GDP, CPI, Unemployment Test - Assignment Essays

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GDP

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Measures total income of everyone in the economy and total expenditure(spending of funds) on economy's output of goods and services

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Income must equal

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Expenditures

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Factors of production

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Labor, land, capital, and natural resources

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Factors omitted from GDP

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Illegal goods, items produced at home, intermediate goods (ingredients), goods produced in the past, goods produced in another country

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GDP is measured

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Quarterly and annually

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GDP formula

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Consumption + Investment + Government Purchases + Net Exports

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Government purchase excludes...

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Transer payments (social security)

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Net exports

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Exports - Imports

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For base year, nominal GDP =

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Real GDP

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GDP Deflator

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A measure of the overall level of prices, measures current price level relative to price level in base year

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Real GDP Formula

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Nominal GDP/GDP Deflator X 100

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GDP Deflator Formula

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Nominal GDP/Real GDP X 100

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Output Growth Formula

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((Real GDP in year 2 - Real GDP in year 1) / Real GDP in year 1) X 100

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Real GDP per capita Formula

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Year 1 Real GDP/Population in year 1

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For Real GDP, use the _______ of the base year

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Price

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CPI

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Measure of the overall level of prices, overall costs of goods and services

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CPI Formula

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Cost of basket of goods and services in current year / in base year X 100

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Inflation Rate Formula

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((CPI this year - CPI last year) / CPI last year) X 100

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For CPI, use the _____ of the base year

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Quantity

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Substitution Bias

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Over time some prices rise faster than others (consumers substitute toward cheaper goods, CPI overstates increases in the cost of living)

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Introduction of new goods

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Increases variety and the value of a dollar

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Unmeasured quality change

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Improvements in the quality of goods in the basket, increase the value of a dollar

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Imported consumer goods are..

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Included in CPI and excluded in GDP

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Capital good are

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Included in GDP deflators and excluded in CPI

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"Amount in todays dollars" Formula

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Amount in year T Dollars X (Price level today / price level in year T)

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Indexation

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A dollar amount is indexed for inflation if it is automatically corrected for inflation by law

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Nominal VS Real Interest Rate

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Not corrected VS Corrected

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Employment

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The number of people currently employed in the economy, either part time or full time

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Unemployment

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The number of people who are actively looking for work but aren't currently employed

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Labor Force

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The sum of employment and unemployment

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Discouraged workers

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Nonworking people who are capable of working but have given up

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Marginally attached workers

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Nonworking people who have looked for a job in the recent past but aren't looking right now

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Underemployment

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Number of people who work part-time because they can't find full time jobs

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Frictional unemployment

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Unemployment due to the time workers spend in job search (unavoidable)

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Structural unemployment

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Unemployment that results when there are more people seeking jobs than jobs available (side effect of government policies)

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Unions

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By bargaining for all of a firms workers collectively, unions can often win higher wages from employers than the market would have otherwise provided when workers bargained individually

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Efficiency wages

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Wages that employers set above the equilibrium wage rate as an incentive for better performance

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Cyclical unemployment

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Deviation in the actual rate of unemployment from the natural rate

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Natural unemployment

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Frictional + structural

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Actual unemployment

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Natural + cyclical

1 of 40

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GDP

answer

Measures total income of everyone in the economy and total expenditure(spending of funds) on economy's output of goods and services

question

Income must equal

answer

Expenditures

question

Factors of production

answer

Labor, land, capital, and natural resources

question

Factors omitted from GDP

answer

Illegal goods, items produced at home, intermediate goods (ingredients), goods produced in the past, goods produced in another country

question

GDP is measured

answer

Quarterly and annually

question

GDP formula

answer

Consumption + Investment + Government Purchases + Net Exports

question

Government purchase excludes...

answer

Transer payments (social security)

question

Net exports

answer

Exports - Imports

question

For base year, nominal GDP =

answer

Real GDP

question

GDP Deflator

answer

A measure of the overall level of prices, measures current price level relative to price level in base year

question

Real GDP Formula

answer

Nominal GDP/GDP Deflator X 100

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GDP Deflator Formula

answer

Nominal GDP/Real GDP X 100

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Output Growth Formula

answer

((Real GDP in year 2 - Real GDP in year 1) / Real GDP in year 1) X 100

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Real GDP per capita Formula

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Year 1 Real GDP/Population in year 1

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For Real GDP, use the _______ of the base year

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Price

question

CPI

answer

Measure of the overall level of prices, overall costs of goods and services

question

CPI Formula

answer

Cost of basket of goods and services in current year / in base year X 100

question

Inflation Rate Formula

answer

((CPI this year - CPI last year) / CPI last year) X 100

question

For CPI, use the _____ of the base year

answer

Quantity

question

Substitution Bias

answer

Over time some prices rise faster than others (consumers substitute toward cheaper goods, CPI overstates increases in the cost of living)

question

Introduction of new goods

answer

Increases variety and the value of a dollar

question

Unmeasured quality change

answer

Improvements in the quality of goods in the basket, increase the value of a dollar

question

Imported consumer goods are..

answer

Included in CPI and excluded in GDP

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Capital good are

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Included in GDP deflators and excluded in CPI

question

"Amount in todays dollars" Formula

answer

Amount in year T Dollars X (Price level today / price level in year T)

question

Indexation

answer

A dollar amount is indexed for inflation if it is automatically corrected for inflation by law

question

Nominal VS Real Interest Rate

answer

Not corrected VS Corrected

question

Employment

answer

The number of people currently employed in the economy, either part time or full time

question

Unemployment

answer

The number of people who are actively looking for work but aren't currently employed

question

Labor Force

answer

The sum of employment and unemployment

question

Discouraged workers

answer

Nonworking people who are capable of working but have given up

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Marginally attached workers

answer

Nonworking people who have looked for a job in the recent past but aren't looking right now

question

Underemployment

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Number of people who work part-time because they can't find full time jobs

question

Frictional unemployment

answer

Unemployment due to the time workers spend in job search (unavoidable)

question

Structural unemployment

answer

Unemployment that results when there are more people seeking jobs than jobs available (side effect of government policies)

question

Unions

answer

By bargaining for all of a firms workers collectively, unions can often win higher wages from employers than the market would have otherwise provided when workers bargained individually

question

Efficiency wages

answer

Wages that employers set above the equilibrium wage rate as an incentive for better performance

question

Cyclical unemployment

answer

Deviation in the actual rate of unemployment from the natural rate

question

Natural unemployment

answer

Frictional + structural

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Actual unemployment

answer

Natural + cyclical

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