the production of final goods - lumber, coal, textiles

question

Double Counting

answer

The mistake of including both the value of intermediate products and the value of final products in calculating gross domestic product; counting the same production more than once

question

Value Added

answer

Gross value of the product minus the cost of raw materials and energy

question

Transfer Payments

answer

Money coming your way for doing nothing (not counted as GDP until spent)

question

What makes up most of GDP?

answer

70% - Consumption (consumer spending)

question

Gross Investment

answer

The total amount spent on purchases of NEW capital and on replacing depreciated capital

question

Net Investment

answer

Gross investment minus depreciation

question

Durable Goods

answer

Goods that last for a relatively long time, such as refrigerators, cars, and DVD players (last more than 3 years)

question

Non-durable Goods

answer

Goods that last a short period of time, such as food, light bulbs, sneakers and clothes (last less than 3 years)

question

Impact of underground economy / nonmarket transactions on OFFICIAL GDP

answer

The black market transactions are not a part of GDP since there is no way to calculate and keep track of them but, when drug dealers spend money at stores they are contributing to the economy

question

Positive Shock

answer

Increases the amount of output that can be produced for a given amount of inputs (right shift)

question

Negative Shock

answer

Decreases the amount of output that can be produced for a given input (left shift)

question

Economic Indicators

answer

Inflation, GDP, unemployment

question

Expenditure GDP Approach

answer

GDP = C+I+G+X

question

Income/Earnings GDP Approach

answer

GDP = wages (salaries) + rents + interest + profit

question

Depreciation

answer

Used up capital

question

Monetary Policy

answer

Run by: Federal Reserve

Tools: Interest Rates

question

Fiscal Policy

answer

Run by: Congress

Tools: Taxing and spending

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Economics – Macro Chapter 20-21

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